Suez Canal Finally Re-Opened for Business as The Salvage Team Manages to Free The Ship from The Blockade. Still, It´s hard to estimate what kind of knock-on effects does the disruption cause for the global shipping market.
SEA FREIGHT
In a very recent development, the disruption caused by the Evergreen’s blockade of the Suez Canal has begun to unwind as the salvage team got the ship released on Monday after a long and excruciating struggle. Egyptian officials say the backlog of ships waiting to transit through should be cleared in around three days, but experts believe the knock-on effect on global shipping could take weeks or even months to resolve.
Container spot rates from Asia were expected to ease slightly from their record highs, post-Chinese New Year (CNY), but the current Suez Canal event, which is adding delays in the hauls, is very likely to impact the capacity of the trips planned further in April. This will again add to challenge for shippers who were already getting stretch on the costs given the capacity constraints until CNY on the Asia-Europe routes.
Rail express from China has already been overbooked on both eastbound and westbound. It’s very difficult to find space and severe delays will happen quite often.
AIR FREIGHT
As the possibility of returning to pre-Covid rates declines further, shippers are increasingly looking for alternatives to air freight. Forwarders are being challenged by the shippers for understanding their supply chains better and developing creative strategies. However, both the forwarders and shippers see no signals of rates coming down from the apex anytime in the near future.
The ocean is the first alternative, but this has been impacted by delays at major gateways and worsened by the recent ‘Suez Evergreen’ issue. This also means longer transit times and different supply chain planning strategies for the shippers.
The air cargo industry is poised for a boom, though uncertainty will be both a source of growth and a cause of the difficulty. The outlook for this year is quite positive. IMF expects global GDP growth of 5.1 per cent this year. It is also expected that there will be a surge in international air cargo demand this year, with sustained growth in the years ahead. Further, over 500 wide-body passenger planes will retire with many being replaced by narrow-body aircrafts, especially the A321s, resulting in a reduction in belly capacity.
Although capacity is still limited, demand is expected to be high, backed by e-commerce, which is expected to have another boom year in 2021, followed by growth at a “new normal” rate.
ROAD FREIGHT
There were expectations of road freight across Europe getting stabilized but with the Sea-Air and other multi-modal solutions being explored by the shippers and forwarders, the demand for the road is expected to be higher than normal.
There is further boost in demand due to connectivity requirement for the post-CNY volume coming to Europe from China.
With the couple of global macros combined with the recent event in Suez, the demand for road is expected to remain high, leading to higher than average freights for next few weeks at least.
BREXIT
Even though the UK has been out of the EU for three months, thousands of businesses are still struggling to adjust to the new conditions for importing and exporting. On a regular basis, there are signs of disturbance. Long delays at ports are causing problems for businesses, and many perishable goods are going to waste. The financial consequences are enormous; some companies are on the brink of bankruptcy.
Businesses will be required to process an additional 200 million customs declarations each year, compared to about 55 million before Brexit. To put this in perspective, a seafood exporter now has to fill out 71 pages of paperwork just to ship one lorry of fish. Supply chains are clearly being slowed and disrupted by these antiquated and inefficient methods.
With the cost of Brexit set to rise and no sign of an expanded trade agreement on the horizon, now is the time to embrace technology and relieve the operational pressure that the supply chain is bearing.
ABOUT US
Wiima Logistics is a provider of fourth-party logistics (4PL) services. The 4PL service provides the customer with a complete solution for supply chain management, administration and outsourcing.
4PL operations can be described as outsourcing the management and coordination of the entire supply chain – this allows the customer to focus on their core business.
Wiima staff will be more than happy to advise you in supply chain and logistics related matters. Our logistics experts and digital tools will provide you with a winning combination if you are looking for an effective and efficient logistics management setup.
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