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The following is an overview of market conditions effecting freight transport and logistics services throughout the world and is intended to inform customers with international supply chain interests. The comments and analysis quoted come from reputable industry sources, which are identified where relevant.

July 2020 updates

According to the information published on The Loadstar, June’s 6% month-on-month improvement despite falling demand for PPE is a sign of the sector taking ‘its first steps to a structural recovery’, reports market specialist.
 
Higher air freight volumes in June compared with May are a sign of the air freight sector taking “its first steps to a structural recovery”, according to air cargo market analysis but
Air freight volumes are on the rise – however forwarders remain concerned about capacity and airport congestion.
 
While global volumes are still 25% lower than in 2019, June improved on May, when year-on-year figures showed volumes 31% down on a year earlier. Capacity last month broadly stayed flat, but was beginning to creep up in the last fortnight by some 1.5% a week.
 
Air freight rates have sunk to mid-March levels, while jet fuel prices rose 7% last week, putting more doubt on the viability and demand for cargo-only passenger aircraft services.

 

The TAC index shows air freight rates out of China, to both Europe and the US, sank nearly 10% in the previous week. However the biggest drops were out of Hong Kong, where prices fell 16% to the US, to $4.29, and 15% to Europe ($3.25).

Transatlantic rates remain well above last year’s, but it is as yet unclear whether much passenger capacity will return soon, with Americans currently unable to travel to Europe, amid claims the country has not managed to control the spread of the virus.
On the Ocean side, while container lines have done relatively well financially during the COVID-19 pandemic, cargo owners have faced inflated transport costs and lower service quality, with many shippers reporting cargo roll-overs and carriers prioritising higher-paying spot cargo, according to container shipping consultancy and analyst Drewry.
Freight rates set to soften: Highlighting its expectations on rates for the second half of 2020 (2H20), Drewry concluded: “Drewry expects freight rates to soften in 2H20 as carriers will cautiously reintroduce capacity to meet any demand recovery, but not at the expense of a large collapse in rates to uneconomic levels.”
Ocean freight prices on the transpacific trade have been “exploding” in recent weeks, according to a key global ocean freight forwarding executive, as US importers restock at a time of tight container shipping capacity.
 
Peak season is difficult to predict, according to US retailers, since many did not ship in April or May, including many large retailers, so June is big, month on month. The uncertainty explains the decision of lines to bring capacity back cautiously. “We see an extra loader or two coming in, but they're not re-establishing regular loops because they don’t see it as sustainable,” said von Orelli[" . He forecasts that the transpacific ocean market will probably contract overall by around 15% this year irrespective of the recent bounce-back in demand.
 
Container lines are bringing capacity back far more quickly on the transpacific trade than on the Europe-Asia lane as coronavirus lockdowns are eased, according to the latest industry analysis by Alphaliner. As a result, while vessel capacity on the Asia-Europe trade is still far below pre-coronavirus levels, capacity available to shippers on the Asia to North America lane is now edging close to 2019 levels.  

AIR FREIGHT PRICING TREND CHINA TO EUROPE, CHINA TO US YOY 
This crisis has of course a strong impact on pricing to/from China, from Hong Kong and to/from USA/Europe. For more information on the Air Freight Pricing on these trades, please click HERE.

Source: The TAC Index, published 29 June 202

Asia-Europe spot prices climbed again last week as demand in Europe continues to recover in a container shipping market with still constrained capacity, taking average global prices to their highest level since 2015, Drewry analysis reveals.

On the transpacific trade, after several weeks of gains, Shanghai to Los Angeles spot rates fell 9%, although they remain 68% higher than a year ago. And after strong gains last week, Shanghai to New York average spot rates were flat last week, 30% higher than a year ago.

Freight rates on Rotterdam to Shanghai nudged up by 1%. However, rates on transatlantic routes declined last week, with prices from Rotterdam to New York dwindling 5% for a 40ft box. Similarly, New York to Rotterdam average prices dropped 2% per 40ft container.

COVID-19 takes its toll on charter rates:  Time charter rates for container vessels have been significantly hit by the COVID-19 pandemic, having dropped by up to 50% depending on vessel sizes since the epidemic expanded globally, according to the Alphaliner.
 
One the Air Freight side, Global air cargo capacity declined 26% last week compared to last year; North America – Latin America decreases by only 7%; Transpacific Eastbound capacity grows 2% compared to last year; Europe – Asia capacity declines by 23%, based on the information published by Seabury. Europe – Latin America capacity is still 75% lower than last year.
Belly and freighter capacity shows almost no change compared to last week.

Airline freighters added the most capacity on a week-onr-week basis, with +6k tonnes; while widebody belly cargo capacity increased +3k tonnes.

Passenger freighters out of China have decreased 30% since mid-May while freighter capacity has been stable, compared against mid-May it shows a slight decline of 5%; Passenger freighter capacity decline is concentrated in PVG, PEK and CAN.
USA is the country with the highest absolute decrease in year-over-year capacity while ANC is the airport with the highest increase in capacity, other large airports, such as, JFK, LAX and IAH have seen strong decreases in capacity.
Over 70% of air trade from Asia Pacific to USA now originates from China. Japan is one of the countries with the strongest decline, with almost 14 p.p. lost in market share. 

Source: Alphaliner, Drewry and Lloyd Loading List, Seabury and The Tac Ondex, 29 June 2020

June 2020 updates

According to the Lloyds Loading List, Average air freight rates on the main east-west intercontinental trades continued to drop last week, especially from Shanghai to Europe, as the scramble for personal protective equipment (PPE) continues to fade.  
Figures from the latest weekly market update yesterday from Freight Investor Services (FIS) indicate that overall China to Europe prices dropped by almost 19%. Like the previous week, the China-Europe price drop was exacerbated by further large corrections from Shanghai (PVG), with Shanghai to Europe prices down last week by more than 30%. That followed a fall the previous week of Shanghai to Europe prices of almost 24% that contributed to a decline of almost 20% on China-Europe prices as a whole. 
According to Peter Stallion, aviation and freight derivatives specialist at FIS, customers are still holding back from long-term contract renewals and block-space agreements (BSAs) “as the market continues its sharp slide into normal pricing levels”.
Seabury indicated that ‘passenger freight’ capacity was “cooling down” on most key lanes, including Intra-Middle East & South Asia; Latin America-North America; Asia Pacific-North America; and Intra-Asia Pacific.
It highlighted easing demand for PPE from China that “drove an 8% decline in passenger freighter capacity from China”. The decrease was largest for carriers from the Middle East & South Asia, and North America, Seabury said. According to Seabury, China’s overall air cargo capacity is 7% above the levels seen in early January levels; South Korea capacity is 9% ahead of January levels; US capacity is down 38%; UK capacity is off 54%.
 
On the ocean side, the rates on key transpacific lanes have risen strongly in the last week, as an increase in demand continues to meet restricted capacity. Digital rates specialist Freightos noted that China-US East Coast prices have exceeded $3,000/FEU for the first time since July 2019, and China-US West Coast rates have reached a 30-month high, although figures from Drewry indicate that Asia-Europe prices dipped slightly last week. 
Figures from Freightos indicate that China-US West Coast prices rose 14% since last week, 76% higher than rates in 2019 at this time. China-US East Coast prices climbed 10% since last week and are 22% above rates for this week last year.
 
Freightos highlighted that “June is the first month that saw two successive GRIs implemented since January 2019, which is all the more striking for happening in such a low demand environment”. It said returning demand and limited capacity “have done what tariffs couldn’t for ocean pricing – China-US West Coast rates increased, with the 50% June increase over the end of May setting an FBX record for monthly gains (compared to tariff-driven August 2018’s distant second at 38%).
 
Drewry’s latest freight rate assessments on eight major East-West trades highlighted that spot rates on the transpacific routes have continued to escalate for the last four weeks. Rates on Shanghai-Los Angeles and Shanghai-New York “soared” last week by 24% and 18%, respectively – Average Shanghai-Los Angeles rates are almost double their level of this time last year, up 91%. However, rates on Los Angeles-Shanghai remained stable.
 
Easing restrictionsIn its analysis of the current market picture, Freightos noted that “demand for freight continued to increase this week as some states began easing restrictions and some shoppers have begun returning to stores”. It said this “demand bump combined with already tight ocean capacity from cancelled sailings to keep ocean rates climbing”. 
It noted that “some carriers even restored a couple cancellations to add some capacity to the market”, but added: “Even with the now weeks-long climbing demand, many industry observers hesitate to call this the start of a sustained rebound, with indications that consumer spending will not come roaring back any time soon. This makes the spikes throughout June even more remarkable.” 
 
Trucking industry association the International Road Transport Union (IRU) is calling on the EU to hand the industry €75bn in post-coronavirus recovery support. Raluca Marian, general delegate of the IRU’s permanent delegation to the EU, said today: “According to our calculations, and given the huge loss our industry has experienced and is still expecting, we need an envelope that amounts to about 10% of this budget for the trucking industry to embrace the future and focus on decarbonisation, digitisation and infrastructure.” Elizabeth Werner, director of land transport at the EC’s transport commission said: “We want to see the industry and governments invest in more automation in terminals and more electronic charging or road tolls and vignettes. “These are big numbers and we want to transform the road industry. I think we can be pretty sure there will be investments in more sustainable infrastructure, alternative fuels, greening and fleet renewal schemes.

Sources: The Loadstar, Lloyds Loading List.

With reference to the information published by Container News, shipping lines continue to tightly manage capacity and the rising demand may have consequences for shippers. Cancelled capacity has so far matched the decline of global demand, give or take 10%. According to the Danish consultancy Sea-Intelligence, the level of void sailings has now reached three times the capacity reductions for Chinese New Year.
That could change in the third quarter as lines maintain cuts to services amid rising demand. Some 4 million TEU of cancelled capacity globally has been matched by a global demand that has plummeted by 4.4 million TEU this year to date. The major east/west trades have seen the bulk of the cancellations and the fall off in demand, with the latest round of cancellations including a substantial cut in capacity.
So far 10-15% of sailings from Asia to Europe have been cancelled through August, and 5-10% have been blanked to the US. The bump in demand has also resulted in some rolled shipments out of China, with some shippers reporting delays of up to two weeks to get on overbooked ships.

Air Freight

According to Journal of Commerce, high air cargo load factors on trans-Atlantic routes are keeping rates elevated into June, with capacity so tight that not even a sharp decline in volume over the past week has been able to soften prices.
The trans-Atlantic aviation market is one of the busiest passenger trade lanes in the world, with thousands of frequent, scheduled flights and direct city-to-city connections offering a highly attractive belly cargo option to shippers. COVID-19 travel bans imposed in March reduced overall capacity across the Atlantic by about 60 percent overnight, sending freight rates soaring.
The capacity-demand imbalance kept Europe-US prices above 2019 levels through May, and the rates strengthened further into the first week of June, according to data from the TAC Index, HERE.

High base costs of operating passenger freighters: Even as volumes decline, most of the air cargo on the trans-Atlantic continues to be shipments of personal protective equipment (PPE) to help fight the coronavirus disease 2019 (COVID-19), with some general cargo beginning to enter the market
As airlines try to make greater use of their grounded passenger fleets, news from IATA that April was likely the peak of the coronavirus impact on their operations may provide some comfort.

Ocean Freight

On the Ocean Freight side, proactive capacity management by ocean carriers is continuing to underpin freight rates on the major east-west trade lanes, as reported by the Loadstar.
The European components of today’s Shanghai Containerized Freight Index (SCFI) were in positive territory, with spot rates for North Europe up by 2%, while edging up by 0.8% for Mediterranean ports.
As carriers continue to “hoover up” a bookings backlog, with around 20% less capacity deployed than advertised, it was noted that “the roll pools had improved somewhat and overall we are seeing less rolling”.
However, the recent demand spike looks to be short-lived as the outlook for the trade lane shows no sign of a sustained recovery. This week, both the 2M and THE alliances announced they would continue to blank entire North Europe loops through July, August and September.
The Ocean Alliance partners, CMA CGM, Cosco (OOCL) and Evergreen will announce their blanking programmes for Q3 next week. As it stands, according to eeSea data, Asia-Europe carriers have so far removed 13% and 11%, respectively, of scheduled head haul sailings for July and August.

