AIR FREIGHT UPDATE
 

Air Freight - Global 

Hong Kong air freight is still impacted by the blanket ban on international flights landing from Australia, Canada, France, India, Pakistan, Great Britain, and the United States. The ban ended on February 18, 2022, but delays are expected.  

Air freight (which usually travels from South China to Hong Kong) is also affected by strict COVID-19 regulations impacting drivers crossing the border between China and Hong Kong. Due to the worsening epidemic situation in Hong Kong, the Guangdong Provincial Government issued several measures for Guangdong-Hong Kong cross-border truck driver control on February 6, 2022.

These measures are expected to affect truck traffic in the following ways: reduction in the number of trucks which can clear customs every day, a 1/3 reduction in cargo operations points in various cities, non-essential items are not allowed to be moved, heavy increase in the frequency of testing drivers and more thorough disinfecting of trucks. 

This impacts air and sea shipments out of Hong Kong. All cross-border pickups from factories require the factories to have a valid location code. This code can be canceled by Shenzhen local government at any time if they suspect the COVID-19 risk of the factory of increasing.

Hong Kong International Airport reported a 12.5% year-over-year increase in cargo throughput in 2021, with its number of cargo flights reaching record levels.

These are the following special measures in place concerning air freight out of Beijing during the Winter Olympics – a ban on all Oversize Cargo that can’t be inspected by security machines and any dangerous good shipments.

Air freight capacity is tight out of Cambodia, India, Indonesia, Malaysia, the Philippines, South Korea, and Thailand. 

The following countries have air freight backlogs caused by the recent increase in COVID-19 cases or backlogs due to much higher volumes than in past years: Japan, Singapore, and Vietnam (Vietnam air exports have reached record levels of ~60k tonnes/month, driven by fashion and high-tech exports. Vietnam air exports in November 2021 have nearly doubled (+83%) versus (pre-COVID) November 2019).

November 2021 recorded the highest air tonnage ever at 2,175 million tons (237,000 additional tons versus November 2019, an increase of 15.1%). Year to date growth at 6.8% versus January to November 2019. 2021 will become a record year in the history of air cargo. Almost 75% of air cargo growth came from Asia, which confirms it being the global air cargo growth engine (+176,000 tons versus November 2019). North America recorded the second largest growth area (+43,000 tons) with Latin America coming in third (+13,000 tons).

Trade lanes: Asia to Europe and Asia to North America remain the most important trade lanes,

covering 70% of the world’s trade lanes. Asia to Europe is up 36% versus 2019 and Asia to North

America is up by almost 50% versus November 2019.  From an industry perspective, high tech stands out, exceeding 400,000 tons of air trade in a month for the first time in history.

Within pharmaceutical growth, it is interesting to note that shipments of laboratory re-agents (COVID-19 testing equipment) and antisera (ready-made antibodies) have increased over the last few months. 

Air Freight - Asia

The market remains much the same as in previous weeks, with demand from North and South Asia remaining strong, albeit with the temporary quiet period of the Chinese New Year in Week 5. Capacities remain tight and challenged due to various constraints from respective countries as well as carrier developments.

Ongoing new COVID-19 infection developments continue to also impact China’s ongoing zero tolerance on COVID-19 cases policy, implementing stringent measures for handling/sanitizing/and crew exchanges resulting in severe impacts on the inbound to China capacity.

These guidelines led to the most recently implemented suspension of flights of various airlines from the US to China, due to concerns of rising infection, on top of the already established (effective January 2022) of no cargo is allowed in PAX flight cabins. These policies further impact the already strained tight capacity status.

On the positive side though, there were no major disruptions (so far) observed from the Winter Olympics event in Beijing from February 4-22, 2022.

Developments in South Asia saw a blip in Singapore (cited as due to rising infection) give rise to disruptions impacting their airport terminals handling SATS in Week 4, causing significant backlogs. This has improved as of mid-week 5.

Air Freight - Europe 

In general, rates have been more stable over the last few weeks, although it is too early to say whether this will continue once volumes increase out of factories returns after the Chinese New Year holidays.

Cathay Pacific paused flights for all long-haul freighters for a full week in January. The airline has resumed reduced operations to the Americas but does not expect to be running freighters to Europe through March 2022.

So far, there has been no impact on air freight pricing or capacity despite some major airlines (e.g., KLM) re-routing flights to avoid Ukrainian air space.

