Suez Canal incidents ripple effects are still affecting the global supply chains. Sea and air freight are suffering from severe supply & demand-imbalance. The overall turbulent freight market is probably going to continue for some time.
The Asian exports still feel the brunt of the disruptions caused by the Evergreen’s blockade of the Suez Canal last month. While many exporters from Asia are facing weeks of delay in shipping their goods, carriers are keen to hold-on before adding extra loader capacity, preferring a more cautious approach to supply & demand and focusing on recovering their network schedules following the Suez disruption. In China, average prices for used 20ft containers increased 94% between November and March as forwarders in China were busier than ever trying to find boxes and space. A similar trend is observed in India where the increase for the similar period has been observed to be 58%.
The impact of the Suez Canal blockade on North European supply chains is expected to last until June 2021. Recently container lines have been observed discharging Asian imports anywhere they can in order to turn ships around as fast as possible in Europe and return them to Asia, where several weeks of full loads at elevated spot rates await.
The excess cargo due to limited capacities on the spot market, with freight prices of more than five times higher than a year ago, ensures voyage profits for standalone services, even for panamax-size and smaller ships, which would have been unlikely a year ago.
The market will take longer than a few months to recover to pre-pandemic levels; tight space and high freight rates will with very high probability persist throughout 2021.
The air cargo industry is currently experiencing a demand boom. Multiple lanes to the US and across Europe have seen a significant and constant surge that is pushing the freight rates only upwards without any respite for the exporters. The easing of lockdowns in some countries has added a boost to the demand across different sectors.
Currently, exports from China have been steadily growing on a weekly basis. There is a significant share of volume being taken by obvious exports like rapid COVID test kits, masks and PPE kits but it was also observed that Apple also began a large movement of goods two weeks ago in order to be ready for October’s planned iPhone 12 launch. With US lanes always commanding a premium, such events significantly impact the cargo capacities which are currently under severe stress already due to the missing belly space of the passenger aircrafts. And this situation is not limited to the export from China but the airports in Vietnam and Thailand are also experiencing high demand with limited supply.
Even if passenger lower-hold capacity returns in the future, the advantages provided by freighters are likely to keep the share of cargo carried by freighters high in global markets, especially on the world’s two busiest trade routes, Asia–North America and Asia–Europe, where freighters carry more than 70% of air cargo traffic. All this only supports the narrative of many industry experts that freighters will continue to dominate air cargo despite the post-pandemic surge in cross-border e-commerce.
This week, Alibaba Logistics launched its newest freighter route: a five-times-week direct charter flight between Singapore and China’s Hainan Island. This only indicates what the possibilities are with e-commerce giants calling their shots with their own logistics arms.
In an expected but interesting outcome of Brexit, multiple charters and fixed schedule flights from China’s inland cities to Heathrow were expected to transport e-commerce volumes to the UK, which can no longer move with EU shipments, adding an additional lane to the already supply starved air freight sector.
This while adds an additional lane for the forwarders, is likely to take away the advantage of economies of scale from them, making it expensive for the importers in UK in the current market where the capacities are their all-time low with the historically highest spot rates.
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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Our global offices are more than happy to advise you on logistics related matters.
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