• The landscape remains challenging with resurgence of COVID-19 related restrictions in China leading to significant disruptions to all methods of transportation.
• The capacity of freight travel is increasingly under pressure as a result the cancellation of flights and blank sailings, with carriers adjusting timescales to mitigate against unforeseen delays.
• Congestion at ocean ports continues through this quarter, including at key trans-shipment ports in Asia. This is compounded by difficulties with equipment supply and a shortage of empty containers.
• Global reliability continues to remain at an all-time low for carrier lead and transit time at 34.4%, with specific lanes performing lower.
• It is therefore recommended that a lead time extension of 2 weeks for short haul lanes and 4-5 weeks is included in forecasts, especially through the most impacted US lanes.
• To ensure continuity of service, it remains necessary to provide a 4-week rolling forecast for both Air & Ocean freight. To do so, a booking must be places at least 1-week in advance for air mode and at least 4 weeks for ocean.
• Courier freight has experienced similar disruption to air and ocean, particularly in Eastern China. Ground transportation has been equally challenging, especially at the Chinese, Hong Kong and South Asian border.

Market Dynamics

Asia ​

• Global air trade has increased by 8% between January 2020 and 2021, with trans-pacific trade accounting for around 50% of that increase.​
• As of April 2022, demand has remained stable for all regions with an overall annual growth rate of 4%, albeit some softening has been observed as a result of lockdowns in China, record levels of inflation and the Russian invasion of Ukraine.​
• It is anticipated that the two-year bull market for air cargo could be ending. This follows the International Air Transport Association’s report that global volumes declined by 8% in April, after a 4.5% drop in March.​
• With general consumer price inflation registering at its highest level since 1982, coupled with the continuation of lockdowns in some regions, demand flow could continue to fall over the coming months.​
•  In Asia, trade lanes continue to face disruption through factory closures, strict lockdowns and a reduction in e-Commerce movements, particularly on the ASPA-AMER trade lanes.​
• The dynamic load factor measuring a plane’s payload capacity fell by 9 points to 62% last month. This was set, however, against an exceptionally high year previously.

 

 

Supply Commentary

Asia 

• Overall annual Air cargo capacity is down around 6% from 2019.​
• Freighter capacity remains up, with the parking of Russian aircraft offset by deliveries and conversions elsewhere.​
• Airline schedules show strong growth of belly air cargo capacity this summer, from 28% in 2019 to 49% in 2021.​
• Capacity recovery is fluctuating due to recent service disruptions, flight cancellations and reroutings.​
• Among major trade lanes, ASPA outbound capacity remains limited due to flight cancellations amidst strict COVID regulations and recent resurgent outbreaks​
•  As a result, the continued closure of airspaces continues, leading to a significant capacity reduction alongside increased pressure on the alternative trade lanes.​

 

  

 

Pricing Commentary

Asia 

• In April this year, Jet fuel price reached $190 per barrel whilst crude oil averaged over $100 per barrel.  
• Oil inventories are at their lowest levels since mid-2014 whilst brent crude prices have increased by 60% over last 12 months.​
   

 
 

• Lower volumes last month, however, did not lead to lower overall air freight rates. April spot rates were nearly 2.5 times greater than in 2019 and even edged up from March. Air cargo prices were also 26% more than the previous year.​
• Airfreight rates remain high and extremely volatile. In March of this year, rates globally were 121% higher than the 2019 baseline and 29% more than the 2021 baseline.​
• Rates are expected to remain at high levels due to rising oil prices, reduced capacity, geo-political tensions, war surcharges and new and continued service disruptions.​
• Rates will also remain high as capacity woes remain and the spike in jet fuel prices continues to add to the already high transportation rate.​
•  Closed airspaces, cancelled flights and pressure on alternative routes will also lead to higher transit costs.​
• It is anticipated that prices will continue to be influenced by the elasticity of supply, passenger recovery trends, the capacity elasticity of belly freight, fuel costs, probability of reactive demand, macroeconomics and the rapidly evolving geopolitical situation. 

