Airports congested in China

Getting ready for air freight demand peaking during ‘peak’ season

Jul 8, 2021 | , ,

While air freight demand from Asia and the Far East to the US has remained high, buoyed by eCommerce and inventory replenishment, demand into Europe has not been so strident in June, but even so rates are now beginning to rise.

May and June are normally a slack period and the air freight market from Asia to Europe has been a little subdued for a few weeks, with rates stable over the backend of June, which should suggest the market has bottomed out, but now rates have started to pick up and there are general rate increases planned by major airlines, which suggests there has been a surge in cargo and capacity is now under pressure due to the uptick in demand for faster modes to market.

The US market has been stable too, but about two weeks ago we saw rates begin to increase again. Quickly on some lanes.

The typical peak season for air freight is from the middle of August until the middle of December and we are expecting a busy Christmas, with volumes already beginning to increase in our pipeline.

We are seeing increasing cargo volumes from the Indian subcontinent and while China and Hong Kong had been relatively quiet, we are also seeing that change over the last week, with the market likely to be very busy by August and beyond, into The UK and Europe.

Hong Kong is steady, with freighter services and  ‘passenger-freighter’ operations continuing to replace the bellyhold capacity that has been lost due to reduced passenger flights, with much ‘distressed sea freight’ traffic resulting from capacity and schedule problems due to the widespread port congestion.

In reality the situation remains very fluid, with many factors influencing the market, so it’s incredibly difficult to identify real trends, their causes, or likely outcome. But it will become clearer over the coming weeks as all logistics options are being utilised and a realisation that there are not improvements with the ocean freight market.

While several carriers have begun ‘reconverting’ passenger aircraft for normal operations, which will reduce some cargo capacity for air freight, other Asian carriers are converting more aircraft for cargo operations, so the hope is that balance will be maintained and, if we’re lucky, some new capacity will be added.

With demand already growing ahead of this year’s ‘normal’ peak season, it is likely to remain high, as many sectors recover and look to grow despite the pandemic situation, with manufacturing picking up across the globe and world GDP forecast to grow by 6% in 2021 and even more in 2022.

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 and we are looking at adding capacity with charter operations in Q3 and Q4, to support customers.

We welcome expressions of interest and will share further information as we develop our plans to deal with the extended ‘peak season’ demand. We are currently finalising charter operations for the second half of the year and would welcome interest on where to play these aircraft to support your own anticipated requirements.

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

Coronavirus update 5th March

Container vessel schedule reliability at all-time lows on a global level

Jul 8, 2021 | ,

Vessel schedule reliability continues to struggle, falling to 38.8% in May, with the lines blaming congestion for the average 5.86 day delay of late vessels

The latest schedule reliability statistics continue to reflect an ocean freight infrastructure that has struggled under the weight of increased demand and tight capacity for almost a year.

Not only are ships struggling to arrive on time, but they are getting later, when they do berth. The average delay for late vessels in May was 5.86 days, which is down from the February peak of 6.96 days, but still higher than most of 2020.

Global schedule reliability fell to 38.8% in May, down from 39.1% in April and from 74.8% in May 2020. Maersk was the most punctual carrier for the month with 46.2% schedule reliability, while Evergreen took the lowest schedule reliability at 25.1%. However this depends on how the shipping lines measure their transits against anticipated planned arrival dates which are not always consistent on the various services and alliances.

"If we look at the situation around the market, then the theme remains congestion," Hapag-Lloyd CEO Rolf Jansen said. "Unfortunately, we still see significant congestion in many places around the world."

Jansen said the peak season ahead of the holidays would need to be fairly mild in order for the industry to catch up, but that's not what they expect to happen.

Our expectation is that smart shippers will book their orders to ship ahead of the traditional peak season start and, as we’ve highlighted previously, this peak season is very likely to last longer than normal.

Overall schedule reliability has been largely consistent in recent months, albeit at a much lower level than pre-pandemic, with year over year (Y/Y) global schedule reliability down a “massive” 36.0 percentage points.

The average delay for late vessel arrivals on the other hand had been improving since March 2021. In May 2021 however, the average delay increased slightly by 0.05 days to 5.86 days. The level of delays in 2021 have been the highest across each month when compared to the previous years. The other factor to consider, however,  is how long it takes at origin to actually ensure that a container is released, returned to port, and then successfully loaded on a vessel on which it is booked. This is not included in the overall transit figure.

