Sea Air aerial

State of the air freight market

May 1, 2024 | , , , , , , ,

The effective closure of the Red Sea and the Suez Canal to container ships is adding around two weeks to supply chain transit times and creating a backlog of manufacturing components, late shipments and inventory replenishment, with critical consignments reliant on air solutions. While Iran’s attack on Israel has led to major carriers rerouting or cancelling flights and causing potential bottlenecks and price hikes.

Traffic ex-South Asia has been particularly driven by the Red Sea push to air, with spot rates climbing significantly. 

Contributing significantly to demand has been a massive spike in eCommerce volumes out of China, which is pushing prices well above typical levels for non-peak periods.

Average spot prices to North America have nearly doubled since mid-December, while Europe rates have climbed over 120%.

The eCommerce spike has seen Heathrow (LHR) imposing restrictions on ad-hoc freighters and charters from Shanghai, which has resulted in diversions to alternative gateways, including Birmingham International, with at least one charter operator transferring their slots away from LHR to Birmingham (BHX).

Traffic ex-South Asia has been particularly driven by the Red Sea push to air, with spot rates climbing significantly. Average spot prices to North America have nearly doubled since mid-December, while Europe rates have climbed over 120%.

The recent loosening of US restrictions on the number of weekly flights to the US allotted to Chinese carriers will increase China to US air capacity and could ease some pressure on rates.

The closure of Iranian airspace, due to safety concerns, following Iran’s attack on Israel has led to major carriers rerouting or cancelling flights and causing potential bottlenecks and price hikes for shipments from India.

Carriers operating to Europe are using alternative routes; primarily through Turkey and Azerbaijan, for Middle-East and Chinese carriers or via Egypt and Saudi Arabia for European/Western carriers. While major carriers, including Air India, Emirates, Qatar Airways and Lufthansa Cargo are temporarily suspending flights to Israel and other affected destinations.

The need to carry (and buy) additional fuel for the extended flights means that there will be a payload impact to passenger flights operating from India to Europe and vice versa, as they will need to significantly restrict the cargo payload, which reduces capacity and increases cost.

The seizure of the MSC Aries by Iran in the Strait of Hormuz raises concerns about the accessibility of the Dubai port, a crucial hub for sea-air transshipments, because if Hormuz is considered a high-risk area, it could mean sea-air shipments being diverted to alternative hubs like Colombo or Bangkok.

Whether rates will soften, or supply vs demand become an issue in the next quarter and beyond depends on world geopolitical events improving, the Red Sea re-opening up and no other global crisis occurring.

If there are no further global events then the market is very likely to soften, however, if the Israeli/Iran situation deteriorates airspace could be closed for the foreseeable future and that will cause huge issues to all logistics activities including airfreight, sea/air, ocean and rail.

For urgent, valuable and sensitive shipments we have a range of airfreight and sea/air solutions, with block space agreements (BSA) and capacity purchase agreements (CPA) that protect space and capacity on the busiest routes.

Regardless of your cargo type, size and requirements, we have extremely competitive rate and service combinations, to meet every deadline and budget.

EMAIL Elliot Carlile, Operations Director, for insights, prices and advice. 

factory emissions

China makes too much, but production is moving

May 1, 2024 | , , , ,

The West says China makes too much, but many manufacturers have moved production to other countries to cut costs, leaving once prosperous manufacturing hubs like Dongguan struggling to adjust.

In recent years workers began to demand higher wages, while companies began cutting prices in order to win contracts, squeezing profits further and when Donald Trump began slapping tariffs on Chinese products companies searching for cheaper running costs and protection from the US-China trade wars – began to look elsewhere.

The “Made in China” slogan that was once ubiquitous on t-shirts, tables and TVs is now at the heart of the electric cars that are pouring into Europe, and the solar panels that are powering our renewable policies. And that is worrying Western politicians.

Rising trade tensions with the United States, strict Covid lockdowns and a global downturn mean that manufacturers who once flocked to Chinese shores are looking elsewhere, with foreign investment in the country at a 30-year low.

The old industrial pillars of furniture, clothing and electrical goods are struggling and have been replaced by high-tech products like solar panels, lithium batteries and electric cars, which are being exported in massive quantities to Europe, Africa, Australia, South America, North America and South East Asia.

But China’s new industries are far less labour-intensive than the ones that once fuelled its spectacular growth – and they require specialised, high-skilled workers and, increasingly, robots. 

The US, UK and European Union believe this is how China is trying to save its economy – producing cut-price and state-subsidised green technology that is being ‘dumped’ abroad. They say it’s a tactic that is driving down the cost of solar panels and other emerging technology and driving Western firms out of business.

It is clear that there is a shift away of some lower-cost production from China to alternative sources, including Vietnam and India, with some companies also looking at near-shore options like Turkey, as a way of managing risk and enhancing supply chain resilience.

There is no doubt that production moving away from China has benefited many countries around Asia, including Bangladesh, Thailand and Cambodia, while other EMEA countries including Turkey, Egypt and Morocco provide opportunities to shorten lead times and carrier costs.

For over 40 years Metro has managed supply chains and helped customers extend and diversify sourcing across Asia and EMEA.

Metro’s integrated transport networks are designed to support JIT manufacturing requirements across Asia, the EU, sub-Saharan Africa and Turkey and are ideally positioned to support the new sourcing requirements that de-risk supply chain operations.