 

Shanghai Import/Export Update

Imports

 

 

Export 

 

Intra-Asia

• There is still a heavy reliance on belly freight with the outlook remaining moderate for most countries. This follows a reduction in ocean to air conversions alongside ocean supply chains adjusting to longer lead times.​

India Subcontinent

• Demand remains steady and capacity is limited as the market relies on historical PAX and belly freight data. There are also still flight cancellations and constraints due to travel restrictions imposed by the Indian Government.

 

Market Dynamics

Europe 

• The current easing of the airfreight market may only be temporary, and rates could rise further once lockdowns in China are lifted.​
• Despite a year-on-year drop in demand over recent months, supply chains remain congested and there could be a surge in production when factories in China reopen following Covid curfews.​

 

​Supply Commentary

Europe

•  In China, the biggest challenge is trucking and ground handling, which is generally slower than normal. Delivery for outbound could take a day’s extra waiting time, but inbound is worse with waiting times of up to five days for cargo checked. 
• Additional passenger flights between the US and Europe are expected to lead to a rise in capacity and potentially downward pressure on rates.​
• The decrease in load factor from China to Europe is normally reflected in a softening of pricing, but the current decrease may be temporary and when production ramps up again in Shanghai and other Mainland China locations, pricing could once again bounce back.​
•  The East Asia – Europe Lane has been the most affected by Russia’s invasion of Ukraine.​
•  Aircraft from all 27 EU Member States as well as the UK, Albania, Iceland, Norway, and Switzerland have all been banned from Russian airspace in response to sanctions placed on Russian aircraft.​
• As a result, flights between East Asia and Europe can no longer stop in Russia and instead have begun operating alternative routes with transshipment points in Kuala Lumpur, Malaysia, UAE, and Dubai for example.​
•  This creates an increase in flight times of up to three hours, as well as higher staffing and fuel costs for carriers.

 

Key Takeaways

Europe

• Shippers increasingly switched from sea to air in 2021, with port congestion and a narrowing price gap helping the airfreight market grow twice as fast as sea cargo.
• At the start of 2022, the picture remained one of high demand and high rates. The underlying drivers of the market for air freight, however, have begun to shift over the first three months of the year.
• Belly-freight capacity is returning as international passenger travel resumes. Demand is reducing as inflation and interest rates increase and dampen consumer confidence. The supply of capacity in freighter markets is also subject to new dynamics. Once close to becoming a dying breed outside of air express, freighters have been given a new lease of life.

 

Market Dynamics

Americas

• Demand fell for inbound freight to the US for three consecutive months (March, April, May). Latin America saw an increase in demand for inbound Air Freight.
• The market is seeing far fewer delays at major airports in the US due to demand softening for inbound air freight. The congestion has cleared but not completely disappeared.
• Still with the demand high for the Ocean containers, some of that demand is pushing over into the Air market and keeping demand high in comparison to previous years.
• Even though there has been a lot of demand roll from Ocean to Air a lot of big retailers have increased their on-hand inventory in the last quarter to avoid the need to air freight cargo.

 

Supply Commentary

Americas

• As passenger travel increased over the last few months, we are seeing increased space for freight in commercial airplanes which should result in lower freight rates and decreased COVID surcharge. Currently the air rates are decreasing only marginally. The total capacity of passenger belly freight is still 35% lower than this time in 2019.
• Load factor across the globe are 9% lower from April of 2021. “The rationale behind the lower load factors and higher rates is the bottleneck on the ground – which appears to be being caused now by not only the shortages of people handling cargo at airports around the world and the severe lack of truck drivers to move the goods, but also by a wider shortage of people for lower paid logistics jobs” said Niall van de Wouw, chief airfreight officer at Xeneta.
• There continues to be a labor shortage of ground handlers and slowing the throughput at the airports but has seen significate improvements from past quarters.
• 75,000 Sq ft has been added to ORD in order to help with the capacity constraints of space to move freight through the airport.
• There has been an increase in charter volumes in the last quarter due to lack of capacity in the heavy air mode.
• Capacity is still down due in part to limited passenger air travel. Shippers and receivers can do their part in the capacity problem by unloading freight quickly, extending receiving dock hours and providing accurate forecast needs to their carrier partners.
• Volumes are still outpacing capacity during Q2 of 2022.