AIR FREIGHT PRICING TREND CHINA TO EUROPE, CHINA TO US YOY
This crisis has of course a strong impact on pricing to/from China, from Hong Kong and to/from USA/Europe, HERE.

 

 

Source: The TAC Index, published 1 June 2020

The easing of lockdowns, especially across much of Europe, has helped demand for container freight gradually get back on its feet to take the first tentative steps toward recovery.After a few months in which demand tumbled around the world, the re-opening of some shops, with more expected in the coming weeks, has resulted in a sudden jump in demand, especially as there are large numbers of vessels out of the market following the void sailing measures by carriers.However, there are some concerns emerging on the Asia-Europe tradelane over a gap starting to grow in prices offered for container freight.Some carriers have reduced rates in an attempt to boost cargo numbers, and this has created a dilemma. The lower rates have attracted more cargo, which has left some vessels at over 100% capacity with some cargo rolled. This has put already fragile supply chains under further pressure.On top of this, looking beyond the short-term boost from easing of lockdown restrictions, are the tremors of an economic slump that all but the most bullish analysts are bracing for.This could have a significant impact on container freight should consumer demand change.

Apparel factories in Bangladesh are still running at half-capacity after orders dried up, and bosses remain pessimistic about the likelihood of new orders any time soon.  Amid the impact of the Covid-19 pandemic, factories which laid-off part of their operations are struggling to make a full comeback, leaving hundreds of workers jobless.  And this week several more factories terminated hundreds of workers, as they are not receiving enough orders from western buyers.  President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Dr Rubana Huq told The Loadstar only 50% of normally expected orders were coming in nowand she is not expecting a return to full capacity soon.

Source, The Loadstar, 3 June

May 2020 updates

Air freight rates out of China have continued to fall, although not at the pace they rose.
New figures for the past week from the TAC Index and Freight Investor Services (FIS) show China to Europe down $0.59, while China to the US is down $0.23.  FIS said the slower rate drop was due to Hong Kong, where rates rose to the US by $1.14. Shanghai, however, fell $1.37 to Europe and $1.60 to the US.  Seabury data from last week showed eastbound transpacific capacity grew 4% compared with last year, while Asia-Europe was down only 10%. Asia to Latin America was down 13% year on year. But, it added, “transatlantic air cargo capacity shows no signs of recovery yet”.
It said there was limited growth of passenger freighters on the transatlantic, with most added on routes to and from Asia, and intra-Middle East and south Asia. Passenger freighters had added close to 75,000 tonnes of air cargo capacity a week since the peak decline, but, as Seabury notes, most of it is directed towards the urgent demand for personal protective equipment (PPE).
Overall, global air cargo capacity is 26% lower than this time last year. FIS’s forward-looking rates suggest that next month will see China to Europe rates rise $0.32, but China to US will fall $0.40. It forecasts that in July, both lanes will lift $0.20.

Source, The Loadstar, 27 May

AIR FREIGHT PRICING TREND CHINA TO EUROPE, CHINA TO US YOY 
This crisis has of course a strong impact on pricing to/from China, from Hong Kong and to/from USA/Europe, HERE.

Source: The TAC Index, published 25 May 2020

Shipper and forwarders planning their container shipment bookings for the third quarter can expect a new wave of blanking announcements over the next two-to-three weeks.  While the second quarter of the year was characterised by a wave of cancelled sailings, there have, so far, been relatively few announced for the third quarter, according to eeSea data.  
During July, there are some 235 headhaul sailings scheduled for the Asia-North Europe and transpacific trades, with just five blanked so far. In comparison, May saw 245 sailings and 51 cancellations, and June saw 223 sailings and 28 blanks. However, SeaIntelligence Consulting founder Lars Jensen told a TOC Events webinar this morning that shippers could expect more blankings for July unveiled soon. “July is now just five weeks away and that’s typically when the first bookings for those sailings would be made, so I would expect carriers to announce blank sailings in the next two or three weeks – not necessarily for all of the third quarter, but certainly July.” 
Last week saw some sailings on the transpacific trade "unblanked” however, Mr Jensen cautioned: “We are beginning to see unblanking, but I do not believe this is sign that demand is returning. What this is a sign of is that the enormous amount of capacity withdrawals was slightly overdone It is not a sign of strong demand, but rather shows that the carriers would rather blank too much than too little.” He explained that blank sailings had proved to be carriers’ only way of maintaining revenue and that, should the industry suffer a freight rate drop in line with the demand decline, the financial disaster would be magnified.

Source, The Loadstar, 26 May

While air cargo volumes diminished rapidly in March, new data for April offers some hope that the decline may be ‘bottoming out’ in parallel with a possible stabilisation of the global economy.  
According to the latest industry intelligence from CLIVE Data Services, in April air freight volumes declined 39%, year-on-year. The data specialist added that “an even greater capacity drop of 45% highlighted the current shortage of air cargo capacity”.
However, optimism could be found in its week-by-week data which revealed that air cargo volumes stabilised from mid-March to mid-April and became “less bad” during the two weeks to 3 May.
According to figures from CLIVE, global air cargo volumes were down, year-on-year, by 47% in the two weeks to 5 April, and 48% in the week to 12 April, before beginning to recover to a 43% deficit the following week and a deficit of 32% in the two weeks to 3 May.
That recovery of volumes broadly mirrored the pattern of capacity, which sank to a low of more than 50% below its 2019 level in the week to 5 April, according to figures from CLIVE, before gradually recovering.CLIVE, which consolidates data shared by a representative group of international airlines, estimates that global air cargo capacity remained down, year-on-year, by as much as 40% in the week to 3 May.

Source, Lloyd's List, 22 May

As it is reported by Alphaliner, the inactive containership fleet has surged to a new record of 524 units of 2.65 M teu as at 11 May, surpassing the previous high of 2.46 M teu at the begining of March this year. The inactive fleet currently accounts for 11.3% of the total containership fleet capacity. The inactive fleet is expected to continue to climb in the coming weeks, with the impact of the blanked sailings due to the COVID-19 pandemic still to be fully reflected in the ship idling numbers. Unexpectedly strong demand for cargo space on the route from Asia to the US West Coast has prompted carriers to rethink capacity deployment plans. These recent reconsiderations follow in the wake of rationalization moves that had resulted in a record number of void transpacific sailings in May.

Source, The Loadstar, 22 May

According to the recent Seabury report, global air cargo capacity is 26% lower compared to last year. Trade lanes to and from Asia fare better than the global average; Eastbound Transpacific capacity has grown by 4% compared to last year; Asia - Europe capacity declined by only 10% and Asia to Latin America by 13%. Passenger freighters drive the continued recovery of widebody belly capacity. The freighter capacity remains relatively stable compared to last week, while belly capacity continues to recover due to passenger freighters, the 17% increase vs. last week equates to 27k tonnes of capacity (~1,820 flights). Transatlantic belly capacity decreased by 81% since February. Widebody belly capacity on the Transatlantic shows no signs of recovery, while freighter capacity remains stable and has only increased 8%. Intra-Asia Pacific widebody belly capacity increase is strongest at PVG. PVG, ICN and NRT this drives the majority of the recovery in intra-Asia belly capacity, as intra-Asia belly capacity at other Asian airports such as TPE, HKG and SIN remains mostly flat.


With logistics challenges mounting on land, at sea and in the skies, shippers are already coping with a perfect storm, according to Rogier Spoel, policy manager for air freight at the European Shippers’ Council. Although barge, rail and ports in northern Europe are functioning smoothly, he said the on-off nature of the global container shipping pipeline was creating multiple difficulties, not least because record numbers of blanked sailings on the Asia-Europe trade made it difficult to plan export and import supply chains.
Making matters worse, “now we are also seeing more blank sailings on the trans-Atlantic trade due to the drop in consumer demand in the US”, he added. The steep rise in air cargo pricing as bellyhold capacity has been withdrawn and demand for emergency shipments of medical cargoes has soared has also been problematic for some shippers “who need their cargo but don’t have the margins to pay the rates so are not importing or exporting” he said. “The big problem shippers are experiencing is that the whole freight network has collapsed,” said Spoel. With airports desperate for revenue to stay afloat, freighter operators are switching services between airports in search of the optimum route and price. This does not, however, always suit shippers. As a result, “nearly all air cargo flights, whether they are full freighter flights or just passenger flights carrying cargo, are now ad hoc operations”, said Spoel said, making it difficult to plan ahead..“Right now, shippers are going in blind, not knowing what capacity is in the market – which is a bad negotiation position.”

Source, AirCargoNews, Lloyd's Loading List, 20 May

As demand for container shipping appears set to increase, the top priority for shippers is securing space on vessels and container equipment, according to a new survey of European Shippers’ Council members.
The survey, conducted in conjunction with Drewry Supply Chain Advisors, also found shippers were becoming increasing nervous about the financial position of their transport providers. Clearly, part of the concern is the dramatic cuts in capacity since the onset of the coronavirus pandemic, with hundreds of sailings on the main east-west and larger north-south trades blanked, often at short notice for four-to-six weeks. Despite the drop in volumes, blanked sailings meant utilisation remained high on the vessels that did load – and, according to SeaIntelligence Consulting, this has meant freight rates on the major trades are well above last year’s levels.“Carriers have been particularly good at maintaining freight rates and, net of fuel, spot rates are actually up 25-40% in some trades compared with 2019. Carriers achieved this through rapid and hard capacity cuts,” SeaIntelligence chief executive Alan Murphy said earlier this year. Our view is that shippers will benefit from shorter-term contracts and either by diversifying their carriers’ selection pool or by concentrating more on financially healthier or government-supported carriers. There have been fledgling signs this week of a recovery in demand on its way, with small capacity additions set for the transpacific headhaul eastbound trade.

Source, The Loadstar, 20 May

AIR FREIGHT PRICING TREND CHINA TO EUROPE, CHINA TO US YOY
This crisis has of course a strong impact on pricing to/from China, from Hong Kong and to/from USA/Europe, HERE.

 

Source: The TAC Index, published 18 May 2020

Based on reports in Container News, some of the biggest ports of United States are suffering from the serious impact of the ongoing coronavirus situation. Major US ports are facing strong challenges caused by the unprecedented crisis, decreasing demand and cancelled voyages are the most serious obstacles facing the ports. April’s report from the Northwest Seaport Alliance (NWSA), a marine cargo operating partnership of the Port of Seattle and Port of Tacoma, is maybe the most discouraging case. NWSA saw last month’s container volumes plummeting by 24% compared to the same period of the last year, handling 247,675TEU. Compared to April 2019, full imports declined 13.9% while full exports decreased 17.6%.
Port of Long Beach (POLB) handled 519,730TEU last month, down 17.3% from April 2019, which remains the Port’s busiest April on record. Imports slid 20.2%, exports declined 17.2% and empty containers headed overseas decreased by 12.2%. The Port handled 2,202,650TEU during the first four months of 2020, which is a 9.5% fall from the same period in 2019.
While the San Pedro Bay Port Complex, which is comprised of the Port of Los Angeles and the Port of Long Beach, has reported only 10 blank sailings from 1 April to 30 June in 2019, it is expected to have 48 cancelled vessel voyages for the same period of 2020.The Port of Oakland has stated that April loaded container volumes increased 1.4% compared to the same month last year, as a combination of exports rising by 3.6% and imports dipping 0.9%. However, its total cargo volume – imports, exports and empty container shipments – declined 6.5%. The port attributed the decline to a 29% drop in shipments of empty containers back to origin destinations. Port of Oakland officials expect reduced cargo volumes in the next months because 11% of scheduled Oakland vessel calls in May and June have been cancelled by shipping lines.Port of Houston has also suffered from the coronavirus repercussions. The port in Texas has shown a significant year-on-year 12% decline in April when it saw a total of 221,540TEU. However, for the full year, the port handled 994,627TEU through April, which translates to a 5% increase compared to the first four months of 2019.