 

Air Freight - Americas

Outbound freight from South America has been extremely tight due the constraints of the ocean market which is driving up the spot market pricing. Capacity into South America is more readily available due to the lack of demand on that trade lane.

The US airports are still congested with air cargo but have improved slightly over the last two weeks. We are still seeing significant delays in our inbound freight to our Guadalajara and CUU locations due to congestion and issues between forwarders and ground handling crews at the airports. 

The rates have remained stable over the last few weeks, but still higher than pre-pandemic levels. From week 7 to week 8 we see a slight decrease in our COVID-19 surcharges from our freight forwarders.
 

COURIER UPDATES

FedEx 

• FedEx lifted their weight restrictions for all APAC origins and now accept shipments up to 2000 kg of weight. Both Priority and Priority Freight services are possible and backlog levels are low hence service reliability is strong.
• Due to the COVID-19 dynamic situation in Kunshan, Suzhou, and Zhangjiagang, within the Jiangsu Province of China, effective February 14, 2022, FedEx will suspend the pickup and delivery of FedEx Express International and Domestic service, and TNT service in accordance with government prevention guidelines.
• Zhejiang Province (China) Inbound Shipment 4–7-Day Hold due to COVID-19

Due to the dynamic COVID-19 situation in the Zhejiang Province of China, effective February 14, 2022, and until further notice, there will be a 4–7-day hold placed on all inbound shipments to Zhejiang Province. This effort is in accordance with local and national governmental agencies to strengthen COVID-19 pandemic prevention and control.

As a result, customers may experience service delays. Please see the approved reactive statement to find out more about FedEx operational arrangements for impacted cities across mainland China.

FedEx Express has launched a new trans-Atlantic freighter flight from Paris to its Indianapolis hub via East Midlands Airport in the U.K., boosting capacity for exporters desiring next-day delivery to the US market.

DHL 

• The temporary weight limit restrictions have been lifted (weight limit restriction 300 kg per pick up (customer collection) per day, from South China (CAN/Guangzhou, DGM/Dongguan, ZUH/Zhuhai, SZX/Shenzhen, and SWA/Shantou) to all destinations has been lifted. 
• Temporary restrictive procedures for 2022 Winter Olympic Games and the Winter Paralympic Games: To ensure smooth holding of the 2022 Winter Olympic Games and the Winter Paralympic Games, as per the guidelines of the State Post Bureau and the local postal administrations, DHL operations in PEK & TSN have established a security service assurance workflow. As a result, the following service impacts are unavoidable from January 25, 2022, to March 13, 2022 (end of the Olympic games):
  • All domestic cash shipments will be suspended.
  • PUD service from/to Beijing city, Tianjin city and Hebei province will be suspended for chemical shipments and Lithium-ion battery contained shipments.
  • Due to intense inspection, as well as sanitizing procedure, further transshipment delay is expected for both inbound and outbound shipments.

DHL Express has announced that Emergency Situation Surcharge (ESS) will be adjusted effective February 14, 2022. 

Origins Rest of Asia² to destinations in the Americas, Europe and Rest of World region: from €0.2 to €0,90 p/kg

This amount is in addition to the already existing ESS – details shown below

 ROAD UPDATES
 

Road Freight - Asia

The cross-border route from China to Southeast Asia through the Ping Xiang & Dongxing border 
crossing from China to Vietnam though recovered back to operating at normal status in Week 6 has 
with effect in Week 8 reverted back to its constraint position with severe congestion due to an increase
in infection cases arising. 

Cross border truck mode to and from HKK to South China however is experiencing challenges due to new and rising infection development in HKG and some parts of South China. Drivers from HKG are restricted from entering areas/zones of South China that have been identified with infections, including the requirement of serving a 7 days mandatory quarantine if entering.

Constraints on the reverse from CN to HKG stems from the shortage of Chinese drivers’ availability, hence impacting capacity and increasing costs/rates. This situation of cross-border truck mode between HKG to China and vice versa has exacerbated further over the weekend, with more infections arising in HKG leading to tightening of measures, which is now causing long queues at the border crossing checkpoints in addition to the shortage of drivers' status.

This has also resulted in not only an increase in lead times but also spiking up of these cross-border trucking costs taking effect this week by providers.

Road Freight - Europe

Driver wage costs, which make up a third of carriers’ operating costs, have risen due to driver shortages. Many carriers have increased driver salaries several times over the year to remain competitive and attractive employers and to keep their trucks moving. Driver costs could rise even further in 2022 as some major rules for transport companies come into effect under the EU Mobility Package from February 21, 2022.

