Air Freight
Partial lockdowns across Europe to contain new waves of COVID-19 have led to significant air freight cancellations, with many retailers switching to ocean freight as they re-think their supply chains. Despite the fall in volumes, airfreight prices remain higher than normal. The capacity situation is likely to worsen in the coming weeks as airlines idle more aircraft to minimize the cost of flying with low passenger loads.
As many of the lockdowns are scheduled to end in early December, many experts expect the air freight peak season will be deferred until December, with some anticipating the late rush in the run up to Christmas to be at double its usual levels. However, there is uncertainty about how coronavirus comeback will affect air cargo, as a renewed need for medical supplies and PPE equipment could lead to more air shipments while the renewed restrictions could slow economic activity due to increased unemployment and dampened consumer confidence.
Ocean Freight
Incidents of container rollovers remains high and schedule integrity has eroded – with arrival times to port 3-5 days behind schedule – further complicating vessel berth schedules and contributing to terminal congestion on both sides of the Pacific. Shippers should note that published transit times should be construed as tentative and subject to change, as delays and disruptions are expected to continue through at least mid-December. Therefore, advanced planning, forecasting, and booking is highly recommended in order to mitigate supply chain disruption.
Space will remain extremely tight as carriers struggle to keep up with demand and manage through delays, rollovers, and overbookings.
Chronic equipment shortages continue to plague the market, and with carriers allocating current bookings up to 3 weeks in advance, shippers don’t know at time of booking whether containers will be available prior to sailing.
Container Shortage Likely to Last into 2021
Exceptionally strong market demand has led to a shortage of shipping containers, especially for the 40’ and 40’HC and 45’HC. While market conditions are expected to remain strong through early next year, ocean carriers have expressed concern that they expect a fairly significant container shortage to last through at least Chinese New Year.
Efforts to ramp up production, by the handful of manufacturers in China that build almost all of the world’s shipping containers, has been hampered by changes in Chinese labor regulations in an effort to contain the spread of COVID-19, and the limit of one shift per day has effectively capped production levels. However, the unexpected spike in demand has prompted manufacturers to add additional hours to bring production back to normal levels.
Carriers are also trying to get as many empty boxes back to Asia in the shortest time possible to alleviate the shortage, and hitting shippers with equipment imbalance fees to do so. Hapag-Lloyd recently announced that it has suspended bookings of agricultural products from North America in order to reposition containers to the Asian market and is reducing the number of days shippers can pick up containers for export loading to 7-8 days prior to vessel arrival.
United States
According to recent reports from investment bankers Jefferies and Evercore ISI, American businesses are nowhere close to replenishing depleted inventories. Companies have been playing catch-up for months trying to keep pace with elevated consumption trends and manage through any further disruption as the coronavirus surges again. This on top of holiday cargoes, will boost trans-Pacific volumes into at least Q1 2021, raising concerns of what some have dubbed ‘Shipageddon’ – the fear that holiday demand will collide with inventory restocking and overwhelm an already stressed system.
Ocean: High influx of container volumes, along with continued measures to limit the spread of COVID-19, are causing delays across the supply chain. Disruptions are significantly impacting LCL imports moving through West Coast ports of Los Angeles and Long Beach as well as the East Coast ports of New York and New Jersey. Vessel delays into the ports as well as chassis, drayage, and domestic trucking capacity shortages are leading to a restricted ability to forward deconsolidated cargo to final destinations across the U.S.
Trucking: A new wave of capacity tightness has spread from the West Coast to inland markets. Outbound tender rejections have risen in Los Angeles, Dallas, and Chicago, particularly on lanes with backhaul destinations. Dry van truckload spot rates are expected to increase next week to reflect the rising tender rejection rates.
Intermodal: Shippers are running into intermodal capacity constraints across the country as demand soars. Over the last week, tender rejections soared in Chicago and Georgia, while spot rates jumped in Los Angeles. Intermodal traffic in the U.S. rose 10% in October to 1.17 million containers and trailers, thanks largely to rising imports and tight truck capacity. Intermodal volumes are expected to rise 2-4% for the remainder of the year, as ocean container volumes remain robust and retailers continue to restock and replenish their inventories.