The number of vessel arrivals subject to extreme delays (>7 days) on the Asia-North Europe trade lane was 461 in January to May 2021, of which 134 were more than 14 days late, and 30 were more than 21 days late.

This compares to 792 vessel arrivals being more than seven days late in the nine year period from January 2012 to December 2020!

In the same period, 35 vessel arrivals were more than 14 days late, and just two vessel arrivals were more than 21 days late.

Metro negotiate rate and volume agreements with a wide range of carriers across all three alliances, which means we can access the widest pool of equipment and offer shippers the biggest range of schedule reliability, service offerings and rates.

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.

We will always provide the true position on the market situation and intel, along with alternative modes and options available for critical cargo, with a deadline that may not be met due to the situation.

Idle containership capacity hits all time high

The pain of pandemic freight rates

Jun 30, 2021 | , , ,

There cannot have been many weeks when we were either warning of impending rate increases, highlighting recent increases, or explaining why further rises were likely. And while we have protected our customers from the worst excesses of the lines, this article by Mike Wackett for The Loadstar lays bare the stark reality for some shippers.

In normal times we would report positive market intelligence and the latest news, but those opportunities are less than sparse currently, so here is another dose of the real market as reported in the trade press....unfortunately.

'I paid ridiculous charges, my cargo still got rolled and the carrier wanted more'

Short-term freight rates from China to North Europe have breached the $20,000 per 40ft mark, while transpacific carriers are quoting rates of up to $25,000 to the US west coast.

And there was one report of $32,000 from Shanghai to Los Angeles being quoted this week.

The Loadstar has seen several quotes from the top five carriers of $21,000 per 40ft for July shipments from Chinese ports to Felixstowe and Southampton, with the average at around $18,000.

Although these massively elevated rates include a premium fee, to guarantee equipment and space, some shippers complain that their cargo is still getting rolled.

“We paid their ridiculous charges and thought that was the end of it,” said one, “but then we found out from our local agent that the boxes were still on the quay and the line wanted more to ship the cargo.

“Apparently, there was another FAK hike from the next vessel which they insisted on charging, which means their so-called premium fees are worth nothing,” he added.

And as the peak season approaches, it appears the situation is about to get even worse for shippers to Europe and the US.

They will need to brace themselves for another round of FAK and GRI rate hikes on the 1st July, with yet another hike likely from the middle of the month and a PSS [peak season surcharge] of several thousand dollars.

One UK-based NVOCC told The Loadstar this week that a “curt email” from his carrier advising of a new increase was “the final straw”.

He said: “We have supported them through thick and thin, even when their standing was pretty low in the industry, and this is how we get repaid.”

On the transpacific, shippers are suffering similar problems. Jon Monroe, of Jon Monroe Consulting, said carriers had the ability to “manage rates” by rolling cargo, suggesting that the US Shipping Act needed to be updated to include a cap on rate increases and a both-parties damages clause for non-fulfilment of contract.

Meanwhile, Craig Grossgart, confirmed to The Loadstar that one shipper had been quoted $32,000 this week for the shipment of a 40ft container from Shanghai to Los Angeles.

“To be honest, I think it was a polite way of the carrier saying to the customer it doesn’t want to take its business,” said Mr Grossgart.

Nevertheless, he said a figure of $25,000 per 40ft had been quoted to a shipper that needed to move 300 containers from Shanghai and Yantian to Los Angeles next month – “and that is a serious offer”.

With the addition of premium fees, plus a raft of other charges, the gap between the spot market indices and the actual rate being paid is widening by the week.

For example, the North Europe component of today’s Freightos Baltic Index stood at $11,006 per 40ft, while the FBX reading for the US west coast was $6,588.

With strong demand for space and limited capacity likely to extend into next year, we continue to encourage shippers to contact us for all options available which may include the spot market and protect themselves with tailored and specific alternatives, rather than face rates that have risen over 50% in two months and are likely to rise even higher than the current record level, as we enter the traditional peak season for ocean and air freight.