 

Pricing Situation

Americas

• Carriers continue to use capacity issues to their advantage, with high pricing to their customers. Forward-looking through the next quarter if lockdowns are lifted and not reinstated, we should see a decrease in heavy air pricing, but probably not significantly.
• Consumer spending is down due to inflation concerns which should free up some capacity in the coming months and reduce heavy air rates.
• The fuel surcharges will probably offset any savings shippers will get in their heavy air rates as jet fuel is skyrocketing. 
• Lack of passenger air travel over the last several years has affected the financials of the airlines, and they will not operate planes without full equipment and maximum profits.

Market Dynamics

• Despite month-over-month improvements in both February and March, global reliability declined month over month in April 2022  by 1.3 percentage points and reached an all-time low, with carrier lead and transit time at 34.4%, with specific lanes performing lower. This also meant that the April 2022 score was down by 4.7 percentage points Year over Year.
• ASIA – North America West Coast/East Coast schedule reliability increased by 1.4 percentage points month over month to 21.7%.(respectively).  
• month over month to 21.0% and increased on Asia-NAEC by 2.0 percentage points
• ASIA – North Europe increased by 1.3 percentage points month over month, to 19.2% reliability. 
• ASIA – Indian Subcontinent was at 28.1%.
• ASIA – Indian Subcontinent schedule reliability decreased by -0.7 percentage points month over month, reaching 28.1%, which is the lowest schedule reliability figure recorded.

 

Supply Commentary

Asia 

• In response to lower demand, carriers have continued the use of blank sailings on the three largest trade lanes over the past five weeks out of the Far East bound for North Europe, North American East Coast, and North American West Coast.
• Out of the three trade lanes, the Far East to US West Coast had the most blanked sailings between April 4 and May 8 this year.
• 63 sailings were blanked over that five-week period, removing a total of 517,300 TEU or 25% of the initial capacity offering.
• This is the most obvious of the three trades for shippers to look at and question whether carriers are removing capacity to safeguard high spot freight rates, while on the other two trades; fewer sailings were blanked, and spot rates fell.
• Out of the three trades, the Far East to US West coast trade had the largest decline in demand in during the first quarter, falling 3.5% on the previous year. Despite this, it is the only one of the three trades that did not see spot rates fall, which can partly be explained by the large share of sailings that were blanked by carriers.
• Despite volumes growing on the Far East to US East Coast trade line, spot rates fell in the five weeks to May 8^th, down $380 per FEU. This trade lane saw the lowest number of blank sailings, where 263 500 TEUs were blanked, the equivalent of 10% of capacity. Compared to earlier weeks, this trade lane is the only one to have seen a decrease in the number of sailings being blanked as carriers adjust to the higher demand. Despite the blanking of sailings, available capacity remains high enough for spot rates to fall, even though volumes are experiencing a record high on this trade line.
• The Far East to North Europe trade line had the largest fall in spot freight rates,  down $770 per FEU, with falling demand outweighing the 13% of the capacity that was blanked over the 5 weeks to April 4, 2022.
• The number of blank sailings from the Far East to North Europe has not increased significantly from earlier in 2022. Despite volumes being down, capacity has been higher this year than last, which has put downward pressure on spot freight rates.
• Overall, Global Ocean market demand remains at high levels and continues to be imbalanced against supply with no significant injection of new capacities into the market. The market update, according to Seabury, on Global carrier schedule reliability remains at a low of 35.9%, with some trade lanes even lower.

 

 

• The overall global effective capacity remains lagging at a negative 15% versus the potential effective capacity available. 

