Recommended Actions

• Planning and forecasting volumes have never been more important than it is now. Both to avoid overages and to secure the appropriate level of carrier capacity.
• Your regional logistics teams are working on Block Space Agreement (BSA’s) with our carrier partners to secure capacity to reduce costs on air and ocean lanes. Please reach out to inquire about specific lanes to your regional logistics team. Some of these options may require a change in your normal operational processes.
• Continue to review calculated lead times to confirm it includes the most up-to-date transit times for your specific trade lane. 

AIR FREIGHT UPDATE

 

Air Freight - Global 

• There has been no change in the situation status following the stringent containment measures instituted by the authorities in Shanghai’s Pudong Airport (PVG). Backlog of cargo at PVG continues to be an issue. Flight cancelations are expected from airlines.
• North China: With the national holiday in mainland China (October 1 through October 7, 2021), the market is extremely challenging. Rates to the EU and North America remain high and capacity is tight. Post-Golden Week, some supply is expected to return to the market and rates may also start decreasing slightly.
• The mainland has recently been affected by rolling power cuts and rationing of power supply largely due to the coal shortage and increased prices in the market. This could result in decreased production which could alleviate the current market constraints.
• South China: Capacity in the market continues to be tight and several carriers have canceled flights because of numerous flight re-routings to HKG caused by increased Covid cases in China. TPEB (Asia-N. America) and FEWB (Asia Europe) rates continued to climb in the lead up to Golden Week.
• Space (example: Southern Vietnam) remains extremely tight with rate levels continuing to increase. Rates are expected to climb even higher next month. The Vietnamese government has allowed some factories to resume production in Southern Vietnam, so demand is likely to increase.

Air Freight - Asia
China – PVG Airport operations remains constrained and unchanged with PACTL still operating at 70%, arising from recent events of infections measures restrictions and weather with overall capacities being significantly impacted.

The Golden Week public holidays began October 1 and runs through October 7. Several airlines have announced flight cancellations which ultimately will impact capacities further.

 

Alternative airports like CGO continue their embargo on inbound cargo up to due to manpower issue. Per updated schedule, there will be a reduction of around 45% of total market capacity.
The outlook further suggests more flights will be cancelled during the National holiday as carriers want to mitigate handling pressure by reducing frequency.

With regular airfreight capacity from China and Hong Kong still reduced because of Covid restrictions, the industry is turning to charters to try to get through peak season.

Air China was supposed to resume flights (example: PVG to Milan last week) but the route was suspended until further notice, and Qatar Airways now only has one flight per week from PVG, as it was forced to move 16 weekly services to Guangzhou.

Lufthansa cut many flights, KLM only runs one flight per week, and Air France operates only three, bear in mind Air France KLM used to do 20-plus flights per week).

As long as quarantine requirements for airline crew and ground handlers are not loosened, these restrictions would prevent many flights from returning and lead to an increase in rates through the peak season, due to capacity shortages.

Outlook is many flights would continue not to be able to come back, and the outlook suggests going into the peak season with a big shortage of capacity; giving rise to heighten rates impacts indications

Other Asia – TPE, HCM, KUL airports; remains challenged and tight as well with no change. 

Air Freight - Americas 

• We are still seeing major issues at US gateways and delays due to ground handler shortages.
• Regional logistics is advising you to update your transit times to meet adjusted actual.
• As demand continues to exceed supply, the International Air Cargo Association has warned shippers to plan for a highly challenging peak season for air freight.
• Exports from Europe affected by congested ports in the U.S. remain a core problem for our Mexico and south America facilities.

Air Freight - Europe

• Frankfurt airport issue. Import handling has slowed down and we are experiencing delays of up to 3 days for the delivery of import shipments. This delay is caused by growing volumes and short manpower resources however increased paperwork screening processes due to new customs security checks have been the main contributor to these delays.
• Positive news in terms of passenger capacity have been announced from November onwards on the EU-N. America. Fully vaccinated EU & US travelers will be allowed to travel freely between EU, GB and US in both directions. This is promising for air freight, as any uptick in demand before the holiday season in December can be met with more capacity quickly.
• EU airlines still offer attractive solutions into US hubs via secondary hubs. This is keeping the rate levels stable.
• Airfreight rates from Asia to EU increased since August by 37% ex Shanghai, Hong Kong by 34%, Nanjing (CAN) by 66%, Vietnam (SGN) by 27%, Shenzhen (SZX) by 20%.

