ships at anchor

Air cargo gains momentum from rising prices in ocean shipping

Jul 28, 2021 | , , ,

The record-breaking sea freight rates, driven by restricted volumes, equipment availability and service disruption is pushing increasing quantities of ‘distressed’ ocean cargo to air freight solutions.

Metro have advised and updated regularly on the dynamic air freight market, which has restricted lifting capacity through the grounding of passenger aircraft and increased costs as carriers rely on air cargo as the only revenue stream available. 

Coupled with manufacturing delays through lockdowns, component and raw material shortages and constant schedule malfunctions of ocean carriers, due to congestion and disruption and we are experiencing a very high air freight demand globally, on all routes, by desperate shippers, needing product to market or into manufacturing.

The International Air Transport Association (IATA), the trade association of the world's airlines and air freight agents, confirmed that that air cargo is benefitting from “exceptionally congested” container shipping supply chains and suggested that the cost-competitiveness of air, relative to that of container shipping has improved over recent months.

Prior to the pandemic air freight was typically 12 times more expensive than sea freight, but that differential has halved, with air cargo just six times as expensive in May. This is not a reduction in cost but a resetting of the standard price of ocean freight versus air freight pricing, which is at elevated levels, compared to the pre-pandemic situation.

Air cargo rates from the Asia to the US began to climb last week, driven in part by rising ocean rates. It is a peculiarly circular situation which sees ocean rates increase, driving an increase in ocean to air conversions, that are triggered by those same climbing rates and persistent delays in ocean freight.

It appears that some UK importers are deciding, or being forced, to move ocean imports to air, despite the expense and possible financial loss, as a way to guarantee their inventory availability and maintain and build customer loyalty, while their competitors continue to struggle with ocean freight delays.

Ocean rates from China to the US west coast last week were up over 150% on 2020, while prices to the east coast were up 209%.

Air freight, while volatile, is very stable in comparison to shipping, with global shipping schedule delays equivalent to an 8.6% loss of capacity. 

Airlines are much more reactive and agile, and can switch on flights quickly to meet demand, as long as there is a reasonable return on the investment. 

Similarly they can switch off supply if their aircraft cannot be filled with cargo – immediately - which ensures market rates remain elevated.

IATA believes that air cargo is likely to continue to benefit from disruption in ocean shipping. “Air cargo also tends to over perform other means of transport at the start of an economic upturn due to restocking cycles, when businesses turn to air to rapidly refill inventories as demand rises.”

“But with strong consumer demand and the lack of container capacity expected to continue until late 2021 at the earliest, air cargo is likely to remain a viable alternative to container shipping for some businesses. The upshot is that air cargo is likely to continue to perform well compared to other modes for most of 2021.”

We work closely with leading airlines and cargo carriers to offer the widest range of time-sensitive solutions, routes and transit times at the most competitive rates, from every origin.

If the right market conditions exist, we will be adding charter capacity during Q3 and Q4 to ensure that expectations from our customers are met and delivery deadlines achieved. We welcome enquiries and expressions of interest for specific origins, as we develop our plans to deal with the anticipated extended ‘peak season’. 

We are driven by client needs and requirements – please engage and we will provide all options available in what is predicted to be a very active market in the latter months of the year and the lead up to an early Chinese New Year.

If you have urgent or time-sensitive consignments and would like to explore options, transits and costs, please contact Elliot Carlile or Grant Liddell, to ensure your deadlines are met.

Ningbo

Sea Freight market update and Q3 Rates

Jul 28, 2021 | , , ,

We are in a new world of shipping. There have been spikes in demand and freight rates before, but never for such a long time and never on such a continuously upward trajectory.

The challenges we face are unique. Even with demand levels increasing on the most popular trades, equipment availability continues to be an issue and the lines still void sailings. And the real effects of those blank sailings may take up to three months to work through, contributing to the ever declining schedule reliability.

The government has added freight workers to the essential workers allowed to use the daily workplace test scheme to avoid needing to self-isolate for 10 days if pinged by the NHS app.

Logistics and warehouse workers have yet to be included to the ‘exempt’ list and despite the inclusion of drivers on the list, massive disruption is being caused to supply chains due to self-isolating workers at ports, airports, haulage contractors, rail operators, in our offices and at customers premises.

Nearly a million people have already been pinged by the app in recent weeks, which is contributing to the delays being experienced outside of the usual day to day impact on movements, and in particular the desperate state of the first/ last mile haulage, especially with late bookings.

Situation summary

Capacity is expected to remain tight on most trades as we move further into the peak season and likely to remain so, for the rest of the year.

Vietnam’s Ho Chi Minh City has been in lockdown for over two weeks and most of its terminals are severely congested, with many ships lying at anchor off Vung Tau, an important feeder and transhipment hub, waiting for berth space to open up.

Schedule reliability on the Asia-North Europe trade was at 23.8% in May compared to 86.2% in 2019. The late arrival of deep-sea vessels, combined with more container exchanges per port call, is creating surges in volume and mounting congestion at European ports.