Road Freight - Americas

There have been significant issues with boarding crossing between the US and Canada due to the mandate protests and blockages, but currently, there are no delays as the Canadian federal government has stepped in and invoked an emergencies act to remove the blockage from the ambassador bridge.

The US road market has started to see a little relief over the last 2 weeks with a load to truck ratio down 8 loads to 1 truck. While this is still a capacity issue, it’s better than what we were seeing a few weeks ago with the numbers being at 12 loads to 1 truck.

 

OCEAN UPDATE
 

Ocean - Global 

The traditional post Chinese New Year lull has helped ease China’s port congestion, but cargo backlogs and container shortages are still propping up rates.

Traditionally, there is a relief in ocean rates post Chinese New Year but not this year. Another year of COVID-19 impacted the Lunar New Year’s celebrations, and a backlog of boxes waiting for exports in the Far East means little respite for the hard-pressed market.

Rates for containers going into the US have increased since the middle of January.

The flat or higher freight rates around Chinese New Year are just another illustration of how different this year is compared to previous ones. Over the past years, there are only very few examples of freight rates not having fallen in the week after Chinese New Year compared to the middle of January.

The high market will continue for many months to come, with freight rates unlikely to fall anywhere near as much as would be needed for them to return to ‘normal’ pre-pandemic levels. Instead, they may ease slowly as carriers continue to deal with congestion and supply chain problems, potentially rising again as we enter the next traditional peak season, from July to September 2022.

Ocean - Asia

Overall market experiencing no change and expected to remain full and rolling including post Chinese New Year (CNY) 2022. Singapore and other Southeast Asia hubs/ports continue to report congestions with large amounts of cargo experience extended turnaround time. Mandatory recommendation remains to prebook a minimum of 4 weeks in advance, and whenever possible, even earlier. Equipment is still having huge impact in overall availability in Asia.

NORTH ASIA – The traditional post-new year (CNY) lull has helped ease China’s port congestion, but cargo backlogs and container shortages are still propping up rates.

North China ports: Qingdao and Tianjin are operating normally, but Shanghai remains the exception, given the port is still suffering significant congestion with most vessels delayed by a week. Space remains tight with many vessels having blank sailings and omitted service following the lunar new year closings in China. High volumes of cargo that were rolled before the holiday are still taking up space for departures. There’s a similar situation at Ningbo with many vessels delayed for the coming weeks, and space remaining just as tight as before CNY.

South China ports: services at Yantian, Shekou and Guangzhou are back to normal with Shenzhen and Hong Kong faring better, with low activity during the first week after the holiday. However, there are still some local COVID-19 issues to contend with. As an example, on February 8, 2022, several CFS warehouses in Shenzhen stopped receiving cargo due to COVID-19 restrictions. This has caused some local delays for shippers.

SOUTH ASIA - All trades equipment availability remains tight in South Asia, in addition to the congestion in main trans-shipment hubs. Space remains tight and rates at elevated levels. 

INTRA ASIA – Landscape remains unchanged with port congestion still occurring at most ports, advanced booking of minimally 4 weeks ahead is critical. Rates have been under extreme pressure going up due to a shortage of space/equipment and port congestion. Schedule reliability remains an all-time record low.

INDIA SUB-CONTINENT – Similar to Intra-Asia, the landscape remains unchanged, and demand remains strong with ongoing tightness in the capacity as well as shortages of equipment.

Overall market outlook remains challenging, with continued tightness of capacity and elevated costs/rates. 

Ocean - Americas

Congestion continues in the US ports, causing massive delays to transit times and continued low on time performance to end destination for the inbound Ocean mode. The port of Long Beach saw another record of more than 118 ships at anchor in drift areas.

We continue to see a chassis shortage in many US ports and causing issues in the rail yards as well due to this issue. The rates remained stable over the last 2 weeks in the inbound ocean mode with little to no increase in the spot market.

South American ports are extremely congested with strong demand capacity for northbound freight. Space is extremely difficult to secure at this time.

Please do not hesitate to contact us directly with any questions, (ruth_maciver@jabil.com, jeannie_carpenter@jabil.com, francis_loh@jabil.com). 

 

Ruth Maciver, Director Logistics Europe 

Jeannie Carpenter, Director Logistics Americas 

Francis Loh, Director Logistics Asia