 

Pricing Commentary

Asia 

• The biggest drop came on the Far East to US East Coast trade line, with spot rates equal to the long-term rates for contracts signed within the past three months. At the start of the year, the spot rate was more than $4,500 per FEU, higher than the long-term rate.
• On the Far East to North Europe and US West Coast trades, spot rates remain higher than long-term rates, but the spread has dropped considerably: standing at $1,180 per FEU to North Europe. 
• The fall in the spread to the US coasts is driven by a rise in the long-term rates, with spot rates close to flat in April this year.
• Whereas in North Europe, a small increase in long-term rates was combined with falling spot rates, which are down by 25% since the start of the year.
• Most shippers on long-term contracts are still paying considerably less than they would be on the spot market with the average long-term contracts below the average of contracts signed over the past three months.
• The average long-term contract for the Far East to US East coast trade is $6,840 lower than the spot market.
• One of the biggest developments over the course of April has been the rapid drop in the fall of the spread between short and long-term rates on the major trades out of the Far East.
• The decreasing gap between short and long-term rates reduces the difference between the two at more normal levels leaving uncertainty. 
• Blank sailings are being announced from the Far East to North Europe to counter the falling volumes, something that has not been seen to the same extent on the Transpacific trade lanes.
• The global XSI ® jumped by an unprecedented 30.1% in May to 383.12 points. The month-on-month rise is the largest on record and takes the benchmark to 150.6% higher than this time last year. Since the end of 2021, the index has appreciated by 55.0%.

 

• The Far East Imports on the XSI ® jumped by 17.4% in May 2022 to 207.99. This represents one of the largest month-on-month increases on record and takes the index to 57.1% higher than in May 2021, as older contracts with lower rates have now almost entirely been replaced by the new round of contracts with much higher rates. Since the end of last year, the index has risen by 26.9%.
• Meanwhile, Exports increased by 35.4% to 542.79. The increase was the largest reported since the inception of the index and means it is now up by 174.8% year-over-year. Since December 2021, the benchmark has appreciated by 62.5%.
• The lockdown in Shanghai has not only impacted the world's largest port but is also having a knock-on effect on schedules at Hong Kong and Yantian.
• With end of lockdown is in sight, with restrictions being lifted next month, whilst a positive development, there are concerns that a lack of cargo moved during this period due to blanked sailings, could cause further disruption as the market enters peak season.
• With China's policy to deal with COVID-19 impacting supply chains, the EU Chamber of Commerce in China has begun lobbying Beijing over its handling of the situation, suggesting its strategy is no longer capable of controlling the Omicron variant. However, it is difficult to see anticipate any immediate change in direction and therefore supply chains are likely to remain disrupted as a result.

 

• Fuel: In March 2022, the average monthly price of very low sulfur fuel oil (VLSFO) stood at $921 per metric ton, the highest figure in the observed period. The price of VLSFO is strongly influenced by external factors, such as the price of crude oil and market forces of supply and demand. In the past two years, two separate events have had a profound effect on the price of VLSFO: the International Maritime Organization (IMO) sulfur cap on fuel oil in 2020 and, more recently, the Russian invasion of Ukraine and the International Maritime Organization’s (IMO) sulfur cap on fuel oil.
• Nevertheless the April and May 2022, prices are ‘stable’ albeit still remaining on the high side.
        
  
  
  
   
• The rise in crude oil prices that followed the Russian invasion of Ukraine is evident in bunker fuel surcharges. Across all trade lanes, the average fuel surcharges have risen close to 50%, reaching almost $600 per FEU.
• Some trades, such as the Far East to US West Coast trade, have seen an even larger increase in bunker surcharges, going from $540 per FEU in January 2022 to $1150 per FEU in mid-May.
   

 

• Compared to freight, the fuel surcharges share of the total shipping cost has climbed to 13%, up from 3% at the start of the year. 
• On the US East Coast, the fuel surcharge also accounts for a larger share of the total rate, up at 14% by mid-May 2022. The longer sailing distance explains the slightly higher increase in this surcharge compared to the West Coast - up 122% to the East Coast compared to 117% for the West Coast, while still making 16% and 13% of the total rate, respectively.
• The fuel surcharges on the backhaul trades have increased by even more than those on the fronthaul - rising 245% from the US West Coast to the Far East and 128% from the East Coast since the start of the year.
• Despite these large increases, they remain a fraction of the fuel surcharges in comparison to the fronthaul, namely at $190 per FEU and $200 per FEU, respectively.
• As bunker prices remain high, these surcharges are unlikely to fall any time soon, and some shippers will be seeing even higher surcharges. Even if they remain flat, they are likely to continue to account for an increasing share of the total rate.

