Challenging times persist in the shipping industry. Covid-19 breakouts in Asian harbours have caused congestions which ripple effects are still to unravel fully. The supply and demand imbalance in almost all international freight modes keeps causing grey hairs to the shippers.
The air cargo industry continues to experience a demand boom as an after effect of the pandemic. Although air freight rates have risen marginally in the last month, forwarders are indicating that a “crazy” market could emerge next month because of reduced capacity due to delayed flights and enormous amounts of distressed sea freight. With all the PPE supplies, as well as e-commerce demand and accordingly increased global production, demand for air freight services has reached new highs.
The recent cooling-off in the rates is expected to be temporary, as we are seeing a re-acceleration, particularly on US-bound lines, which is driven by heavy consumption patterns, regardless of the historically unmatched capacity crisis.
According to data from the International Air Transport Association (IATA), air cargo tonne-kilometres (CTKs) flown increased by 4.4 per cent compared to the pre-crisis 2019 level. CLIVE, an aviation cargo data services provider, estimates that air freight volumes surged 78 per cent in April compared to April 2020 and 1% compared to April 2019 (pre-COVID) figures.
Making the situation difficult even further, several flights have been cancelled in the last two weeks due to rigorous requirements for the crew returning from overseas to undergo a 14-day quarantine. Cancellations were increasing the space crunch because there was no fresh capacity.
While the airliners continue to struggle to meet the shippers’ demands, sea freight rates are not looking to settle down either. Consumer demand has not slowed, and there is still a labor, equipment, and shipping capacity constraint to meet their demands.
There are growing concerns about traffic congestion in Asia which are being matched by a resurgence of delays at US ports on the west coast. According to current AIS data, over 30 ships are anchored in San Pedro Bay, just offshore from the ports of Los Angeles and Long Beach, with Maersk warning clients of significant delays. In addition, railroad congestions are adding to delays in US import deliveries and empty containers being returned to Asia for exports.
Back in Asia, the lockdown in South Vietnam has created more than 100,000-teu backlog at the Cat Lai port in Ho Chi Minh City. Although 2,000 containers were evacuated a few days ago, yard density at Cat Lai is still around 85 percent, with 106,700 teu clogging the terminal.
In China, new Covid restrictions are reportedly causing significant congestion at the ports of Shanghai and Ningbo. Moreover, there still are equipment shortages, which have existed since the start of the pandemic. All this combined has pushed the rates up, as high as 5x. Chinese ports are severely clogged, to the point where it’s feared that there won’t be enough capacity to handle Christmas shipments, which are expected in October. As more factories start to reopen and manufacturing starts to ramp up, the expectation is that there will be severe equipment shortages as well in Asia, in the weeks to come.
INLAND WATERWAYS EUROPE
July floods across Europe, that brought two months’ worth of rain in 48 hours, are still causing restrictions on certain rail lines along with significant congestions that have plagued Europe’s inland waterways. There are reports of barge handling delays of 43 hours into Antwerp’s harbour, and larger delays into Rotterdam, where the average wait time is more than 64 hours.
There is a mounting concern as the continent gears up for the looming peak season. And these concerns when combined with the congestions and availability issues of empty containers in Asia, indicate major headwinds in the region.
Wiima Logistics is a provider of fourth-party logistics (4PL) and project logistics services. We provide our customer with a complete solutions for supply chain management, administration and outsourcing.
If your companies supply chains are suffering from the problematic freight market situation, we are more than happy to help. Our world-class experts are at your service, willing to provide you with creative logistics problem solving where and when it´s needed the most. Extraordinary times require extraordinary measures, and we are up for the job.
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