Rotterdam is operating with berthing delays of 2 – 10 days due to ongoing congestion and the Ever Given (the Suez Canal blocker) has returned to service on European destinations, but has been forced to drop the Hamburg port call because of concerns surrounding navigation safety.

Bangladesh is close to breaking point with severe national lockdowns, restrictions on container movements and enforced factory closures.

Asia to North Europe

The space and equipment crunch continues, with market demand exceeding supply and rates skyrocketing.

The overall situation is exacerbated by blank sailings and poor equipment availability at most significant origins throughout China and other manufacturing regions.

Carriers that are overcommitted are limiting booking acceptance or rolling shipments and schedule reliability remains at all time lows.

Rates increased on the 15th July and are expected to move up again with GRI’s on the 1st August across all major trade lanes, led by the transpacific trades.

This is without the consideration of weather influence and relentless hurricanes and typhoon disruption being caused at ports and airports throughout the continent.

Shippers need to be flexible on equipment and provide as much notice of requirements as possible and book no later than 5-6 weeks prior to order ready date.

North America to Europe

The reopening of the US and European economies after last year’s COVID-19 lockdowns spurred a resurgence in the trans-Atlantic container trade, with total containerised volume between the US and Europe rising 7.4% in the first five months of 2021 compared with the same period a year ago.

In the first five months of 2021, eastbound shipments picked up 2.6% to 732,618 TEU, compared to the same period in 2020.

Space is still very tight from the west coast and while the east coast is being managed tightly by a few ocean carriers, with sufficient lead time, securing capacity is more achievable.

Equipment at east coast ports are available and rates are generally steady.

Recommend 4+ weeks lead time on bookings from the east coast and 5 to 6 weeks for the west coast.

Europe to North America

US imports from Europe hit an all-time single-month record of 328,627 TEU in April, a 14.7% increase from a year earlier. May imports reached 316,687 TEU, a 26.4% gain from the same month last year

Capacity and equipment remains severely restricted and strong volume forecasts, together with the existing cargo backlog is going to keep pressure on rate levels.

Several vessels are omitting Rotterdam from their schedule, due to the ongoing port congestion and shipper flexibility on departures from different origin ports is pragmatic.

New blank sailings announced will reduce capacity further to the west coast in the first week of August.

Shippers need to be flexible on equipment and provide as much notice of requirements as possible and book no later than 5 weeks prior to order ready date.

Federal Maritime Commission to audit detention and demurrage

The US Federal Maritime Commission (FMC) has informed the top nine container lines operating on US trades that the agency will immediately begin auditing how they bill detention and demurrage charges amid increased pressure from the White House to crack down on unreasonable storage fees tied to ongoing port congestion.

Our commercial and operations teams work closely with our partners across Asia and North America, monitoring the sea freight market and the port congestion that continues to impact most regions globally.

As we enter the traditional peak season much uncertainty remains and we will continue to keep you updated as the situation evolves; day by day.

Please do continue to send us your forecast data and order information, at the earliest opportunity, so that we can manage cargo bookings and transit deadlines, to meet your expectations.

If you have any questions, concerns, or would like any further information regarding the situation in China, please don’t hesitate to contact Elliot Carlile or Grant Liddell.

businessman stressed

Shippers go out of business as ocean surcharges continue to mount

Jul 28, 2021 | , , ,

Container shipping lines are becoming ever more inventive with the names they apply to the surcharges they keep adding to already over-loaded FAK rates.

The latest example is Hapag-Lloyd’s ‘value-added surcharge’ of $5,000 per 40ft, from China to the US and Canada.

The carrier told customers the new surcharge was due to “extraordinary demand from China and the resulting operational challenges along the transport chain”.

Hapag-Lloyd said the surcharge would be implemented from the 15th August and would “replace other ad-hoc surcharges like the SGF” (shipment guarantee fee), which is $1,000 per 40ft.

Some carriers, including Zim, Cosco and ONE, are already charging Asia to US west coast shippers in excess of $7,000 per 40ft for so-called ‘value-added’ products, on top of their FAK rates. Zim is also implementing a $5,000 per 40ft congestion surcharge from the 6th August for shipments to the US west coast ports of Los Angeles and Tacoma.

Last week’s Baltic Index for Asia to the US west coast actually fell by 8%, but in many cases shippers are paying at least double the Baltic Index quoted figure to secure shipment, despite having signed MQC [minimum quantity commitment] contracts with shipping lines.

For Asia to North Europe, the Baltic Index reading rose 7% this week, while the 30% spike in rates from Europe to the east coast of South America this week is likely to be a result of capacity being diverted to the ex-Asia lanes.

There is growing anecdotal evidence that carriers across a number of tradelanes are ignoring contracts and forcing shippers to accept sky-high FAK rates and hefty surcharges and there is growing concern that businesses will be unable to absorb or pass on to their customers these massive freight cost increases.