 

Key Takeaways

Asia 

• The lockdown in Shanghai continues to cause disruption to global supply chains.
• Despite the Shanghai port remaining open throughout the restrictions, the transportation of cargo through the port has been challenging.
• The biggest impact of lockdown has been on intra-Asian shipping networks, with the production pipeline disrupted as raw materials and semi-finished goods are in prolonged transit, causing delays to the manufacturing process.
• The volume of trade leaving Asia was already falling prior to the current restrictions, leading to concerns around the backlog of goods requiring transportation once the region returns to normality.
• The only exception to this is on the Far East to US East Coast, where volumes have grown. But this is primarily due to the shift from the US West Coast rather than any actual underlying demand growth.
• Manufacturing in the area is still severely impacted. Some industries have been allowed to restart production, however ensuring a return to the workplace remains challenging for many and includes a requirement for employees to live on site.
• Intra-Asia carriers remain conservative on their capacity growth for 2022.  High charter costs combined with increasing bunker are cited as the main reasons for their pessimistic forecasts.
• Except for the Far East to Southeast Asia route, freight levels are to remain stable. Carrier believes this will persist until the Chinese lockdown is lifted and restrictions ease. When that occurs, an increase in short-term freight may take place due to a surge of cargo movements.
• LSS/LSF are continuously increasing due to the ongoing Global bunker price upward trend
• Equipment supply is currently adequate in most key areas throughout the continent.
• Space is manageable, however, with a liners requiring 2 to 3 week notice required to ensure adequate capacity.
• Spot freight rates continued to trend downwards with a rebound expected when Chinese exports return to their pre-Covid pace.
• Long-term rate level remain elevated whilst escalating Bunker/LSS will be ongoing due to Russia-Ukraine war.
• Extended lockdowns in various Chinese cities have led to significant export cargo shortfalls with capacity utilization out of Asia still falling.
• After Southeast Asian countries lifted some Covid-19 restrictions, exports rebounded. This led to growing equipment and space demand at the same time as Vietnamese container port volumes recovered strongly due to export orders diverted from China.

 

Market Dynamics

Europe

• After an initial drop in volumes at major European ports at the start of the Covid-19 pandemic, data shows that throughput in 2021 was on average 7% higher than in 2020.
• Based on available port data for Q421, figures are five index points above Q3 and up to six points year-over-year.  This suggests that the European ocean freight market continues to see high demand.

 

Supply Commentary

Europe 

• Unequal global distribution of containers has caused considerable upward pressure on ocean freight rates.
• There are around 180m containers worldwide, but an imbalance in global trade has meant container shortages at export locations. 
• The Container Xchange availability index shows that this problem has worsened since the start of the pandemic.
• A CAx value of 0.5 means the same number of containers leave and enter the port, smaller than 0.5 means more leave the port than enter while a value larger than 0.5 means more containers enter the port.

 

• According to Alphaliner, the published network schedules of the three Asia-North Europe alliances are currently unsustainable, and carriers need to add three ships per loop to maintain a weekly frequency.
• Ships on Asia-North Europe loops arrived back in China, on average, 20 days late, compared with their proforma schedules – up from the average of 17 days in February.
• They calculated that the ultra-large vessels deployed on the route currently needed an average of 101 days to complete a full round voyage, explaining: “This means they arrive on average 20 days late in China for their next round-trip, forcing carriers to blank some sailings as there is no (replacement) ship available.”
• Blocked Russian import cargo at Rotterdam accounts for an overwhelming 3,000 TEU overflow off-dock storage area which is contributing to the congestion problem there and other Northern European ports.
• "The time needed to discharge and load at the three biggest European container ports was 36 days between arrival at Rotterdam and departure from Hamburg,” said Alphaliner. “As the big terminals get choked up with boxes, ships have to wait at anchorage,” warning that a rush of Chinese exports after the ending of Covid lockdowns “could add unwanted extra pressure on the North European port and terminal systems again this summer”.
• The port of Hamburg is experiencing disruptions with its rail freight services. The German port cannot receive any more export trains as of week 21 until at least mid-June and a there is a 2-week delay on import trains due to a combination of factors that include limited track capacity, already delayed services, and reconstruction works.
• The North Sea Terminal at Bremerhaven is also experiencing long delays in loading and unloading vessels.
• In the Mediterranean, Genoa and La Spezia are backlogged. Congestion in Piraeus, Greece continues mainly due to vessels arriving off schedule from Asia.
• Koper has major issues with a newly installed IT system and a severe shortage of trucks to move containers from the port plus the rail services are running with extended transit time.