If you have outstanding orders in Asia and are waiting for rates to fall, all the indications are that you will have a very long wait. Certainly up to Lunar New Year 2022 and possibly even after that, which is why we would recommend booking at the earliest opportunity, despite the current high rates. Definitely don’t try to play the market. 

Forecasting continues to be a key ingredient to successful supply chains in the current market and are now needed months ahead of despatch, and not weeks or days as we used to ‘enjoy’. We can only manage cargo movements and your expectations, if we can see them ahead, especially during the critical busy last six months of the year.

Please contact us immediately to receive further updates on a rapidly changing logistics market and arrange a review and discussion on how we can further enhance the movement of your products to market or manufacturing locations globally.

container lorry queue

Pandemic reveals weak links in global supply chain

Jun 30, 2021 | , ,

Global supply chains have been under pressure since the outbreak of COVID-19 at the beginning of last year, highlighting deficiencies that have resulted in disruption, delays and rising costs. Along with a roller coaster journey from start to finish.

In time, most of the congestion and disruption we currently face will dissipate, containers will be in plentiful supply, there will be space on ships and there will be more planes in the sky, and freight rates will return to a more sustainable level. But not yet.

Expectations that cost pressures would reduce, as vaccinations and lockdown re-openings prompted a shift in consumer spending on consumer products to spending on services, are proving to be too optimistic, as demand continues unabated on a global scale.

While container shipping prices should be expected to remain higher than before the crisis, they are thankfully unlikely to stay at their current levels, but other problems in the global supply chain need to be addressed, outside of the pure logistics element.

The shortage of computer chips, used in consumer electronics and automotive, is a high-profile example of the challenges facing “just in time” (JIT) production, leading many to suggest there is a clear case for building up inventories of crucial components and SKUs, which arguably defeats the whole point of JIT.

Another typical response is to bring production home (on-shoring), or find closer suppliers (near-shoring), but moving chip, or many other forms of manufacturing closer to home makes little sense, because the scale you need to make ‘low-margin' production work is very high and Europe and the US are far behind Asia, having advocated their manufacturing capability decades ago.

Sourcing from an expanded range of suppliers and regions is another strategy for mitigating supply chain risk, with many technology and fashion brands successfully  diversifying from China, in favour of lower-cost south-east Asian markets including Vietnam and Indonesia. 

But these regions have been hit almost as hard as China by the ongoing supply chain disruption and expanding supplier portfolios increasingly requires more focus on due diligence, to carefully consider environmental, social and governance responsibilities, with more domestic governments insistent that foreign suppliers meet acceptable standards.

The EU is intent on turning multinationals into labour rights enforcers and while this may create competitive disadvantages in the beginning, supporters believe it will result in those companies that invest in sustainability becoming more resilient and securing the most ethical suppliers early on.

Nevertheless, meeting due diligence standards and diversifying supply chains will raise prices in the short term, as would re-shoring to markets with higher labour and production costs.

The need to manage supply chain shocks, such as the myriad triggered by the pandemic, may mean global trade ceases to be the deflationary force that it has been in recent decades, if efficiency gains from technology and logistics and cheap (mostly Asian) labour are replaced by misplaced focus on near and re-shoring. 

Higher costs related to the physical movement of goods, that we are currently experiencing, can be replaced by a higher cost of products, with a lower price for the positioning of goods to the end market – it is a new balance that could change the dynamics of world trade.

The spread of globalisation has extended supply chains, as buyers sought low-cost manufacturing and cheap new products in the Far East, Indian sub-continent and other regions.

Increasing supply chain complexity adds uncertainty by extending geographic reach, introducing language barriers and multiplying participants, which is complicated further by the addition of order due dates, required actions and critical timelines.

Metro has spent 40 years transforming and simplifying the most complex supply chains, with our global network of partners and our award-winning MVT supply chain management platform.

Invaluable for shippers during the unprecedented supply chain disruption unleashed by the pandemic, MVT is our cloud-based, hyper secure, workflow solution that connects shippers to their entire supply chain – from suppliers and manufacturers, to carriers, distribution networks and customers – harnessing participant, process and inventory data to provide complete real-time visibility, control and intelligence.

Please contact Elliot Carlile or Grant Liddell to learn how MVT and our supply chain knowledge can protect your commercial interests during these challenging times.

Category: Supply Chain

Environment | General | Supply Chain

Latest News in this category