Increasingly it is reported in the national press, shippers such as Taylor Group, a heavy equipment manufacturer, are getting the ear of US politicians, and legislators don’t like what they hear.

“This situation is causing inflation to run rampant throughout the supply chain. So far, we have kept our production lines running but are facing 30% to 75% price increases from our vendors and transportation companies,” William Taylor, CEO of Taylor Group, told the Senate Commerce Committee this month.

The Biden administration is wading into ocean regulatory waters via an executive order, upping pressure on maritime regulators to crack down on illegal behaviour and work more closely with the Department of Justice (DOJ).

And for the first time in more than 20 years, Congress is on track to rewrite the shipping law that gives the Federal Maritime Commission (FMC) its direction, powers, and purview.

The escalation of federal and Congressional attention on container shipping speaks to how supply chain disruptions have moved out of the world of logistics managers and onto the front pages of general news.

Metro negotiate rate and volume agreements with a wide range of carriers across all three alliances, which means we can react quickly to market changes and offer shippers alternative services, in line with their deadlines.

Our fixed validity contracts provide supply chain security and peace of mind, but with space and equipment in such short supply, we recommend a minimum of four weeks visibility and booking window, to secure space on the vessel and get the right equipment positioned.

Dover lorry queues

Post-Brexit update: Haulier and multimodal transport market latest

Jul 28, 2021 | , ,

UK hauliers are under massive pressure, struggling to counter the border delays, increased administration and crippling driver shortages that have plagued the industry since Brexit and now, as they fear the full UK border checks due in January, drivers are planning a strike in August.

Surges in pandemic-driven demand are pushing hauliers to breaking point, with a study suggesting that 94% were seeing greater aftershocks from Brexit than expected and that 69% of UK haulage firms have been losing business because of post-Brexit regulation changes.

Lorry drivers in the UK are planning a nationwide strike over their working conditions, prompting warnings that this would cripple the country’s already creaking supply chains.

So far the “stay at home” action proposed for the 23rd August has attracted the support of 3,000 HGV drivers, however the Road Haulage Association (RHA) is urging drivers against taking action, saying it would make a “bad situation worse”.

The RHA is concerned that any action may heighten the effect of driver shortages, itself compounded by the ‘pingdemic’. Even the exemption of about 10,000 workers at 500 food distribution centres from quarantine does not appear to have offset the effect of the current shortage of an estimated 100,000 lorry drivers in the UK alone.

The 2021 Post-Brexit Hauliers Survey showed that more than half of haulage companies have already moved some operations to the EU and more would consider it in the future.

Over two thirds of haulage firms said they had already seen increased costs, with the rest expecting rises next year or in the near future. Many will have no choice but to pass these costs on, to keep their businesses viable. 

This fallout has already being experienced in the container haulage market over recent weeks, with container transport becoming a premium product within the domestic transport environment, as salaries are increased to match those of retailers and commercial businesses outside of the industry.

Almost a third said they were avoiding the food and drinks sector because of increased checks and administration on some products and other sectors have been impacted, including livestock farming (25%), agricultural farming (25%), gardening supplies (19%) and retail (13%).

The impact of the driver shortage has been amplified by the fact that in the three months of 2021, the uplift in demand for haulage was more than twice what it was for the same period in 2019 and in April it was 120% higher than in 2019.

Despite the massive increases in demand for domestic movements, half said fewer exports were going to the EU, and half said fewer imports were coming in. However the main freight transport operators are not UK based but are European organisations so this may not reflect the real situation as they would not necessarily have been considered, just the impact on UK domiciled haulage companies.

Increased waiting times at the border was the biggest impact cited by respondents (81%), followed by increased time spent on admin (69%), and fewer exports and imports (56% and 50% respectively).

Other challenges included longer journey times to take alternative routes, higher tariffs, changing licensing and registration requirements, with only 6% of hauliers saying they had not been impacted.

Nearly seven out of ten haulage companies said they believed they would be negatively impacted by full border checks due to come into force at the beginning of next year and the British International Freight Association (BIFA) is encouraging businesses engaged in trade between the UK and EU, to make sure that they are fully prepared for the rule changes that will be even greater than those of January 2021. This is predominantly focused around the current temporary customs processes that will change permanently in 2022.

Road transport cannot be avoided, as part of the international movement of goods, with drivers critical for container movements, international and domestic haulage.

We work with a number of selected long-term haulage partners across the UK, to give us access to the widest pool of equipment and driver resource. 

Our CuDoS customs brokerage platform is optimised continuously, in line with the regimes in force on both sides of the Channel, automating and submitting customs declarations, for simple and compliant border processing in either direction and means that our clients' EU supply chains will not be interrupted when full UK/EU border controls are implemented on the 1st January 2022.

To learn more, or to discuss your situation, please contact Elliot Carlile or Grant Liddell (or Simon Balfe who leads our UK multimodal transport operations) who can talk you through the options.

Category: Supply Chain

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