Source, Container News, 20 May

US retailers are losing hope of any recovery in the autumn, casting serious doubt on the summer peak season in the transpacific arena.Shoppers will come back and there is still a need for essential items, but the economic recovery will be gradual and retailers will adjust the amount of merchandise they import to meet demand.Volume levels had stayed well below usual levels, although Chinese factories have resumed production and US stores are beginning to re-open.The resumption of Chinese production has not allayed concerns about supply chain disruptions, as other manufacturing locations are still affected by measures implemented to stop the spread of the virus.US ports are bracing for falling volumes after imports from Asia declined 1.3% in April. The South Carolina Ports Authority has lowered its container outlook for the remainder of the fiscal year and announced steps to trim costs by 10%. Virginia Port Authority has signalled that it is not expecting any volume growth in the near term. According to SeaIntelligence, container lines have blanked transpacific capacity by 17.3% in the second quarter. So far they have played their cards close to their chest regarding the third quarter, but more blanked sailings would not surprise anybody at this point. 

Source, The Loadstar, 19 May

The air cargo industry has come a very long way in a very short time. Typically representing about 12% of airline revenues on average, it has now come to represent almost the entirety of some carriers’ turnover.  This sort of quote – from Air Atlanta Icelandic CEO Baldvin Mar Hermannsson – is becoming typical: “Freight is our lifeline now. We have no passenger revenue.”  
Of course, carriers are looking to widen their services from next month, with more passenger travel anticipated. But nowhere near the level seen pre-Covid. Carriers are expecting years of diminished passenger capacity. 
This is air cargo’s opportunity to make its case, as it is now the driver, to governments, regulators and even IATA and growing interest from financial institutions in air freight suggests airline investment decisions will be supported by the case for cargo. If cargo can be in the cabin, it can also be in the boardroom. Everyone is in the cargo business now, but the question is, for how long. Operating passenger aircraft as freighters only makes sense at a certain price point and, with rates likely to come down from the absurd highs seen this month and last, that capacity will decline to some extent – leaving the majority of the cargo market to real freighters. Airline freighter capacity is now 28% higher than last year, according to Seabury. This is the time for freighters, and for airlines to finally notice how critical cargo is to their bottom lines. 

Source, The Loadstar, 15 May

China-Europe rail freight is bucking the pandemic-wide trend of falling air and ocean volumes, boasting double-digit growth this year. According to China Railway Group, 2,920 trains ran between January and April, carrying 262,000 teu, up 24% year on year. Last month alone, westbound volumes were up 58% and eastbound 29%, totalling 88,000 teu. Duisport reported its weekly China trains for April had increased from the “normal” 35-40, to 50, following the end of the lockdowns in China. Andre Wheeler, chief executive of Asia Pacific Connex, said Duisport’s figures were an “important indicator”, since 80% of all rail traffic out of Chongqing passes through the key dry port hub.“It is also interesting that new routes are being added, as rail is proving to be a viable option.

Source, The Loadstar, 15 May

Based on the Seabury report, global air cargo capacity is 25% lower compared to last year. There is a large difference in growth between trade lanes; Transpacific cargo capacity is up with 9% to 18%, while Transatlantic cargo capacity is over 50% lower compared to last year. Transpacific and Asia Pacific – Europe air cargo capacity is almost back to 2019 levels. 

Global widebody belly capacity increased 30% in the last two weeks: Airline freighter capacity is 28% higher compared to last year; after consistent growth in March and April, freighter capacity remains mostly stable compared to the two previous weeks. Total Asia Pacific outbound freighter capacity increased 68% compared to last year. Intra-North East Asia (NEA) is the biggest trade lane for air cargo capacity; NEA cargo capacity to North America shows strong growth of +25% compared to last year.

The Covid-19 pandemic has hit the automotive industry hard. US car production in March was 1.7 million units, down from 2.62 million the previous month, and European output was down by at least 1.2 million vehicles by late April. The WTO, which predicts global trade to shrink this year, foresees the most pronounced contractions in the electronics and automotive sectors. Indeed, US auto sales were almost 40% off the pace in March. In China, vehicle sales fell as much as 80% in February. Projections for the remainder of the year are grim. Meticulous Research predicts a 12-15% dip in global sales for the year, which translates into a $5.7bn impact on the auto industry. These numbers are in stark contrast to projections last summer – with corresponding ramifications for the automotive logistics sector. Last June, Global Market Insights was predicting the automotive logistics market would climb from $115bn a year to $170bn by 2025, eleven months later, there are question marks over how long it will take automotive supply chains to get going again. The complexity of these supply chains – thousands of parts from a multitude of suppliers – is a massive headache. Many involved are small firms, and it is unclear how many of them will have survived the crisis – the loss of a few small manufacturers can paralyse vehicle production. And the US restart looks set to be hampered by the ongoing lockdown in Mexico, which is a major supplier of parts. Some pundits have warned that it could take months for auto supply chains to be fully functional again.

Source, The Loadstar, 14 May

AIR FREIGHT PRICING TREND CHINA TO EUROPE, CHINA TO US YOY
This crisis has of course a strong impact on pricing to/from China, from Hong Kong and to/from USA/Europe HERE.

 

Source: The TAC Index, published 11 May 2020


With US retailers projecting double-digit declines in containerized imports into the fall, carriers’ hopes for a peak-season rebound in the eastbound trans-Pacific are fading fast.Global Port Tracker, published monthly by the National Retail Association and Hackett Associates, projects double-digit declines in US imports in May through August, and a 9.3 percent decline in September, compared to the same months last year. Due to the uncertain retail environment resulting from the impact of the coronavirus disease 2019 (COVID-19) on consumer demand, the NRF said retailers are being cautious in projecting import volumes beyond September. Shoppers will come back and there is still a need for essential items, but the economic recovery will be gradual and retailers will adjust the amount of merchandise they import to meet demand.Nevertheless, since the peak shipping season for imports from Asia generally runs from August through October, retailers are signaling to the trade they expect peak season 2020 to be weak, at best, which would be a continuation of the first half of the year. Global Port Tracker projects first-half imports will decline 13 percent from the same period in 2019.Carriers are prepared to cancel more sailings in the months ahead if prospects for the third quarter remain bleak. Carriers in the trans-Pacific trade have already announced  blank sailings into July that will reduce capacity in the largest US trade lane by 17.3 percent, according to this week’s Sunday Spotlight published by Sea-Intelligence Maritime Consulting.

Source, Joc, 13 May

The lasting impact of Covid-19 on the US container trade will force US ports to position themselves for more diverse trade-lanes, somewhat smaller vassels, and accelerate the shift of imports away from the West Coast as retailers increase sourcing in Southeast Asia, according to ports director and industry analysts. Although 12,000-14,000- Teu vessels will remain the workhorses in the eastbound trans-Pacific, expanding sources in Southeast Asia, The Indian subcontinent,Latin America, and possibly Africa will require the deployment of 8,000-10,000-Teu ships. Ports in developing countries are best suited for those vessels, and their deployment could mean more opportunities for second-tier US ports to serve niche markets.The chief lesson going forward, from the US-China trade war, which has resulted in a significant drop in imports from China, to the coronavirus disease 2019, which caused extended factory shutdowns in that country, is that the reliance by retailers and manufacturers on a "China-plus-one-strategy" is too risky. Retailers for the past two decades sourced most of their merchandise from factories in China but also sourced a small portion of their imports from another country in case there were problems in China. Now retailers may spread out their sourcing in multiple countries, in several differenr Regions. The heavy dependencey of retailers and manufacturers on 15,000 Teu-plus vessels linking a handful of gateways in North Asia with a limited number of ports in North America will lessen over the next two decades. However it remains to be seen which larger ports will gain ground at the expense of their smaller counteparts. To cut costs, container lines could consolidate calls around larger ports, but they also may keep their service to smaller ports if their total cost, which includes inland transit and ports tariffs, is competitive.

Source, Joc, 12 May

US box imports likely to see double digit decline this year; Global Port Tracker’s revised first half of the year forecast is 13% lower year on year. But Hackett Associates continues to see recovery in the second half of 2020.‘Factories in China are largely back online and stores that closed here in the US are starting to reopen. But the volume is far lower than what we would see in a normal year,’ says Jonathan Gold, National Retail Federation vice-president for supply chain and customs policy.Mr Gold expects that shoppers “will come back and there is still a need for essential items”, but also that “the economic recovery will be gradual and retailers will adjust the amount of merchandise they import to meet demand”.
Ben Hackett, founder of consultants Hackett Associates, said his firm believes second quarter of the year economic growth will be “significantly worse” than the previous quarter.
Still, Mr Hackett said “we continue to expect recovery to come in the second half of the year, especially the fourth quarter and into 2021” — an expectation based on the “big and somewhat tenuous assumption” that there is no second wave of the virus.Ultimately, he said, “much will depend on consumers’ willingness to return to spending”. The NRF and Hackett Associates jointly publish the monthly Global Port Tracker, which analyses containerised import data from the major US container ports.According to the May 8 GPT, US ports handled 1.37m teu in March, representing the lowest volume since the 1.34m teu recorded in March 2016. The current figure is down 9.1% from February and down 14.8% year on year. 
The GPT estimates April throughput at 1.51m teu, down 13.4% year on year. It forecasts May at 1.47m teu, down 20.4%; June at 1.46m teu, down 18.6%; July at 1.58m teu, down 19.3%; August at 1.73m teu, down 12% and September at 1.7m, down 9.3%.

Source, Lloyd's List Maritime Intelligence, 11 May

Ocean carriers are scrambling to cut costs as the demand for liner services continues to plummet, and the off-hiring of chartered tonnage is top of their agenda.Carriers are withdrawing up to 20% of their network capacity on the main tradelanes and, notwithstanding that many chartered ships will have been fixed with owners on charters of 12 months or more, they will be endeavouring to redeliver as much surplus chartered tonnage as possible in the coming weeks and months.

Bangladesh’s import and export volumes in April nosedived as the coronavirus pandemic took hold, new data shows.Last month, export volumes through Chittagong port fell 87% and imports were down 22% – a crippling blow for the impoverished South Asian nation of 160m people.
According to figures from Chittagong Customs House, April saw 1.24m tonnes of goods exported through the port, compared with over 2.89m tonnes in April last year. And 6.65m tonnes of goods were imported last month against 8.43m tonnes a year ago.Garment makers and economists have expressed grave concern and fear further deterioration as the deadly virus continues to expand its grip globally.Retail shops in Europe and the US, the major importers of Bangladeshi products, have started reopening, but on a limited scale, with a return to previous levels of economic activity still in the distance. However, some Bangladesh garment factories reopened this month, but most commercial activities remain closed as the Covid-19-linked shutdown, which began  on 26 March, is extended until 16 May.

Source, The Loadstar, 08 May

Shipping lines have realised the benefits of consolidation during the coronavirus crisis, with the sector seeing a “new competitive landscape”. According to Lars Jensen, CEO of SeaIntelligence Consulting, carriers’ ability to control capacity is better than ever, since there are now only “seven or eight” global carriers and just three alliances on the deepsea trades.“In the three months impacted by the virus, demand has dropped, in some cases by 20%-30%, and the oil price has dropped 60%-70%, yet freight rates are unchanged,” Mr Jensen said during a webinar by freight marketplace Cogoport. “This is a very clear example of what you can do when you have a much more consolidated industry,” he added. Furthermore, he said, there was a “new competitive landscape” in which the perennial era of “all savings and more” being passed on to shippers was over.Mr Jensen believes the impact of the pandemic on container shipping is at its peak, from an export perspective, with blank sailings removing 25% capacity on the transpacific, 30% from Asia-Europe and 59% – within a single week – on “top scorer” Asia-east coast South America trade. The future for freight rates, therefore, looks much more stable than during previous cycles, he said.

