SEA FREIGHT FROM CHINA TO EUROPE IS STILL CAUSING HEADACHES TO THE SHIPPERS. AIR AND RAIL FREIGHT CONGESTIONS CONTINUES.
With no sign of a spot rate decline after the start of the Chinese New Year last week, shippers who waited, expecting rate reduction after CNY, are now forced to bite the bullet and agree to far higher contract prices. In addition to increased freight, spot shippers must also pay a slew of additional fees, including container retention and expedited booking fees.
Even from the long term rates perspective, the Asia to North Europe segment of the Freightos Baltic Index (FBX) is up 3.6 per cent last week, to $8,455 per 40ft now, up 145 per cent since early December and 428 per cent higher than the same week the previous year.
Despite a shortage of haulage in China due to drivers quarantining ahead of the Chinese New Year, carriers continue to have a large amount of previously booked and pending cargo to clear before they have to start looking for new bookings.
The carriers are determined to keep container spot rates at their highs for as long as possible and lock-in annual contract customers with rate increases of 100% or more.
Many companies still find themselves struggling with a great deal of uncertainty and a general lack of capacity when it comes to Air Freight.
Cargo congestion can be observed at airports worldwide as freight forwarders try to find new opportunities to help their customers overcome the consequences of the COVID-19 pandemic on their supply chains.
Freight providers are now trying to expand air charter services to offer more flexibility, certainty and security to the cargo. This helps in creating a strong top-line for the freight providers as well, creating a win-win situation. In addition to charters, freight providers are also exploring alternative airports like Munich instead of Frankfurt and Rockford instead of O’Hare, as forwarders had expressed concerns recently about severe congestion in some major global hubs.
All these efforts add to the pre-existing complexity of a global air network, keeping the shippers’ costs still at a premium compared to the pre-COVID rates.
Road freight across Europe is stabilizing as the pandemic-driven decline of 2020 in European road freight prices appears to be reversing to normal levels. Last year, European road freight prices plummeted as the pandemic slashed demand across the continent.
There were signs of recovery in the fourth quarter of 2020, and now analysts expect a substantial price increase this year. Fuel costs, EU economic growth, and the balance between supply and demand are all key factors to be monitored.
Other factors that can contribute to price rise include: structural changes in markets served by hauliers, such as the decline of traditional retail models and the transformation of automotive supply chains; and the adoption of the EU’s mobility package, which is still being resisted vehemently by many eastern and central European countries with large numbers of drivers.
The right of drivers to return home every three to four weeks is a crucial clause of the mobility package. East and central European hauling leaders claim will break their economic cost structures and impact productivity by up to 20%.
Every year the end of the Chinese New Year (CNY) is a start of rising volume and demand for rail free services between Europe and China. And this year, with many parts of Europe being in some sort of lockdowns with shops closed, this has led to high volumes stuck at different ports in Europe, leading to substantial congestions. The situation looks worse when you consider the similar congestions and delays in Ocean and Air, leaving limited options to the customers in the current situation along with a premium attached to the freight.
A lot of containers are not transported forward in Europe and they are all currently stalling, leading to congestions, constrained storage capacities and availability issues for the empty containers. The freight providers are taking bookings well in advance in order to minimize this impact but with limited outcome so far.
The full impact of Brexit is still uncertain. Market access, livestock movement, phytosanitary inspections, insurance, customs declarations, and anticipated IT problems remain unanswered as the UK introduces border checks from the mid of the year. Nothing is certain yet, but regardless of demand, we should predict reduced capacity and higher prices.
There are demands that the UK government must ease the burden on businesses trading with the EU, amid reports that selling into the single market is becoming financially unviable for some of the companies. Nine out of ten companies polled said their costs had been increased by Brexit.
The UK aerospace industry is also currently unsure how UK’s latest aviation regulations will sync with EU and other global counterparts as the UK now operates under a separate aviation safety regime.
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