 

Pricing Analysis

Europe

• Global ocean freight rates have risen dramatically since the second half of 2020. This is having a significant impact on the world economy.
• The explosion in rates over the last 18 months has been driven by high levels of consumer demand as recovery from the pandemic continues. Backhaul rates are also being pushed up by fuel prices, container shortages, and port congestion providing upward pressure.
• Container prices have softened since the Ukraine war and lockdowns in China, although they remain higher than 2019 levels.
• May saw the highest ever monthly global increase in long-term contracted ocean freight rates, as the cost of locking in container shipments soared by 30.1%.
• European imports on the XSI ® continued to reach fresh all-time highs after increasing by 11.3% to 379.13 points. Year-on-year the index is now up by 122.0% and had risen by 39.7% since Dec-21. Exports also rose in May, jumping by 27.6% to 333.91. 
• While the split between long-term contracted and spot cargoes has traditionally been 50:50, during the first couple of years of the pandemic, the volume of spot cargoes edged ahead, this is expected to reverse in 2022.
• European long-term rates rose by 11.3% on the import index, and are 122% up year-on-year, while exports recorded their largest ever monthly jump of 27.6%, an impressive 138.3% increase on May 2021.
• Far East Import and Export indices both raced upwards, with the former rising by 17.4% and the latter soaring 35.4%, the largest monthly rise tracked by Xeneta for this measure. Seen from a year-on-year perspective, the respective benchmarks stand 57.1% and 174.8% up.

 

Key Takeaways

Europe

• The disruption in the ocean market has worked in favour of the ocean alliances which have posted record FY21 revenue numbers.  They have used the disruption on the port side as a reason to blank sailings artificially creating less capacity in the market and keeping pricing high.
• The 11 global carriers that publish their results posted a “staggering” $59.3bn net profit in the first quarter, the sixth consecutive quarter of the highest net income ever for the industry.
• The container shipping industry profits in the first quarter of 2022 beat out those of FANG—an acronym for Facebook, Amazon, Netflix, and Google—by 103%, expanding the gap from last year’s fourth quarter when liner industry profits beat FANGs by 14%, according to an analysis by Blue Alpha Capital.
• This huge increase in profits for the larger ocean lines has meant that MSC, Maersk, and CMA are all seeking partners in the airfreight market to widen their influence and challenge traditional freight forwarders.
• German airline Lufthansa has submitted a joint bid with Switzerland-headquartered shipping firm Mediterranean Shipping Co. (MSC) for a stake in Italian airline ITA Airways, according to media reports.
• CMA in addition to acquiring freight company Ceva are planning to purchase a 9% stake in Air France-KLM Group as part of a new partnership that also includes combining their freighter operations. During the last three years, CMA CGM has announced the acquisitions of CEVA Logistics, Ingram Micro’s Commerce & Lifecycle Services (CLS), Colis Privé, and GEFCO.
• Maersk, too, has been aggressively acquiring companies – Senator International (air freighter company), Pilot Freight Services (US Road Transport), and LF Logistics (Asian end-to-end logistics solutions provider).
• In April 2022 Maersk announced the creation of a new business called Maersk Air Cargo. This will be a physical aircraft operator that will act as the air freight provider for the logistics operations of the Maersk Group.
• Essentially this is a rebranding of Maersk’s existing air freighter business, Star Air, with the significance of the move possibly being in the re-naming.
• This development is concerning to the shipping community who up until now have had less than good experience with the door-to-door services offered by these large ocean lines.

