Air Freight Backlogs and Slumping Economic Reports Cause More Struggles for China

As the FDA is continuing and updating new documentation requirements for goods imported from Tianjin, China’s economic reports and airport backlogs are causing concerns.

The current economic downturn in China is lowering the domestic demand for foreign goods and services. As a result, lower commodity prices are making products cheaper to import, and there are no indications that this trend will change shortly, especially with a looming rate hike from the Federal Reserve.

For the fourth consecutive month, exports fell, and imports decreased for the twelfth straight month. Imports fell 19 percent in U.S. dollar terms. In contrast to October 2014, exports declined by 7 percent, and shipment values dipped 3.5 percent.

If China’s economic reports were not troubling enough, now the country is the leading cause of backlogs at several Asian Airports. Restrictions on the capacity to and from China coupled with heightened air freight demand from Asia to the Americas and Europe is the root of the backlogs at these airports. The conversion of ocean shipments to air freight to meet holiday orders is another reason for the backlogs.

Capacity is struggling to meet all the demand from the increased factory output following the Chinese National holiday. As a result, destinations outside China in Taiwan and South Korea along with origins such as Hong Kong, Shanghai, Beijing, Chongqing, Chengdu, Tianjin, and Guangzhou, are feeling the pressure from higher levels of demand for available capacity. Additionally, the Chinese Civil Aviation Administration implemented restrictions on airports in Shanghai, Tianjin and Shenyang and there are no new flights or lanes to replace to address these changes.

However, there are signs that things could get worse for importers of Chinese goods because these backlogs have the potential to spiral out of control as the pre-Christmas rush approaches. A new ban on ad hoc licenses for air charters at the origins mentioned above may cause congestion and chaos for shippers.

For example, ad hoc charters from Shanghai are not being issued traffic rights until the start of December. This news is troubling because shippers are not only dealing with the usual pre-Christmas demand for electronic goods, but they also see a sudden surge in demand for launches of various hi-tech products, such as the iPad Pro.

Charters are in frequent use this time of year to meet the demand for all the hi-tech Christmas goods. The lack of availability of charters puts significant pressure on commercial cargo operations.

Even though the Chinese government plans to lift the ban on charters beginning in December, it may be too late for many merchants to get their product to market. It is likely that China’s economic downturn could, and congestion issues may continue into 2016. OCEANAIR strongly encourages reviewing 2016 strategies for China now.

Please contact your OCEANAIR representative for more information or to evaluate your China strategy.