COURIER UPDATES

Courier - Global 

DHL Express

• Between October 1 and October 7, no standard pickup and delivery service will be provided (No Customer drop-off/self-collection either). In South China (Guangdong Province, Nanning City and Haikou City), Saturday pickup service will be provided. Normal pickups and deliveries will resume October 8, 2021.
• Street price increases announced for 2022 varies country by country but are between 4.9 - 5.9% for 2022. Jabil has already agreed a fixed increase of 1.5% for next year.

Global FedEx

• FedEx set an early marker for parcel prices in 2022 with its announcement of a general rate increase, flanked by new or rising surcharges. On January 3, 2022, the integrator’s tariffs for domestic, export and import services will increase by an average of 5.9%. This is just a baseline and not a final decision, which will be subject to negotiation. These charges reflect incremental costs associated with the challenging operating environment, while enabling FedEx to continue investing in service enhancement, fleet maintenance, technology innovations and other areas to serve customers more effectively and efficiently. 

Europe FedEx

• ASIA-EU: There is no serious impact on transit time except shipments moving from Shanghai, where severe backlogs are still in place due to COVID-19 restrictions and lack of manpower. Demand on Asia - EU trade lanes significantly increased and Fedex has added an additional number of regular and ad hoc flights, increasing their capacity by 30%. Weight restrictions are kept until further notice, but an escalation path is available for urgent shipments that exceed temporary weight limitations.
• Intra EU: Operations within network are relatively stable. 5 additional aircraft have been added with a flexible schedule to cover various lanes when increased volumes are reported.  CDG hub has been upgraded with a new sorting line which improves operational time and decreases transit time. 
  • A new road hub in Elst is about to open for business and will be fully operational by November. This new hub will bring relief to the currently pressured Eindhoven station.
• EU-US:  This lane is most impacted currently due to growing demand. If sites have new projects with freight on EU-US lane – estimated volumes should be provided in advance to secure a regular capacity on aircraft.

Courier - Asia
DHLE announced the expiration of their weight limits on CN service, effective October 1.  Oct 01^st the uplifting of their temporary service weight limitations - on their CN service of “300 kg per pick up from selected location (customer collection) per day.”

Similarly, they have also announced with the reduction of local COVID-19 restrictions and gradual resumption of normal activities in Ho Chi Minh city, their pick-up and delivery services covering all suburbs returned to normal effective the week of October 1, 2021.

General information:

• Factories in at least ten Chinese provinces have either reduced output or closed temporarily this month, after government-imposed power cuts to curb carbon emissions. Affected provinces include Jiangsu, Guangdong and Zhejiang, which are among the most industrialized in China. These provinces are also home to China’s busiest ports: Ningbo, Guangzhou, Nenshi, Yantian and Shekou.
• Jiangsu province lies along the Yangtze River Delta and its container exports are usually processed by Shanghai or Ningbo. As this is the peak season for container shipments to US and European retailers, the new moves could exacerbate delays in receiving shipments at the ports.

 

OCEAN UPDATE

Ocean - Global

• There has been an increase in multi-vessel sailings, the number of scheduled services which have more than one vessel operating in a single week has increased sharply in 2021. This is another element causing congestion issues.
• Well-connected ports are experiencing the longest delays. Containership capacity equivalent to 12.5% of the global fleet is unavailable due to delays caused by congestion in ports. 

Ocean - Asia

China – Port congestion deteriorates further with 154 vessels waiting to load export cargo off Shanghai and Ningbo in China, according to eeSea, a company that analyzes carrier schedules. The number of container ships anchored off Shanghai and Ningbo has surged over recent weeks. There are now 242 container ships waiting for berths countrywide.

Given the extreme anchorage situations both off China and Southern California, a repeat of the blank-sailing scenario seems likely in Q4 – a worrisome prospect for shippers.  

Equipment situation remains tight across all ports with no changes.

Other Asia – BUS; MNL; PKL; SIN remains challenged and unchanged with major trans-shipment ports like SIN experiencing significant roll overs resulting in stretched lead times.