 

Market Dynamics

Americas

• Consumer spending has dropped in the Americas due to inflation in the last several months, yet it is still extremely difficult to obtain a container without paying sky high surcharges or locking in long term contracts. The containers misplacement is wreaking havoc on the global supply chain.
• Forwarding looking demand should loosen due to consumer spending shifting from goods to back to services and travel. Shippers have also changed their approach at holding more inventory and have bulked up their inventory levels which we should see a lessening in demand.

 

Pricing Situation

Americas

• Looking forward, the price for Ocean containers may be affected by the bargaining agreement between the PMA (Pacific Maritime Association) & ILWU (International Longshore Warehouse Union). The negotiations began May 12, 2022. During the last negotiations in 2015, there was a strike which affected pricing due to stoppage of work for weeks in the port of Los Angeles. The ILWU rejected an offer for contract extension and the president of the PMA has estimated there is a 50/50 chance there will be stoppage of work at the ports.
• Demand has softened in Q2, and COVID-19 surcharges are decreasing in the second half of the quarter. The surcharges peaked during the quarter in mid-April. For ocean rates to decrease, we need the ocean lines to correct the container misplacement around the globe. This issue has only compounded over the course of the pandemic.

 

Key Takeaways

Americas

• The Ocean market doesn’t seem to be leveling out and will not get completely corrected until the container displacement situation has been resolved.
• Shipper should look to book freight at least 6 weeks in advance to secure space. As peak season approaches over the next quarter, the demand will increase for containers and spot rates will likely increase.

 

Supply Commentary

Asia 

• Demand remains high as a result of several factors, including conversion of air to ocean mode due to ongoing disruptions.
• Capacity remains tight but stable.
• Courier mode was not immune from the impact of the recent lockdown measures introduced in severa Chinese cities.
• Due to the ongoing disruptions in Shanghai, all service providers have implemented restrictions on their service.
• DHLE have introduced temporary restrictions on the Eastern China outbound service & inbound service during lockdown situation in Shanghai. However, with the lifting of this status of Shanghai from June 1, 2022, onwards; effective the week of June 6, 2022, DHLE outbound & inbound service has been restored to normal operations.
• FedEx service in and out of Eastern China resumed normal service on June 6, 2022. Post various restrictions over last 2 months due to the lockdown status of SHA.
• Similarly, UPS resumed normal effective June 1, 2022.  

 

Pricing Commentary

Asia 

• Pricing levels remain elevated with Emergency Situation Surcharges being implemented by carriers remaining in place.

 

Supply Analysis

Europe 

• There have been 2 main issues affecting the smooth running of express parcel networks in recent months and both still are ongoing: 
• The first is the ongoing lockdowns in China – this usually means that for the first period of the lockdown very little moves in or out of the affected area; gradually more shipments move but there are usually weight restrictions and restrictions on the number of shipments per shipper that can be picked up. This situation will simply move from city to city until the approach of the Chinese government changes.
• The second affected FedEx hubs in Liege and Charles de Gaulle where further consolidation of TNT and FedEx services triggered strikes which caused huge backlogs to build up in these hubs and severely restricted the movement of shipments through these hubs for a period of at least a month. Full services are said to be back to capacity as of May 18, 2022,  but we are still seeing some service delays.
• The ever-increasing shortage of drivers is impacting capacity and making it harder to service longer and less regular routes.
• The global chip shortage means that companies are struggling to replace ageing truck fleets and in Europe, more rigorous environmental requirements have exacerbated this situation.

 

Market Dynamics

Europe 

• The European Road freight market remains extremely volatile with events in Ukraine and the sanctions imposed on Russia and Belarus reducing driver numbers.
• This means that - on top of the drivers that were missing at the end of 2021 - more than 166,000 truck drivers from Ukraine, Belarus, and Russia employed in Europe could have left their jobs due to the conflict, making the driver shortage problem in Europe even worse.
• In addition, fuel costs have increased, and the driver mobility package is causing a great deal of uncertainty in the market.
• Only some EU countries have fully adopted the package despite knowing at some point the rules will be enforced. This is causing concern and disruption in the market.