Source, The Loadstar, 07 May

Air freight prices this week soared past 10 dollar per Kg on routes out of China as demand for vital medical supplies to combat the Covid-19 continued to consume all available capacity. With demnad for personal protectice equipment, pharmaceuticals, and essential food products outstripping capacity, the sky-high prices also reveal the  heavy impact of losing so much belly space on China toEurope and the trans-Pacific trade lanes. Close to half of total  air cargo capacity was withdrawn from the key China to Europe and North Americas market with the grounding of passengers flight in March as the Coronavirus started to spread rapidly around the world. The scheduled passengers flights multiple daily and weekly flight provided the backbone of postal services, e-commerce shipments,couriers, and manufacturers using just-in-time strategies.Accordinf to IATA (Air Transport Association), global air freight volumes fell over 15% in March year over year while capacity tumbled 23%, and the space constraints have persisted through April. In response air freight rates continue to hit new highs every week. Shanghai-Europe rates this week are up 313 per cent year over year to 10.45 dollar per Kg, and Shanghai-North America rates are up 226 per cent to 10.55 dollar per Kg, according to TAC Index. Some observers anticipate high air rates even after shotdown ends, as many passengers flights and their cargo capacity will likely stay canceled even as other restriction are lifted.

The offer by shipping lines to temporarily store containers at way ports to avoid congestion at destination terminals has proved popular with European importers.
There has been a significant take-up of the products to help manage the reduced demand during the coronavirus crisis, which have been variously dubbed ‘delay in transit’, ‘suspension of transit’ and ‘detention in transit’. However, there have been reports of some instances where the wrong boxes have been selected for storage at the transit hubs. Moreover, insurers are concerned about the increased security risk from the storage of containers at the temporary off-dock facilities, as well as the potential for cargo damage.

Source, Joc,The Loadstar, 06 May

AIR FREIGHT PRICING TREND CHINA TO EUROPE, CHINA TO US YOY

This crisis has of course a strong impact on pricing to/from China, from Hong Kong and to/from USA/Europe HERE.

 

Source: The TAC Index, published 4 May 2020

Flows of PPE out of China are expected to see further delays as the country enters a  holiday period until Tuesday, 5th May while rates continue to soar, triggering criticism of airlines. It is expected that China’s risk control office, which oversees and checks PPE exports, will close and there could be reduced hours at Customs, according to the Loadstar. Shippers are already experiencing delays out of China, which are expected, at least temporarily, to worsen. Meanwhile, the shift reported last week towards using Hong Kong has continued. Despite news from Seabury last week that capacity had risen, albeit modestly, (the total cargo capacity decline of 29% shows an improvement on the previous week, when it was 31% lower), rates have not gone down.


Cargo revenue contribution can and will make a huge difference to airlines when it comes to reinstating passenger routes, and it will have a significant impact on their choice of aircraft gauge (size) and service frequency. Cargo’s financial contribution has always been critical to passenger airline profitability, but will now take on a critical role in decision making for airline boards in the coming years as to which routes can resume profitably, and which aircraft is right to serve the demand anticipated. There will be a belly capacity shortage as the weakest airlines disappear completely and older, cargo-friendly passenger widebodies, are retired. Airlines will strive to find profitable solutions to optimise their assets, in an environment where passenger yields and load factors alone cannot come close to providing the solution. As airline fleets shrink and activity levels decline, airports will be seeking to retain and, hopefully, gain a greater share of the airline traffic and activity that will remain, and air cargo can and must play a central role in decision making.
There is much uncertainty as to what the future air cargo market will look like, but certain trends are evident. E-commerce demand will certainly continue to grow faster than anticipated; there will be a new tendency toward reshoring or near-shoring supply chains to reduce risk; and geopolitics will have an increasingly important impact on both demand and capacity.

Source, The Loadstar, 04 May

April 2020 updates

The air freight results for March are out – and the numbers will surprise few people.
Cargo capacity fell 22.7%, year on year, while cargo tonne km (CTK) dropped 15.2%, according to IATA. And additional freighter operations (+6.2% in capacity terms) and passenger freighters were not enough to offset the reduction in the passenger fleet, which saw international belly capacity decline by 43.7%. However, March was a tale of two halves, as the larger impact of Covid-19 hit in the second half of the month: dynamic load factors fell 2 percentage points, year on year, according to Clive Data Services.In the first half of March, China had not re-opened and the worldwide demand for PPE hadn’t started.The massive reduction in capacity only hit in the second half. And much of the PPE traffic is one-way, preventing overall load factors from rising much.April, however, is showing rising dynamic load factors.Asia Pacific, Europe and North America all saw falls of about 18% in CTKs, said IATA, while Africa was down just 2.1%, its lockdowns starting later than elsewhere.

Vietnam could see a v-shape freight recovery if the country continues to contain the spread of coronavirus.Some countries in the EU and states in the US are opening up, but the key question is how long will it take for demand to return?The most common scenario is a poor second quarter and then a sharp return in Q3 and Q4, provided Vietnam stays where it is today in terms of containing the virus. When looking at the companies that are moving airfreight, which is mostly personal protective equipment (PPE), it’s moving at three to five times the per kilo rate compared with the end of 2019,that has created a shift to ocean freight, and  both inbound and outbound, with ocean volumes staying fairly flat year on year.The beauty of Vietnam, in terms of logistics, is not just exports, but the very healthy and fast-growing domestic economy.

Source, The Loadstar, 30 April

AIR FREIGHT PRICING TREND CHINA TO EUROPE, CHINA TO US YOY
This crisis has of course a strong impact on pricing to/from China, from Hong Kong and to/from USA/Europe HERE.

 

 

Source: The TAC Index, published 27 April 2020

The volatility in air freight markets – which has heightened during the Covid crisis – could help trigger greater interest in managing freight rate risk.The move towards new ways of buying air freight, including via the derivatives market, has been eased by the inclusion of the TAC Index air freight rates to the Baltic Exchange, where it will be rebranded as the Baltic Air Freight Index (BAF Index).The proponents of a move towards the integration of air freight into global commodities markets argue that the industry was ripe for this anyway, owing to the highly volatile nature of rates.But the latest developments in air freight pricing could accelerate the process.Covid-19 has seen the large majority of fixed-price contracts capitulate under the strain of volatility,the stimulus is there for derivatives and index-linked agreements to allow businesses the ability to create contracts that are far more resilient to volatility, while still achieving the industry-wide aims of stable costs and revenues over any timeframe and with any level of price volatility.

A Beijing crackdown on shoddy medical exports has led to a surge in air cargo costs and congestion in South China.Following widespread complaints of defective personal protective equipment (PPE), including face masks and coronavirus test kits, the Chinese authorities have tightened quality controls and increased customs inspections.New regulations include yesterday’s announcement by China’s Ministry of Commerce on strengthening the export quality supervision of “non-medical” masks, including a blacklist of suppliers which have failed to gain export certification. “In Shanghai, customs brokers have raised rates for export clearance by up to six times, due to extra paperwork and processing time.So far this is impacting the Hong Kong, Guangzhou and Shenzhen regions, but it is expect  to happen in the rest of the country, as at least 90% of all medical cargo will require customs inspection.

Source, The Loadstar, 29 April

According to the report on Lloyd Loading List, as demand for air freight capacity continues despite the current inflated rates on many lanes, driven by the rush to ship healthcare equipment, passenger airlines are expanding their cargo-only flight networks.

United Cargo has increased its programme of cargo-only flights to 150 per week, using Boeing 777 and 787 aircraft from United's passenger fleet, the US airline has operated over 460 cargo-only flights and has moved over 7 million kgs of cargo solely on these flights. It said the numbers “are increasing every day” and “are even higher if you consider our full cargo network”.

Cathay Pacific, one of the first carriers to operate cargo-only passenger flights, said that in addition to adding more freighter flights it had operated a total of 257 pairs of cargo-only passenger flights in March and expects to operate a similar number of cargo-only passenger flights in April, “including on some long-haul routes such as the Southwest Pacific where air cargo capacity is extremely tight”.

Emirates SkyCargo said it had “rapidly scaled up its cargo services to connect an increasing number of global destinations”, noting that the air cargo carrier was currently operating flights to 51 destinations globally, “out of which 19 cities are served by the Emirates SkyCargo Boeing 777 freighter aircraft offering up to 100 tonnes of capacity per flight and 38 destinations are served by dedicated cargo flights on Emirates' Boeing 777 passenger aircraft offering up to 50 tonnes belly capacity”.

Other major network airline groups including IAG Cargo, Lufthansa Cargo and Air France KLM Cargo have also been ramping up their cargo-only passenger flights, including KLM Cargo reviving its B747 combi aircraft to operate as semi-freighters. And Virgin Atlantic Cargo also announced yesterday it will resume scheduled services to China, operating three flights a week between Heathrow Airport and Shanghai, to help fill strong demand ex-Shanghai for healthcare shipments.

Source, The Loadstar, 28 April

Air Freight rates out of China are at the highest level as massive global demand for personal protective equipment from Countries battling the coronavirus diseas 2019 continues unabated.The demand is so strong from Europe and the United States that China  factories manufacturing the vital medical equipment will remain open through the May 1-5 Labour Day Holidays.  On top of the sustained heavy demand for PPE, available cargo space has been drastically reduced with the continued suspension of passengers flight on both the China-Europe and trans-Pacific trades, which led to a market environment Freight Investor Services (FIS) describing the situation as "mayhem". The air freight  market sees a ballooning demand for medical equipment at eye-watering mark-ups being absorbed by end-users-governments, FIS noted in a market update this week, adding that some on-the-street rates were as high as 14 to 16 dollars/kg.  Online rate platform Freightos shows air cargo rates at record highs out of China, with demand for critical supplies high and limited capacity pushing rates up to 25 to 30 per cent over the previous  week for  the second consecutive week.

US ports and forwarders warn that a coming plunge in import volumes   will be even sharper than they feared, although their concerns of a bottleneck building from a last wave of Asia imports hitting terminals filled with containers left due to Covid-19 lockdowns, are fading. US port directors and forwarders anticipate rapidly declining import volumes beginning in mid-May and extending well into June as additional blank sailings announced by trans-Pacific carriers will reduce capacity by 25 per cent to the West Coast and to 20 per cent to the East Cost. However the ports do not anticipate equipment dislocation, such as they  feared would take place in the first quarter when terminals were struggling to  return empty containers to Asia. Port executives say imports in the coming few months are likely to decline by double digits, so there will not be a surge of containers that must be returned to Asia when they are emptied. Marine terminals and ports have added storage space for non-essential imports, alleviating any potential carglo flow issues.

Source, Joc, 27 April

Covid-19 lockdown restrictions on consumers, particularly in Europe and the US, have resulted in a dramatic slump in demand for container space and forced ocean carriers to blank hundreds of sailings.According to the latest data from Copenhagen-based maritime and supply chain intelligence company eeSea, carriers have so far cancelled 302 previously scheduled headhaul voyages in May across the major tradelanes – 11% of the 2,693 proforma sailings.That number is likely to increase significantly as carriers assess the full extent of the damage to their forward bookings as a consequence of governments shuttering non-essential stores and entertainment centres.

Australia has offered to help its exporters pay air freight costs in the face of “major air freight shortages” and soaring rates. The International Freight Assistance Mechanism (IFAM), set up by the Australian government, has a network of 15 air freight providers and freight forwarders to help shippers deliver agricultural and fish exports and, crucially, the government will meet a portion of the cost, as well as help with bookings.Eligible products include seafood, premium red meat, dairy and horticulture, including premium fruits and packaged salad or vegetables.Initially, the scheme will focus on exports to China, Japan, Hong Kong, Singapore and the UAE, but it is expected that the list of destinations will grow

Source, The Loadstar, 24 April

With oil prices plunging to less than $20 per barrel, ocean carriers are coming under increased pressure to cancel their bunker surcharges and introduce negative bunker adjustment factors (BAFs) across their networks.Strict capacity discipline by carriers has supported freight rates on the major tradelanes to compensate for recent demand slumps, but shippers complain that the lines are still charging BAFs – and IMO 2020 low-sulphur surcharges – despite the precipitous decline in fuel prices.Due to the logistics costs of supplying fuel to vessels in the form of storage and barging, the bunker industry is unlikely to follow crude oil prices into unprecedented negative territory – however, the price of compliant low-sulphur fuel oil (LSFO) at Rotterdam has now fallen to less than $200 a ton – a third of its cost when the IMO 0.5% sulphur cap came into force on 1 January.