Major carriers have continued to increased rates over the last 10 days, for their sailings between October 1 to October 15. Shippers using the spot market are impacted the most, as even bookings on premium rates are getting rejected in some cases. To make matters worse, even regional operators have increased the rates drastically since September 1. Rates for trade lanes such as India-Gulf and India-Far East have increased from 33% to 50.  These are the major trades for Indian shippers.

Reported 400 trailers were added within this calendar year into European road network to support lanes where they have seen the biggest capacity pressure.

Ocean - Europe

• Space and equipment crunches continue. Market demand is consistently exceeding supply, and rates have skyrocketed. The overall space situation is worsened by blank sailings and poor equipment availability. Carriers are overcommitted and are limiting booking acceptance or rolling shipments. With continuous vessel delays and other route changes, schedule reliability is very low.
• Rates remain at a record high level but have been stable going into September and we have seen only a marginal increase in October.
• Finding space on vessels remains critical. There are severe equipment shortages across all Asia origins.
• The recommendation is to book at least 4 to 5 weeks prior to cargo-ready date. Consider premium options, which may be limited. Be flexible in regard to equipment.
• Maersk says it expects to see “early signs of a pre-Chinese New Year rush in December” and is advising customers to plan their supply chains “well ahead”. The carrier said it was taking steps to “rationalize” its service coverage and reduce the number of port calls, to speed-up schedules and improve reliability. Maersk said it was planning to reduce port calls in North Europe on its Asia-North Europe loops to improve schedule reliability on the route.

Ocean - Americas

• Please make sure you’re requesting booking 4 weeks out to secure space on the vessel.
• MSC have announced plans to enhance their Sentosa service between the USWC and Asia with a new direct call at Oakland port. The first vessel is expected to arrive in Oakland in early November. The new port rotation will be Oakland – Long Beach – Port Kelang – Singapore – Tanjung Pelepas – Laem Chabang - Vung Tau.
• Services to East Coast South America ports have reduced capacity by approx. 25% and blank sailings to west coast South America ports have increased to approx. 32% of capacity, due to space constraints and congestion at the transshipment hubs.
• COVID-19 impact in Southeast Asia production and exports continues, therefore the space/equipment allocation moves to upstream/downstream ports of calls.
• Congestion in the US continues, some outstanding examples:
  • LAX/LGB: 67 at anchor + 23 in drift area // Average dwell to berth 9-11 days
  • SEA: 10+ vessels at anchor // Average dwell to berth 12-14 days
  • SAV : 20+ vessels at anchor on average // Average dwell to berth 5-7 days
• Pricing continues to increase, but not at levels we have seen in weeks past.

 RAIL UPDATE

Rail - Europe

• Congestion levels continue to fluctuate on Asia-Europe service for Rail. Congestion at origin is around 7 days.
• Routing via Malaszewicze/Poland is suffering further delays of 7 to10 days due to congestion at Belarus-Poland border.
• Transit time on alternative routing via Ukraine / Hungary is not experiencing extreme delays, but due to the increased interest on this route, trains are fully booked.
• During Chinese Golden Week, rail departures are also suspended.

Rail - Americas

• Congestion at rail terminals due to import container volumes is leading rail carriers to limit the number of export containers they will accept per day.
• Shortage of truck capacity and chassis at some key rail ramp locations such as Chicago, as well as port locations such as Savannah, Charleston and Norfolk, are seriously disrupting the timely movement of US imports/exports.

ROAD FREIGHT UPDATE

Road Freight - Europe

The road freight industry in Europe is experiencing an extreme shortage of drivers caused by multiple reasons:

• Covid-19 restrictions have meant that new drivers have been unable to train and take their tests
• Retirement: The driver population is aging, and the industry has struggled to recruit for many years due to working conditions and image issues of the profession.
• East European import/export markets are booming, and local drivers have the chance to be at home more frequently in contrast to working in Western Europe. The downside for the drivers is that wages are not so high.

2022 European rates are expected to increase due to the above factors, spot rates in Q3 are already up by 5 to 10% compared to spot rates in Q1.

Road Freight - Americas

• National Load-to-Truck ratio remained relatively flat WoW from 6.15 to 6.17 WoW.
• California region is the tightest region at 12 to 1, up from 8 to 1 WoW.
• The market is still suffering a driver shortage, and this is causing service level issues and the increase in the load to truck ratios being at a 6 year high.

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 European Logistics 

Jeannie Carpenter, Director Americas Logistics 

Francis Loh, Director Asia Logistics