We see diversification and near-shoring as a simple extension of a client’s sourcing strategy, so that if there is disruption in one area, inherent flexibility means the supply chain will continue to flow. 

Our global partner network, strategic carrier alliances and MVT supply chain platforms are all geared towards supporting the widest spectrum of supply chains. 

If you would like to learn how we can boost your ability to source from alternative global manufacturing regions, EMAIL our Chief Commercial Officer, Andrew Smith, to arrange a consultation and scoping discussion.

Gulf of Oman 1440x1080 1

Red Sea crisis expanding and growing

Apr 17, 2024 | , , , , , , , , ,

After the longest period of attack-free shipping in the Red Sea since December, the situation in the region is escalating, with an increase in Houthi attacks, fears that the ‘danger area’ may be expanding into the Arabian Sea and Indian Ocean and an Iranian vessel hijack off the Gulf of Oman.

At virtually the same time the US special envoy for Yemen indicated that the US might consider a path to revoking the terrorist designation on the Houthis if attacks on vessels are halted. The Yemeni group resumed attacks after an eight day pause and claimed to have attacked a number of warships and commercial vessels in the Arabian Sea and the Indian Ocean. 

The Houthi claims have not been corroborated and it remains uncertain if they have the capability to acquire targets that far out to sea. However, if they have been successful it may have implications for shipping, possibly forcing it to head further east and making access to the Gulf harder.

Iran hijack
In a further, unexpected development, the 15,000 teu MSC Aries was boarded and seized by Iranian Revolutionary Guard troops in international waters off the Gulf of Oman in the Straits of Hormuz on Saturday 13th April.

The Aries was managed by Zodiac Maritime, a firm controlled by the Israel-born shipping magnate Eyal Ofer, but the vessel is currently chartered to MSC and its current links to Zodiac is unclear. 

Iran’s action means the ‘maritime danger zone’ has expanded significantly and the ramifications of this illegal vessel seizure could be massive, potentially providing a catalyst for freight rates to rise in the short-term.

Insurance check
We would recommend double-checking your cargo insurance, to clarify what it covers, but also to ensure its validity should your cargo suddenly be in a war-zone, even if the planned route was not intended to transit a war-zone.

Anticipate increased risk premiums for insurance and freight to and from the Persian Gulf area, and also the Gulf of Oman, and not necessarily labelled as a risk premium but another acronym.

Scenarios
We do not anticipate a full closure of the Strait of Hormuz, it is more likely to resemble the southern Red Sea where some shipping lines will still operate and some will not. However, a partial closure could backfill, escalating port congestion problems at origins including Sri Lanka, Singapore, Port Klang and Indian ports.

Finally, it is clear that threats against shipping made by Iran, and their proxies have not been idle and it might be prudent to recollect the threat made by an Iranian Revolutionary Guards commander to target shipping in the Mediterranean. 

Groups in Algeria have received attack drones from Iran, which have the potential to impact shipping in the Eastern Mediterranean.

If you have any questions or concerns about the impact of the Red Sea crisis on your Asia supply chain, or would like to discuss its wider implications, please EMAIL our Chief Commercial Officer, Andy Smith.

For questions about airfreight, sea/air and our suite of time-sensitive solutions EMAIL Elliot Carlile, Operations Director, for insights, prices and advice.

For insurance related questions or concerns please EMAIL our Chief Financial Officer, Laurence Burford.

India office workers

Strengthening global partnerships: India

Apr 17, 2024 | , , , , , ,

Metro’s main board recently completed a multi-city tour across India, as part of a strategy to fortify existing partnerships with key suppliers and to carve out new avenues for growth, by direct engagement with prospective customers.

The visit spanned several major cities including Mumbai and Bangalore, with multiple engagements and discussions focused on exploring opportunities within this key market.

The carefully curated itinerary and interactions were aimed at reinforcing the supply chain robustness, quality and continuity of the products and services offered.

Positive engagement with Jeena, Speedmark, 20Cube and Hapag-Lloyd strengthened existing relationships and laid the groundwork for future collaborations. The agenda was clear: to reinforce Metro’s commitment to its partners and to explore avenues for mutual growth and development.

India, with its vast industrial landscape, is a pivotal market in key verticals including automotive, industrial, retail, and fast-moving consumer goods (FMCG) and it is the potential for growth in these areas that triggered discussions on long-term strategies and partnerships that would benefit all parties.

Signalling the board’s intent to expand Metro’s regional footprint, meetings were held with several large prospective customers, which focused on understanding their needs and aligning the business to support their success in the longer term.

The visit is a testament to the company’s proactive approach to business development and recognition of the importance of strong partnerships. By investing time and resources into these face-to-face interactions, the company is setting the stage to drive continued growth and success in the economically vibrant market in India and the wider sub-continent.

As a business we have several promising leads and look forward to further developing these opportunities through strengthened relationships that solidify Metro’s presence in these key global markets. The road ahead is promising, and with the insights gained from this tour, the company is well-positioned to navigate the complexities of this market with confidence.

We look forward to sharing future updates.

Our commercial and operations teams work closely with our partners across India and surrounding regions, processing air, sea and sea/air shipments.

If you have any questions, rate requests or would like any further information on our capability in India, please EMAIL our Chief Commercial Officer, Andy Smith.

Category: Supply Chain

Air | China | Sea | Supply Chain

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