US intermodal traffic has slumped to levels last seen in the recession of 2008-09 – and there are no signs of relief in sight.Industry organisations are predicting the decline continuing into next year.Weekly traffic numbers from the Association of American Railroads (AAR) keep plumbing new depths: in the week ending 27 March, volumes fell 15% to 2008/9 levels.Numbers on US imports offer little hope of recovery in intermodal volumes. Imports from Asia sank to their lowest level in seven years last month. According to global trade intelligence firm Panjiva, waterborne shipments bound for the US were down 10.1%, with containerised shipments down 9.2% to reach the lowest level since February 2017.

Source, The Loadstar, 23 April

Inactive fleet starts to climb again with more to come, according to Alphaliner. The inactive containership fleet has renewed its climb, reaching 385 units for 2.20 M teu as at 13 March, with more ships expected to join in the coming weeks. The number of blank sailings is expected to increase and the Labour Day holidays in May could trigger a new round of capacity cuts. Anticipating the lack of cargo demand, several carriers have begun to slow down ships on backhaul legs, allowing the vessels to skip a week upon their return to Asia.

US customs brokers and importers have been scrambling to revise monthly statements after the US government announced they could postpone duty, taxes and fees for 90 days. This temporary postponement applies to formal entries of merchandise entered, or withdrawn from warehouse, for consumption (including entries for consumption from a foreign trade zone) in March or April.

The UK could run out of warehouse capacity within a fortnight as imported goods pile up at storage locations and social lockdowns have devastated consumer demand. With outbound flows severely reduced or stopped altogether, as stores and factories are closed, inbound flows have become a mounting problem. Inbound supply chains continue towards destination, arriving at ports, requiring receipt, handling, onward distribution and storage. There are around 1.5 million pallet positions available across the country, largely in third-party warehouses, to which UK retailers are increasingly having to turn to for storage as their own distribution centres are full.

Source, The Loadstar, 22 April

AIR FREIGHT PRICING TREND CHINA TO EUROPE, CHINA TO US YOU

This crisis has of course a strong impact on pricing to/from China, from Hong Kong and to/from USA/Europe. HERE.

 

 
 

Source, The TAC Index, published 20 April 2020

According to Blue Alpha Capital’s first-quarter port throughput data of the top 10 US container ports, last month Houston saw a 19.4% decline in import containers, compared with the same month last year, to 88,302 teu, and a 2.9% quarter-on-quarter reduction to 293,272 teu. Overall import volumes for the US east coast ports fell by 11.6% in March, to 688,869 teu, according to the data, and was down by 3.1% for the first quarter at 2,251,459 teu.Total imports through west coast ports slumped 17.7% in March to 605,895 teu, and by 12.9% over the first quarter, to 2,195,181 teu. Indeed, Los Angeles saw import volumes collapse by 25.9% last month, to 220,225 teu, reducing its throughput performance in the first quarter by 15.8% on the previous year, to 905,011 teu.

Bangladesh customs authorities have allowed logistics operators to shift a further six types of goods in containers to private off-docks in a bid to reduce the number of containers in Chittagong’s yards.The authority have also asked importers to redirect Dhaka Rail Inland Container Depot-bound containers to a private box terminal near the capital by waterways.The measures are a bid to reduce the number of containers in Chittagong port yard, which has surpassed its capacity and is effectively overflowing – as of today, some 49,974 teu against capacity of 49,018 teu.

Source, The Loadstar, 21 April

There appears to be no end in sight for soaring air freight price and there are fears, with the next Chinese holiday due from 1-5 May, that prices might go even higher in the last week of April. Rates will continue to remain high as long as there’s a surge in demand for PPE. It’s unclear by how much, and even if, the upcoming holiday will impact rates further. Additionally another potential challenge is aircraft maintenance. Freighters are flying maximum hours, and available capacity is selling out almost immediately. Most freighter carriers are sold out through May and there is little room to add additional flights. It is not just rates that are high, handling charges and surcharges are also skyrocketing.

Reports of ports suffering congestion as consignees and their forwarders are unable or unwilling to collect imports were  backed up by new data showing higher utilisation of storage areas and warehouse. According to the weekly Covid-19 barometer report issued by the World Ports Sustainability Programme, part of the International Association of Ports & Harbours (IAPH), 35% of ports it surveyed reported an increase in utilisation for “foodstuffs and medical supplies, with some ports reporting capacity shortages”. The situation for consumer goods has remained almost the same, although there is an increase in the number of ports dealing with major increases in utilisation or facing capacity shortages (11% now vs 8% last week).” Terminals which handle finished vehicles have seen their facilities overwhelmed as automobile sales effectively vanished with the widespread introduction of social lockdown programmes. As dealers fail to collect new cars due to a collapse in sales, overcrowding of relevant storage areas near some quaysides has been reported.

Source, The Loadstar, 20 April

AIR FREIGHT PRICING TREND CHINA TO EUROPE, CHINA TO US YOY

This crisis has of course a strong impact on pricing to/from China, from Hong Kong and to/from USA/Europe, HERE.

 

 

Source, The TAC Index, 14 April 2020

The European road freight market could shrink by almost 20% this year, due to the coronavirus pandemic. New research from Transport Intelligence (Ti), published today; Ti’s original forecast of 2.1% growth in Europe’s road freight has had to be radically revised with the outbreak of Covid-19 and the subsequent social lockdown. It says the best Europe’s road freight operators could hope for now would be a 4.8% contraction, and in the worst case it could be a 17% contraction, which it described as “far worse than the great recession of 2008/9”.The big five European markets – Germany, the UK, France, Spain and Italy – are projected to suffer a cumulative decline of 5.6% in the best case, and 21.3% at worst.The variation largely depends on how long lockdowns continue and their effect on demand.


IATA has renewed its calls for a coordinated approach among governments to keep air cargo flowing.The association said that delays in permit approvals, quarantine measures for air cargo crew and not enough support on the ground continue to hamper the movement of cargo flights carrying vital medical supplies and other necessities. Airlines are providing as much capacity as they can. Governments need to step up and ensure that vital supply lines remain open and efficient and that there is adequate infrastructure and support available in the air and on the ground.
The association said that governments and regulatory bodies had issued guidelines to facilitate air cargo movement during the crisis. However  there are still “too many examples of delays in getting charter permits issued, a lack of exemptions on Covid-19 testing for air cargo crew, and inadequate ground infrastructure to/from and within airport environments.

Source, The Loadstar, Aircargo News, 17 April

The risk of another major ocean carrier bankruptcy has grown with the worsening global economic outlook, liner consultancy Alphaliner said today.It explained that the unprecedented amount of capacity withdrawn in April and May, a result of a collapse in demand, “will hurt carriers’ operating cashflows and further weaken their fragile balance sheets”. Picking up on the carrier Altman Z-scores, as at the end of December last year, for the 11 largest lines that publish results – excluding Japanese merged carrier ONE – the consultant painted a gloomy picture of the financial health of the liner industry.

Australia’s coronavirus lockdown and collapse in consumer demand could trigger a container storage crisis.Container yards were full of empties which would have been carried back to China, but for the huge amount of withdrawn capacity by shipping lines, totalling about about 20 vessel calls so far.
With more imports arriving over the coming weeks, a backlog of cargo ordered before the coronavirus crisis began, the port was urgently searching for backup sites to store the overflow.As a result, some shippers and transport operators are concerned about possible detention and demurrage (D&D) charges, should they be unable to unpack and return containers to shipping lines.

Source, The Loadstar, 16 April

According to the Sea-Intelligence, blanked sailings have risen more than 400% in a week .Freight rates over the next few weeks on both the Pacific and Asia to Europe trades will be key to the carriers' losses this year. Over the course of the next few weeks carriers will know what kind of losses they will make over the course of the year, with further wide ranging capacity cuts meaning that rates will need to hold up if the carriers are to successfully manage their losses as a result of the Covid-19 crisis.An increase in the number of cancelled sailings to 212 from 45 over the last week with the scope of the cancelled services stretching to the end of June, could prove costly if rates fall to 2009 levels, according to the latest Sea-Intelligence report.The Asia-Europe trades have seen the greatest level of capacity withdrawal with close to a third of the scheduled sailings, 29-34%, having been cancelled, said the report.In the worst-case scenario carriers could take a US$23 billion hit in the course of this year, compared to 2019.

Freight forwarders in Vietnam have seen cargo volumes down by up to 70% on pre-coronavirus levels, as their key markets remain under lockdown. The American consumer is currently already reducing expenditure on shoes, phones, appliances, clothes, cars and tools, most of which are made in Asia, and a large portion in Vietnam. Exporters were seeing orders from Europe and the US being cancelled on a daily basis, and forwarders seeing volumes collapse. Vietnam’s exports are projected to have fallen by 21% in the first quarter.

Source, The Loadstar, Shippingwatch, 15 April

Following a short interruption due to the changes in the export regulations out of China , exports of masks into Europe by Air have resumed and are absorbing a large portion of the available capacity pushing pricing up and making access to short term capacity challenging . The same scenario is quickly developing into the USA with a sharply increasing demand pushing airfreight rates up to level probably never witnessed before . These east / west developments are absorbing a very large portion of the aircraft available and are having a knock down effect on flows to other destinations also chasing after masks supplies .
The Ocean market remains characterized by service and sailing cancelations but in general access to capacity remains within reach . Geodis has designed a number of solution to enable in transit or on arrival storage to help cater for goods bound to consumption areas which will have to await resuming of retail or manufacturing operations.

Container cargo after container cargo is being switched to air freight, as the limited air network sees a distinct upturn this week in PPE and medical shipments. But significant delays and high costs are reported as companies, governments and health services “try to buy their way out of the equipment shortages”. The main air freight tradelanes remain at a very high leve lof usage, especially Asia outbound, primarily driven by China exports. Rates are four to five times what they would normally be on pretty much all routes and lanes for the time of the year.

Source: The Loadstar, 10 April 2020.

In late 2017, Amazon launched a pilot to offer parcel deliveries to businesses outside its retail and fulfillment universe. Now the initiative has been put on hold, overtaken by unprecedented life-or-death events. Amazon has notified customers that the program will be suspended, effective in June. The company is focusing its resources on coping with a surge in demand as the COVID-19 pandemic keeps people indoors and almost exclusively reliant on home deliveries of online orders. Amazon is likely to resume the delivery initiative once global markets return to some semblance of normal.

Source: Freightwaves 09 April 2020.

AIR FREIGHT PRICING TREND CHINA TO EUROPE, CHINA TO US YOY

This crisis has of course a strong impact on pricing to/from China, from Hong Kong and to/from USA/Europe HERE.

 

Source: The TAC Index, 6 April 2020

The inactive containership fleet has dropped to 338 units for 2.12 M teu as at 30 March, down from the record high of 2.46 M teu on 2 March. The fall was largely due to the resumption of sailings that were blanked during the extended Chinese holidays in February.


Time is running out to lift travel restrictions on seafarers and keep global trade moving, the shipping industry has warned. Around 100,000 crew changes are required every month, according to the International Chamber Shipping (ICS), which called on governments to designate seafarers as key workers and allow them to transit their territories. However, in a bid to stop the spread of coronavirus, ports around the world continue to restrict when crew can disembark, while the collapse in passenger flights has drastically reduced the options for repatriating seafarers, preventing the normal frequency of crew changes. As a consequence, those on board are unable to return home. Crew at home and unable to join a scheduled vessel, struggle without an income, and many are locked-down in their own countries. The welfare of crews stranded at sea for extended periods, beyond their contracts, has become another industry crisis.


The coronavirus crisis has meant that retailers have had to go back to the drawing board when it comes to forecasting. With the public turning to online delivery during lockdown, businesses that have not had an online presence have realised that given the current state, this could mean the difference between surviving and going under. Even for those businesses with e-commerce in place, they have likely never had to deal with such an unprecedented demand. The likelihood is that businesses will see more staff shortages as increasing numbers of workers will need to self-isolate, and an efficient way of picking, packing and shipping is essential to keep up with increasing demand. Since consumers have no choice but to turn to online shopping methods, it is also likely that many will continue with online shopping even after the pandemic is over – especially if they have had a good experience. Retailers need to be prepared for a shift in consumer habits that may not be just a temporary change in operations.