Sri Lanka
Following a surge in Coronavirus cases, the government of Sri Lanka announced a partial lockdown in the capital city of Colombo and two neighboring districts. The restrictions, which bar travel for non-essential purposes, have led to severe labor shortages and impacted terminal operations at Colombo. While the busy port is still operational, low productivity levels, terminal congestion, and severe berthing and sailing delays are being reported. Inter-terminal transfers (ITT) have also grinded to a halt.
As the port of Colombo is a major trans-shipment hub for cargo moving to and from India, Bangladesh, and other Southeast Asian countries, schedule disruptions and delays are likely across the region.
United Kingdom
The UK is continuing to experience unprecedented delays, port congestion, and significant rate increases. Port congestion continues to cripple the port of Felixstowe and has rippled to ports across the country. Port congestion has led to berthing delays, port omissions, rollings, capacity constraints, and haulage issues. There have also been increasing reports of vessels ‘cutting and running.’ In response, carriers are increasing container rates from China and adding port congestion surcharges. To make matters worse, some carriers have withdrawn line haulage, leaving imports stranded on the quay and shippers rushing to find alternative transport. In an effort to clear its congestion backlog, the port of Felixstowe announced it would “temporarily stop the restitution of all empty containers until further notice.”
China
Air: Delays are expected after a cargo worker tested positive for COVID-19 at Shanghai Pudong Airport, promoting the airport to close the West Terminal for disinfecting and testing workers who may have been exposed to the virus. All import and export cargo movements will be affected and operations maybe delayed. Affected airlines include Emirates, China Airlines, China Southern, China Cargo Airlines, Nippon Cargo, Korean Air Lines, Silkway West and ASL.
Ocean: Market conditions on the trans-Pacific lane remain unchanged from two weeks ago, with spot-rates remaining fairly consistent and space remaining extremely tight. Given that the last 3 GRI announcements since October 1 never materialized, rates are expected to remain stable through the end of November. Container inventory has collapsed, with pick-up activity skyrocketing past the drop-off activity. As new COVID-19 cases soar in the U.S., the re-emergence of PPE projects is likely to complicate trade flows in a time when space and equipment are already in high demand.
India
India is facing an acute space problem due to increased demand, reduced imports, and port rotation issues. Freight rates for almost all trade lanes ex-India have skyrocketed. Port congestion in Sri Lanka has further complicated the situation. The acute container shortage is expected to continue for another 3 months.
Bangladesh
Feeder vessels operators at Colombo, Chittagong, Singapore, and Port Klang have announced emergency cost recovery surcharges (ECRS) on shipments to and from Bangladesh due to acute congestion at the ports.
Australia
As its trade war with China heats up, Australian ports are reporting a huge build-up of empty shipping containers, estimated in excess of 50,000. The problem is particularly acute in Sydney, where recent industrial action has hit repositioning of equipment to Asia.
New Zealand
Severe congestion has been reported at the port of Auckland due to a lack of workers and a stronger-than expected peak season. According to MSC, “Delays and wait times for vessels to berth in Auckland are being reported between 10 to 13 days.” Issues with berthing congestion and a lack of ad hoc charter vessels have hindered efforts.
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Sources:
- American Shipper
- Mounting evidence that container spike could last into 2021
- Air cargo momentum builds; air travel stumbles
- FreightWaves
- Intermodal growth fuels US traffic volume gains
- Trucking markets: Game on: LA, Dallas, Chicago tighten
- The LOADSTAR
- Expected November peak a new low for air freight as lockdowns shut shops
- Colombo port congestion brings extra expense for Bangladeshi shippers
- Double-whammy for shippers: record rates and surcharge surges
- Felixstowe bans empties again as congestion builds and vessels ‘cut and run’
- Shippers hit lack of port workers and containers as lines add congestion surcharges
- Air cargo delays as Covid closes West Terminal at Shanghai Pudong Airport
- No respite for congested UK container ports as carriers take evasive action