 

Pricing Situation

Europe 

• The Mobility Package impact on costs and rates are still limited as many EU Member States are late in their obligation to transpose and publish the information on the conditions applicable to posting in their countries.
• That includes critical information on drivers’ remuneration in the host country. The same is true for specific aspects regarding access to the market and access to the profession.
• To date, the European Commission has started infringement procedures against 22 Member States, meaning that no more than 5 countries could be considered as fully in order.
• Fuel pricing has however increased which adversely affects pricing.

 

Supply Commentary

Asia 

• Demand remains high despite recent developments in China for domestic and cross-border trucking to and from China, Hong Kong, and Southeast Asia.
• Capacity has been curtailed as a result of the requirements for ‘special trucking permits’ stemming from the Shanghai lockdown.
• Availability of trucking permits is limited causing prices to increase as much as 10X.
• The crossing at the border of China and Vietnam - namely Ping Xing - has recommenced. However, border processing remains cautious and closely monitored by authorities to avoid any additional Covid-19 transmission. As a result, alternative optional intermodal solutions - including road-railroad as well as road-ocean-road - have been developed by carriers and service providers to mitigate the unnecessary delays.
• The Hong Kong cross-border truck landscape and supply are also slowly improving, however, pricing is still unusually high.

 

Market Dynamics

Europe 

• The European Road freight market remains extremely volatile with events in Ukraine and the sanctions imposed on Russia and Belarus reducing driver numbers.
• This means, on top of the drivers that were missing at the end of 2021, more than 166,000 truck drivers from Ukraine, Belarus, and Russia that were working in Europe could have left their jobs due to the conflict, making the driver shortage problem in Europe even worse. 
• Fuel costs have also increased, and the driver mobility package is causing a great deal of uncertainty in the market.
• Only some countries in the EU have fully adopted the rules to this point, despite knowing at some point they will be enforced. This is causing additional concern and disruption in the market.

 

Supply Commentary

Europe 

• The ever-increasing shortage of drivers is impacting capacity and making it harder to service longer and less regular routes.
• The global chip shortage means that companies are struggling to replace aging truck fleets and in Europe, more rigorous environmental requirements have exacerbated this situation.

 

Pricing Analysis

Europe 

• The Mobility Package impacts on costs and rates are still limited as many EU Member States are late in their obligation to transpose and publish the information on the conditions applicable to posting in their countries. 
• The same is true for specific aspects regarding access to the market and access to the profession.
• To date, the European Commission has started infringement procedures against 22 Member States, meaning that no more than 5 countries could be considered as fully in order.
• Fuel pricing has however increased which adversely affects pricing.

 

Market Dynamics

Americas

• The spot market for over the road trucks has declined and down 20% YoY. Shippers are looking to contract with full truckload carriers to predict rates as well as lock in some fuel surcharge pricing into those contracts.
• Demand remains high for road freight currently in the Americas. Demand has softened as we approach midway through the year, but not to the level of where you would see a decrease in pricing just yet.

 

Supply Analysis

Americas

• Capacity is tightening in the southeast as produce season ramps up and will continue to be tight throughout the summer.
• There has been a decline in Truckload linehaul rates over the last few weeks, but shippers are not seeing an overall decrease in rates due to the rising fuel surcharges.
• The supply of trucks is increasing, but not to the point of having more trucks than loads. The trend line looks more in line with pre-pandemic levels. In Q2 the load to truck ratio in the Americas is around 7 to 1. In January of 2022, Americas was looking at north of 30 trucks to 1 load.
• In the rail mode there continues to be a chassis shortage to pull freight from the rail yards. There has also been an embargo on rail traffic from ramps west of Chicago to US East coast ports. The embargo is expected to last through the end of Q2 2022.  

 

Pricing Situation

Americas

• Diesel prices remain at record highs and are a major factor of increasing costs on carrier operations.
• Driver shortage is still a major factor, but the truck to load ratio is a much more favorable to shippers than 2021. There are still more loads than trucks to service them across the region. The industry has been facing a truck driver shortage for years, but the pandemic has highlighted the issue. These factors are causing the increase in linehaul charges for TL and LTL rates.
• On top of the increased linehaul charges the price of diesel in the US have hit an all-time high.
• The trends from the last several months though look to be favorable to shipper and negotiating pricing in the next several quarters for contact TL and LTL lanes.