Source: The Loadstar, Alphaliner, 08 April 2020.

AIR FREIGHT PRICING TREND CHINA TO EUROPE, CHINA TO US YOY

This crisis has of course a strong impact on pricing to/from China, from Hong Kong and to/from USA/Europe HERE.

 

Source: The TAC Index, 6 April 2020

According to Clive Data Services, airfreight volumes dropped 48% in the week 23-27 March. The retail sector has been decimated globally, so there is little movement in the retail space. Most of the goods still moving have transferred from air to LCL ocean as timing is no longer an issue. Reduced e-bookings last week indicate that non-essential items are either being priced out of the mode or scaled back in response to falling consumer demand.  With manufacturing activities and retail largely in limbo in North America and Europe, the outlook for demand is bleak.  Moreover the rates currently charged have priced some commodities out of the market as several types of perishables cannot absorb the elevated cost.

Source: The Loadstar, 07 April 2020.

Container spot rates from Asia to Europe remained stable this week and, having withdrawn around a third of headhaul capacity for April, carriers will hope they have done enough to match the collapse in demand.
This week’s Shanghai Containerized Freight Index (SCFI) component for North Europe ticked down by 1.8% to $750 per teu, which is 14% higher than the same week of last year.
Then the price of traditional heavy fuel oil (HFO) was around $400 per ton – about 50% higher than today’s price of compliant low-sulphur fuel oil (LSFO). Plummeting fuel costs is expected to trigger the cancellation of carrier low-sulphur surcharges as well as significant reductions in standard bunker surcharges.


As the coronavirus pandemic and social lockdowns continue to hobble global supply chains, fears are mounting among forwarders and shippers that they could face escalating terminal storage and demurrage and detention (D&D) fees.Their fears have grown more acute recently as goods ordered from Chinese exporters prior to the outbreak but that couldn’t be loaded onto vessels during the country’s lockdown, are now on their way to European and North American importers.
This raises the spectre of an avalanche of arriving container imports that cannot be handled in countries now themselves in social lockdown.
The global freight forwarding association FIATA this week called on carriers to “exercise restraint” in the application of extra charges.

Source: The Loadstar, 06 April 2020.

This crisis has of course a strong impact on pricing to/from China, from Hong Kong and to/from USA/Europe  HERE.

AIR FREIGHT PRICING TREND CHINA TO EUROPE, CHINA TO US YOY

Source: The TAC Index, 30 March 2020

European regulators have approved an interior modification for Airbus A320-family jets which enables seats to be converted into cargo-transport facilities, after an accelerated development effort in the wake of the coronavirus crisis.The cargo seat-bag configuration comprises a kit for a triple-seat block enabling up to 75 kg of cargo to be stored on the seat as well as another 9 kg beneath it – a total of more than 250kg for each block.The kit can be easily installed within several minutesand it is capable of hosting mail, electronics, medical equipment and humanitarian aid.

The Federal Maritime Commission (FMC) will create new "Supply Chain Innovation Teams" that will help to address the ocean shipping challenges related to the COVID-19 outbreak.It should support particularly the small and medium-sized shippers especially affected by a lack of cargo storage space and running out of options of where to send shipments.

Source: The Loadstar, 03 April 2020.

This crisis has of course a strong impact on pricing to/from China, from Hong Kong and to/from USA/Europe  HERE.

AIR FREIGHT PRICING TREND CHINA TO EUROPE, CHINA TO US YOY

Source: The TAC Index, 30 March 2020

Air freight volumes are declining at an increased pace – last week, figures were down, year on year, by 48%. This follows 27%  and 11% declines recorded the previous two weeks.The biggest pace of decline was seen on Europe to North America routes, down 51% last week year-on-year. The least affected lane was Asia Pacific to Europe, down 35%.
Covid-19 raised its ugly head faster and faster in the air cargo industry in March, as global cargo volumes for the month as a whole fell 23% versus the same four weeks of 2019. There is perhaps a little bit of hope to be found in Asia, which was hit first by the outbreak of Covid-19. Improvement on the Hong Kong to Europe market  is continuing. The reported volumes for the last week of March were 26% higher than before the Chinese New Year holiday started. If this is sustained, it will at least offer some hope to the speed with which air cargo traffic can recover after a very difficult time.

The Philippines gateway of Manila has emerged as a new hot spot of reefer container congestion, as carriers stop unloading at the port. Between 1 March and 26 March, there were 8,201 cleared exportt containers sitting in the terminal, of which 850 teu were reefers, and 21,387 teu that had been unloaded and awaiting clearance, of which over 1,400 teu were reefers.

Source: The Loadstar, 01 April 2020.

This crisis has of course a strong impact on pricing to/from China, from Hong Kong and to/from USA/Europe  HERE.

AIR FREIGHT PRICING TREND CHINA TO EUROPE, CHINA TO US YOY

Source: The TAC Index, 30 March 2020

Shipping lines operating on the trades between Asia and Europe have announced 45 blank sailings within the last week with the 2M Alliance cutting its AE2/Swan and AE20/Dragon services, by itself the equivalent of 21% of the capacity on the routes; this can only be seen as a reflection on the similar sharp decline in both active and expected booking activity from customers.  It should therefore be expected that this week will see a further rapid escalation in the amount of blank sailings both by other carriers as well as on other trade lanes. This situation will inevitably lead to a reconfiguring of supply chains, but it is unclear how long this period will last..


The Japan International Freight Forwarders Association (JIFFA) has announced that containerised exports from China did not recover as fast as expected in Week 13, due to the ongoing coronavirus (Covid-19) outbreak. The Shanghai Shipping Exchange (SSE) unveiled on Friday (27 March) that the Shanghai Containerized Freight Index (SCFI) for the week in question came to 889.8 points, down 0.9% from the previous week. The spot rate for moving containers from Shanghai to Europe fell 3.1% to US$764/TEU. On the Mediterranean trade route demand for transporting protective medical products to Spain and Italy became stronger, but it was not enough to raise rates. As such, rates decreased by 1.3% to US$880/TEU.
JIFFA has reported that transport demand was also slow on the route to North America, under the influence of the Covid-19 pandemic. The spot freight rates for containerised shipments bound for the east and west coasts were US$2,758/FEU and US$1,515/FEU, down 1% and 2.2%, respectively according to the association.  As for other trades, container rates to Australia and New Zealand surged 19.4% to US$899/TEU, as operators continued to squeeze tonnage supply. In contrast, the rates for containers to the Middle East Gulf and South America were both weak, declining 1.1% to US$1,004/TEU and 4% to US$1,304/TEU, respectively.


The coronavirus pandemic is now causing disruption to trade and economic activity on an unprecedented scale. The container industry, operating on the front line of the global economy, is bracing itself to feel the full impact of this.  Long-term container shipping contracts have registered their first pricing decline since October 2019. March figures have yet to reflect the full impact of the Covid-19 pandemic index. In Europe, the import benchmark declined by 1%, but the export index climbed 0.5%, and both are up year on year, 5.8% and 6.7% respectively. The Far East import benchmark rate edged up 0.4%, but was down 11.6% year on year; while the export benchmark dropped 0.8%, but year on year was up 6.4%. In the US, the import benchmark was up 1.3%, month on month, and 23.1% year on year, while the export benchmark declined 2.3%. However, it was up 2.6% year on year.

 

Source: The Loadstar, 01 April 2020.

March 2020 updates

This crisis has of course a strong impact on pricing to/from China, from Hong Kong and to/from USA/Europe  HERE.

AIR FREIGHT PRICING TREND CHINA TO EUROPE, CHINA TO US YOY

Source: TACIndex, 23 March 2020

Forwarders are predicting “mega-congestion” in the next couple of months, as they attempt to do the opposite of their normal job, and slow the flow of freight.Customs authorities in China have required all non-essential goods which have been loaded on vessels for export after March 27 to be unloaded.The decision is based on lockdowns in various countries, which may mean that the cargo will not be accepted by the customers.With shipping lines cancelling sailings, there are also concerns that, when demand rebounds, ships and containers will be in the wrong place – perhaps increasing the demand for air freight, which has now fallen off for most cargo.

Bangladesh’s key seaport, Chittagong, is facing heavy congestion in its yard as the Government has declared a 10-day general holiday between 26 March and 4 April, barred people from going outside from home and halted all types of commercial activities except emergency services.
Bangladesh Customs is releasing only essential commodities.  As a result, the port has massive congestion in its yard: today, some 40,469 teu of containers remain in the area, against its total capacity of some 49,000 teu.

Source: The Loadstar, aIR Cargo News, 31 March 2020.

This crisis has of course a strong impact on pricing to/from China, from Hong Kong and to/from USA/Europe HERE.


The Purchasing Managers’ Index (PMI) – a bellwether of economic health for the manufacturing and service sectors – has dropped to record lows in both the USA and the Eurozone during March. In February, the Eurozone’s index stood at 51.6. This dropped to 31.4 in March – the largest monthly fall in business activity since comparable data was first collected in July 1998. Similarly, US private sector firms indicated a marked contraction in overall business activity in March following the escalation of Covid-19 outbreak. The overall decline was the steepest recorded since comparable survey data was available in October 2009, and reflected widespread falls inactivity across the manufacturing and service sectors.


Air freight demand is expected to plummet as consumers in Europe and the US are forced to stop buying as a consequence of shop closures. The automotive industry has already stopped requesting components as plants have closed; retail has cancelled orders – Bangladesh alone faces cuts in orders for apparel worth $2.67bn.The only real air freight demand now is medical equipment and some urgent products. The real question for transport companies is what will happen in two to three months’ time, when consumers are likely to be able to buy again – but may not have the money to do so.


The coronavirus has caused the drop in shipping demand to shift from China to Europe and carriers have announced new blank sailings, including 10 along the Transpacific route and five on European routes, according to numbers provided by Sea-Intelligence. 
Demand for shipping is decreasing along some routes because economies around the world are paused, due to quarantines and social distancing measures.
Ocean shipping can be impacted by changes in either side of the supply and demand equation. Factories shutting down in China hit freight supply and now carriers are dealing with a decrease in demand.


The first container freight train to leave Wuhan since the coronavirus outbreak left Wuhan in Hubei Province, the original epicentre of the pandemic, departed on Saturday, 28th March and it is estimated to reach the Duisburg (Germany) hub in 15 days.Nearly 90% of all the goods aboard were produced locally in Wuhan, including 166.4 tonnes of medical supplies such as medical fabrics. There were also auto parts, electronics and telecommunication cables on the train. All these goods would aid in pandemic control and construction projects in European countries such as Germany, France, Hungry, the Czech Republic and Poland.

Source: TAC Index, 23 March 2020, The Loadstar, World Cargo News, Markiteconomics, 30 March 2020.

US ports are experiencing a decline in volumes and are shutting down some operations.
North American container terminals are slowing, and in some cases shuttering, as volumes drop due to the Coronavirus pandemic. The coming months are likely to offer little, if any, reprieve from the downturn as the US enters a recession and container volumes likely remain weak.
Even as Chinese factories slowly return to normal, the US is beginning to see its rate of coronavirus infections surge, leading to massive shutdowns of the country’s major consuming regions New York and San Francisco.The US economy forecast to drop 6.5% in the second quarter, and another 1.9% drop forecast for the third quarter.

Italian logistics companies are pooling their resouces to help in the battle against the Covid-19 virus.The North Tyrrhenian port system is faced with the challenge of managing thousands of TEU coming into Northern Italy that cannot be delivered to companies now running in “non-essential” business mode for at least two weeks. To avoid heavy port storage costs and congestion risks within the terminal as well as transport activities, the port-community together with Tarros Group and Contship Italia Group have rallied together to offer a number of solutions including the availability of 100,000TEU local storage capacity within a radius of 15km from the port of La Spezia as well as the intermodal-hubs in Melzo (Milan), Dinazzano (Reggio Emilia) and Padua.

Freight representatives have urged European governments to implement green lanes at border points to keep shipments moving across the Continent. Despite new EC’s green lanes guidelines which stipulate that border crossings should take no longer than 15 minutes for road freight, many logistics operators have faced  delays at the EU’s internal borders” disrupting the delivery of goods and integrated supply chains.The industry now needs the support of all European governments to support their efforts by suspending restrictions such as weekend, night and sectoral bans, and to provide stimulus to facilitate the operation of such a vital sector of the economy.

Worldwide air cargo demand fell 3% year-over-year (YoY) in the first two months of 2020, a larger decrease than the provisional estimated fall of 2.7%.As the global aviation industry enters a period of extreme uncertainty about its immediate future, the overall picture is “very bleak,” with the starting positions of individual parties showing large differences;the average 3% YoY decrease hides starkly different individual performances.The Europeans as a group lost 6.5%, with a spread between -23% and +9%. And the North American forwarders as a group lost 5%, the best among them being at the same level as in the first two months of 2019, and the worst at -21%.

This crisis has of course a strong impact on pricing to/from China, from Hong Kong and to/from USA/Europe HERE.

Source: TAC Index, 23 March 2020, The Loadstar, Air Cargo News, 26 March 2020; 

While demand for commercial cargo is decreasing in most sectors, a very significant requirement for masks and other PPE equipment is generating pressure on the China to Europe market. Air freight capacity is currently almost fully dedicated to these humanitarian shipments and available space is quickly drying up with very limited full aircraft capacity remaining between now and mid-April. Partial relief is being phased in through converted passenger aircraft providing limited payload and operating at a significant cost premium.

Demand on the Transatlantic remains firm but softening up and is being catered for by specifically designed flight programs.

Demand on other less structured route is very difficult to fulfill due to the costs and the time aircraft are unavailable due to being sent to ‘’off main corridor’’ destinations.

Source: GEODIS, 25 March 2020

Demand for freighters is currently “extraordinarily high”, primarily due to the resurgence in production in China as the spread of the coronavirus there stabilises coupled with a dearth of bellycargo capacity following the suspension of airline passenger services on Chinese routes.

However, a leading air charter broker has warned that there is the prospect of the market for all-cargo planes tailing off markedly in the coming weeks as economic activity slows in Europe and US plants shut down amid government measures to contain Covid-19 by confining workers at home.

IATA recently stated that airlines stand to lose $252 billion if severe travel restrictions are in place for three months, more than double the International Air Transport Association’s projection from earlier this month and 44% below 2019’s top-line. The economic analysis assumes there will be a global recession during, and after, the COVID-19 pandemic and that travel demand will be slow to recover later this year.

Sources: Freightwaves and Lloyds Loading List, 24 March 2020

As the retail industry across Europe and North America begins to effectively shut down as governments enforce widespread social lockdown, there are increasing warnings that the industry is set to see some of the largest declines in volumes in living memory.

Ocean freight
According to liner analyst SeaIntelligence Consulting, the possibility of a 10% decline in global container shipments – which would equate to 17m teu carried by the world’s box shipping fleet and some 80 teu handled in global container ports – has “unfortunately moved closer to reality”. 

Road freight
Europe’s international trucking arteries are under increasing pressure as border delays increase and the threat of quarantine deters drivers from embarking on long distance international routes.

According to a live border delays map created by Sixfold, for much of the last week there have been substantial delays at national borders within the EU as check points are set up in a bid to stem the spread of coronavirus.

Airfreight
Airfreight rates continued their rapid ascent last week, breaching the $5 per kg mark on the transpacific trade lane for the first time in years. Transatlantic rates also increased rapidly last week following a US ban on travellers from many countries in Europe, while Europe began to close its borders.

The increases come as carriers have been slashing bellyhold capacity from the market – on the transatlantic it is estimated that belly capacity is down by 90%. Capacity constraints are reported on many key markets, including Asia-Europe, Europe-Asia, transatlantic, Intra-Asia, transpacific and the Middle East.

Sources: Air Cargo News, Lloyds Loading List and The Loadstar, 23 March 2020

The situation in airfreight is the most contradictory of all the sectors, with some parts of the market approaching something like complete shut-down whilst others are either recovering or booming.

China
The situation varies from region to region, however, generally China has been recovering fast since Monday (16-Mar). Destinations in Northern China are reporting reasonable conditions with Airports operating more-or-less normally, however, through-put volumes are restricted due to the lack of passenger flight belly-freight for international traffic. Domestic traffic has recovered much more quickly but from a lower base. Land transport serving airports remains problematic with a shortage of capacity and drivers as many migrant workers are only gradually returning to major cities.

Central China is still badly affected. All services out of the province of Hubei are still forbidden and essentially all traffic, both passenger and freight, remain quarantined. Regions approximate to Hubei are suffering from knock-on effects with some difficulties for trucking outside the major cities.

Southern China still appears to have problems, especially around Shenzhen, although this appears to be more about the timing of the recovery.

The situation in Hong Kong is distinct from the PRC and it has imposed stringent quarantine measures which are still in place. Although these are not aimed at cargo they continue to suppress belly-freight operations. It is believed that Cathay Pacific has commenced the adaption of previous passenger services for dedicated cargo operations.

South Asia
Although India has imposed restrictions on international movement by air, travel restrictions are currently not as great in this region. However, it is being badly hit by the restrictions elsewhere. Passenger flights are down by almost 90% however domestic flights are not that badly affected. The freighter market seems to be working at normal levels of capacity however the problems in Dubai are said to be having a severe impact on operations.

Rest of Asia
South Korea, Japan, Singapore continue to impose intense quarantine barriers, however, the impact is quite different from that in China with land transport much less disrupted. Airports are running more-or-less normally, with the main problem area being the severe reduction in passenger transport. The charter market seems to be holding-up on a number of routes, notably South Korea and Japan.

Much of the pain has already been felt in North Asia however South East Asia is still seeing a deterioration, with routes other than those out of Singapore, still declining although from higher levels. Freighter availability is mixed but high on a number of key routes. Freighter rates are very high but possibly softening.

Europe
Europe is described as the new epi-centre of the COVID-19 outbreak and this is reflected in the status of the airfreight market. Effectively air transport has shrunk to a minimal level of belly-freight and some charters. Many countries in Europe have imposed various types of bans on the entry of non-citizens and this has brought the air transport network to a near-halt. Europe’s largest airline, Ryanair, has reduced its operations to just its core of travel within the British Isles. This is more-or-less the case with international travel, with trans-Atlantic operations now focussed on converting passenger operations to cargo-only routes, the success of which is unclear at present. Certainly marketing activity is intense.  

As noted previously freighter activity is intense, with the large freight companies busy despite obstacles to their operations. Due to what is effectively a shift in demand away from belly-freight to freighters they are experiencing demand they cannot service and anecdotal evidence points for a scramble for aircraft. Landside transport and airport operations are functioning reasonably although congestion, as a result of border restrictions, are said to be an issue. Freighter rates are very high. In the region of +50% higher than normal.

North America
The situation here is similar, yet less severe than Europe. Restrictions on passengers from Europe, China and the effective demand for its citizens to return to the US has had obvious effects.

The trans-Atlantic trade lane is less badly affected than might be expected due to the heavy freighter traffic available. Rates have hardened but not as much as in other routes. The disproportionate presence of UPS and FedEx will affect the market.

US Domestic is less affected although flights are still down 30-50% and falling. State quarantine measures are already having an impact and some airport operations have been affected.

Canada and Mexico routes are badly affected although freighter traffic here is ramping-up.

Freight rate increases less extreme than elsewhere.

Middle East
This region has been badly hit by quarantine restrictions. Both international and inter-regional flight volumes are down by 90%. Almost all markets are only permitting freighter traffic although the supply of this appears to have increased on some routes, whilst the major routes out of UAE have suffered badly and are looking at reductions in freighter capacity.

Source: Transport Intelligence, 20 March 2020

The China Container Industry Association (CCIA) has said that the recovery of container movements in China is progressing rapidly.

In a survey report released on 18 March 2020, CCIA said that as of 10 March 2020, China’s container ports, barges, railways and multi-modal transport have resumed work, while the operating capacity of trucks and storage facilities is around 90% of pre-Covid-19 levels.
The report said, “In the past three weeks, except for Hubei, work resumption has been rapidly gaining momentum across the country. Many restrictions on work resumption are gradually being lifted.”

Other consultancies have estimated that the outbreak wiped off shipments of 17 million TEU and US$6 billion of revenue from liner operators as the global economy took a hit.

Freight trains from China to Europe are now operating at 90% of pre-Covid-19 levels, while at least 85% of such trains have restarted services.

However, with the Covid-19 epicentre shifting to Europe and the subsequent lockdown of the continent and other countries, further supply chain disruption is looming. China is imposing quarantine obligations on ships arriving from, South Korea, Iran the UK and most of the European Union. These measures apply to ships calling at China’s two busiest container ports, Shanghai and Ningbo-Zhoushan.

Sources: Container News, 19 March 2020

Coronavirus continues to spread, and it is likely that more government restrictions are coming to help flatten the curve of its impact on life. Grocery stores and other retailers that offer life essentials will continue to operate, but even these could see reduced hours. The supply chain will continue to be negatively impacted as manufacturing and transportation continue to see potential shortages. However, with the continued growth of online commerce, more consumers should be able to find the items they need, even if they have to wait a little longer to get them. No one knows how things will shake out or how long social distancing guidelines will be in place. But supply chains are resilient and will continue to evolve to meet the growing needs of consumers.

With COVID-19 impacting global supply chains, supply chain leaders should focus on three impact areas for their initial crisis management, according to Gartner, Inc.

“As COVID-19 spreads globally, we are seeing increased supply chain disruption, but also changes in consumer spending habits,” says Sarah Watt, senior director analyst with the Gartner Supply Chain practice. “Supply has been impacted in three primary ways: limited access to employees due to quarantines, factory closures or manufacturing slowdowns and limited access to logistics to move goods. Most supply chain organizations are in crisis management, assessing impacts and response on a daily, if not hourly basis.”

Workforce
In order to limit the impact of COVID-19, many employees have been instructed by local governments or advised by their employers to stay at home. Employers have put in place controls around travel and site visitors. For factories, this resulted in goods not being produced and exported to dependent markets or other factories. As long as this situation continues, supply chains won’t work as intended.

Products
Suppliers of commoditized products are at risk to lose market share, as clients will look into substitute suppliers when they don’t receive their products on time. Products associated with a higher degree of brand loyalty are likely to be less impacted in the short term because customers are more willing to wait. As the virus progresses, consumers might adopt more conservative spending patterns, focusing on essential goods.

Costs
There is a variety of financial impacts to organizations with increased costs for shipping, and more broadly concern about companies meeting their financial objectives. Any additional cost related to the coronavirus should be treated as an issue that concerns the whole organization rather than a single department. This makes it easier to assess the costs against the organization’s ability to achieve its strategic objectives and manage stakeholder expectations.

“It’s also a good idea to sit together with the legal department and analyze all supplier contracts. When the time for renewal comes, make sure that the organization is financially protected against similar situations that might occur in the future. Supply chains will not be the same after this event. There will be an increased focus on resilience, risk exposure and business continuity plans going forward,” Watt says.

Sources: Gartner, 18 March 2020
The devastating impact of coronavirus on global trade and supply chains continues to escalate as non-China Covid-19 infections surpass those recorded in China itself. One consequence is that even as cargo availability in China increases, the implementation of social distancing and isolation policies in a bid to contain the spread of the virus threaten economic growth and demand in Europe and North America.

Road freight
The global road freight industry could be looking at an accumulated loss nearing $1 trilion as a result of the coronavirus outbreak, the International Road Transport Union (IRU) has warned. “On the basis of the significant fall in intercontinental container shipments, IRU estimates a decline in global road transport activity of up to 20% in 2020, depending on how long the situation continues. This could lead to a global loss in operator revenues of $800bn,”. The organization added that the situation had become confused, due to “rules and restrictions changing rapidly and often in a haphazard or uncoordinated way”. That has become particularly true in Europe, where countries have begun to close land borders, with cross-border movements of road freight at risk.

As of yesterday, nine EU countries had closed their land borders: Czech Republic, Cyprus, Denmark, Hungary, Latvia, Lithuania, Poland, Slovakia and Spain. And they appear to have been joined by Germany and Estonia this morning.

Yesterday the European Commission issued new guidelines to member states to try and ensure European freight movements continue unimpeded, as it was “particularly crucial for essential goods such as food supplies including livestock, vital medical and protective equipment and supplies”, and that “member states should designate priority lanes for freight transport (eg, via ‘green lanes’)”.

Ocean freight
Cheap fuel may be one of the few aspects of the global shipping environment currently acting in favor of the carrier. Carriers continue to announce new blank sailings — Maersk today announced two new canceled trips scheduled for April. "Our analysis points in the direction that it can no longer be ruled out that container shipping might be looking at developments similar to the financial crisis of 2009," Sea-Intelligence wrote in its note. "This implies a potential volume loss of 10% equal to 17 Million TEU globally."

Capacity management by carriers has meant shippers have experienced relatively consistent rates through an otherwise tumultuous period, according to Sea-Intelligence.

Rates are currently lower, on average, than they were the same period last year. The average rate from China to the North American West Coast is down about 7% year-over-year, while China to the North American East Coast is down about 6% year-over-year, according to Freightos.

Air freight
More airlines are resorting to using passenger aircraft as makeshift freighters, as forwarders emphasise borders “remain open” for cargo. Following moves last week from Cathay Pacific and Scoot, the low-cost carrier of Singapore Airlines, yesterday Korean Air, Qantas and Delta Cargo all announced passenger aircraft would be used for cargo-only flights.

This crisis has of course a strong impact on the pricing to/from China, From Hong Kong and to/from USA/Europe. Please see HERE.
Sources: Supply Chain Dive, The Loadstar & TEC Index, 17 March 2020
The devastating impact of coronavirus on global trade and supply chains continues to escalate as non-China Covid-19 infections surpass those recorded in China itself. One consequence is that even as cargo availability in China increases, the implementation of social distancing and isolation policies in a bid to contain the spread of the virus threaten economic growth and demand in Europe and North America. Sea-Intelligence’s latest Sunday Spotlight newsletter warned that as the situation in Europe and North America deteriorates, container shipping could soon be facing a demand scenario similar to the financial crisis of 2009. This could see a potential volume loss of 10%, equal to 17 million TEU globally. 

Supply chain problems
Companies in Europe and the US are also still grappling with the supply chain problems created by the shutdown of factories in China for an extended period from late January onwards. ISM reported that 61% of procurement and supply chain managers across a range of manufacturing and non-manufacturing industries were experiencing supplier delays due to coronavirus-related disruptions in China.

Some positives
For container lines at least, there are some positives. Bargain basement oil prices are acting as a cash infusion given that bunker surcharges are based on oil prices two months ago, according to Sea-Intelligence. Another upside is a potential rebound in demand once the worst effects of coronavirus have played out. This will result in temporary capacity shortages and “rocketing freight rates”, according to Sea-Intelligence.

Air freight challenges
As reported in Lloyd’s Loading List last week, while demand increases have bumped up air freight rates on bellyhold routes that remain open, and for freighter charter rates globally, further service cuts and travel bans threaten the future of many airlines. “We might face an upstream problem of demand as quarantine measures in Europe and the USA start to bite,” Peter Stallion, aviation and freight derivatives specialist at Freight Investor Services (FIS), told Lloyd’s Loading List.

“Transhipment via Europe has started to bottleneck as transatlantic capacity has been heavily throttled by Trump’s travel ban.”

“Freight rates will drastically increase as everything moves on freighter charter.”
Source: lloyds loading list, 16 March 2020
The introduction by the Trump administration of the ban on all travel on airline passenger services between mainland Europe and the US for an initial period of 30 days, in response to the spread of the coronavirus, will “savage trans-Atlantic air cargo,”. The sanctions came into effect from midnight on Friday, US Eastern Standard Time. In his address President Donald Trump initially said it would also apply to goods and cargo, but the White House later clarified that only people were affected.

“Even assuming that this is the case, any ban on passenger traffic will inevitably have a catastrophic effect on the availability of belly-freight, said Ti analyst,  Thomas Cullen.
“It may be the case that, as Cathay Pacific in Asia is considering, airlines serving transatlantic routes may run freight-only services using passenger aircraft. If not, cargo traffic will become difficult even with a ban. It might be speculated that the air express carriers will be the few air operators capable of offering a service.” Cullen continued: “Perhaps some of the first sectors to be hit will be pharmaceuticals and healthcare.  Trans-Atlantic traffic is important, linking the major research and production centers in the US, the UK and Switzerland. The good news is that the White House seems to be considering lifting the restrictions on China and South Korea.”

Reacting to the US' travel restrictions, the International Air Transport Association's (IATA) director general and CEO,  Alexandre de Juniac, commented: “These are extraordinary times and governments are taking unprecedented measures. Safety - including public health - is always a top priority. Airlines are complying with these requirements. Governments must also recognize that airlines - employing some 2.7 million people - are under extreme financial and operational pressures. They need support.” In 2019, there was a total of around 200,000 flights scheduled between the United States and Europe's Schengen Area, equivalent to around 550 flights per day. IATA said that while the US measure recognized the need to continue to facilitate trans-Atlantic trade, it warned that the “economic fallout of this will be broad.”

Other industry sources highlighted that the travel ban would trigger a spike in demand for road feeder services from and to the UK and at trans-Atlantic freighter gateways, as well as sharp increases in rates. Turning to the Chinese market from the perspective of the coronavirus, the volumes from China continue to increase and freighter operators are forecasting very high activity levels for at least the next three weeks.

Evidence of the diminishing effects of the epidemic in China and the gradual pick-up in the country's manufacturing output, is perhaps given by Lufthansa Cargo now operating more than one-half of its standard winter freighter schedule between Frankfurt and mainland China - eight  weekly round trips compared to 15 normally.

Ti's Cullen underlined that with Covid-19  now becoming a worldwide crisis, both in terms of economics as well as epidemiologically, one of the problems for sectors trying to manage the issue is that it is a biological question and thus not really vulnerable to the economic and management tools normally used to forecast other types of crises. “Therefore, it is difficult to know what the trajectory will be. For example, it could be erroneous to assume that the problem is short-lived or that the issue is close to being resolved in China.” He added: “The impact on logistics markets has been substantial with airfreight savaged and container shipping badly disrupted. Other segments of logistics are suffering less whilst areas such as chartered air freight are booming. It is unclear what the long-term implications will be. However, it would be unwise to strongly assume that all will return to normal in a couple of weeks.
Source: lloyds loading list, 13 March 2020

Today we provide an outlook in the ocean capacity situation between Asia and Europe: In the Asia-North Europe trade lanes the weekly capacity decreased drastically during this week but is expected to increase significantly in the coming weeks, as four blank sailings occurred in this week. See further details in the below chart.

On the Asia-NAEC* trade lane, the weekly capacity decreased significantly in week 11 and is likely to recover in week12, before decreasing again in the following weeks. On the backhaul, the weekly capacity decreased significantly in this week and is expected to increases sharply in weeks 20, 21 and 22.

Below graphs illustrate ocean freight weekly capacity, Asia to North Europe and North America to Asia.
 
*North American Economic Community

Source: Sea-Intelligence Maritime Analysis, 13 March 2020

Extended yard stays and the long waiting times have forced some carriers to send some of their ships to alternative deployments, with most services expected to resume regular sailings by early April. Despite the reduction in the number of blank sailings in March, it will take a few more weeks for the inactive fleet to fall back to pre-COVID-19 levels as demand is only recovering gradually in China.

The charter market remains busy as demand for container shipping stays strong despite the continued impact of the coronavirus on the global supply chain. The last two weeks have been particularly active, with the fixing activity increasing across most vessel sizes, apart from smaller ships of 1,250 TEU and under. The high volume of business concluded was however insufficient to soak up redundant capacities which remain generally stable, or slightly on the rise, across most sizes. Only the struggling 1,500-1,900 TEU segment has seen its supply overhang falling substantially. The continued surplus of tonnage is naturally impacting charter rates which keep weakening across the board.

We would like to share latest airfreight pricing trend, mainly from China to Europe: the current situation on year-on-year comparison – please see the graph below. Information on China to other destinations including Hong Kong outbound statistic, you can also find HERE.

With Chinese factories being only about 60% operational, according to different media sources, one of the biggest challenges is the lack of raw materials for factories in South-east Asia. The reduced passenger demand in Asia has apparently led to capacity cuts of between 50% and 70%, depending on lane and country.

The GDP growth in the first quarter of 2020 is expected to be sharply slower in China and ASEAN, according to the Container News. Coronavirus-related capacity reductions are reported to reach 378,000 TEU on the Transpacific trade and 449,000 TEU on the Asia-Europe trade, in weeks from end of January to first week of April 2020. This equals a combined capacity reduction of 9% across these trades in this 10-week period – on top of the 14% already cancelled for Chinese New Year.

For the US, "cargo volumes will drop between 20 and 25% in February", explained Gene Seroka, executive director of the Port of Los Angeles in the Container News. As of 2 March, the Port of Los Angeles had 40 cancelled sailings between 11 February and 21 March. Those cancelled sailings represent about 20% of its vessel calls during that time period. At the "Port of Long Beach, the easing has hit volumes by a collective 12% for the first two months of 2020. Normally the port processes US$180 billion in trade", explained Noel Hacegaba, the managing director of commercial operations at the Port of Long Beach, California. That 12% in volumes translates into US$12 billion in lost trade.

February 2020 updates

Carriers have cancelled more sailings throughout February. Only on the Asia-North Europe route alone, 19 sailings were cancelled in February, (compared to 12 in February 2019), according to the Drewry Container Forecaster. However, they expect that ocean carriers will run extra sailings to cope with the upwards swings in volumes, once production is fully restarting.

Drewry also reports a 30% fall in container volumes from China equaling to a 9% reduction in global container volume. At least 2 further months of global port volume reductions are expected. According to the same source, so far the cancellations of sailings represent a shortfall in revenue of roughly $1 billion for the carries, resulting in short-term damage to carrier profits.

According to market research conducted by several organizations, it is expected that container shipping lines could lose around USD 1.7 billion in revenue due to the coronavirus outbreak.  This will have consequences for ports and terminals.

Spot rates in container shipping markets have weakened substantially despite an increase in blank sailings by carriers, while the volume of idle capacity in the world box-ship fleet continues to grow. In a similar manner, airfreight rates for shipping goods in and out of China have soared, with companies facing two or three times the cost before the coronavirus outbreak forced airlines to cut routes. The price spike threatens to complicate efforts by companies to get their Asian supply chains moving again even as they deal with quarantines and other anti-virus measures that have slowed the restart of production at factories in China.

According to the Seabury, the cancelled capacity from mainland China has exceeded 40,000 tonnes over the last week. Widebody belly capacity from mainland China is reduced to all regions and often more than 70%, while freighter capacity is mainly reduced to North America and Europe. Belly capacity from mainland China to the rest of Asia shows the largest absolute decrease.

Flight cancellations have removed in excess of 6,000 tonnes capacity per day. Worldwide belly cargo capacity reduction remains limited to Asian flights while Intra-Asia widebody belly capacity has reduced with 54%. Transatlantic widebody belly capacity shows a slight increase, suggesting some capacity is starting to be reallocated.

According to the Shanghai Containerised Freight Index on the Shanghai Shipping Exchange, which resumed operation on 14 February, Asia-Europe rates dropped more than 12% from the pre-holiday level on 23 January. Meanwhile, transpacific rates slid 6-8%. On Asia-Europe trade, the tallies are 22 versus 10 over the same period, plus 44 blanked sailings driven by the Chinese New Year holiday. 

According to Sea-Intelligence, the impact on exporters from non-China origins is therefore a negative side-effect of the blanked sailings.” It added that the current situation was leaving carriers with little choice between blanking a sailing or potentially sailing at a “highly loss-making” utilisation level.

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