Covid Outbreaks in China are affecting all Transport Modes

To date, these are the current cities affected:

• Ningbo: A total of 33 COVID-19 cases have been reported between January 1 and January 6. While some areas of Ningbo, Beilun district were fully or partially closed, with the exeception of a specific containment area, Beilun was released from temporary lockdown on January 8, 2022.
   
• Tianjin: On January 8, 2022, 20 new locally transmitted COVID-19 cases were reported in Tianjin. The Tianjin Government decided to launch a city wide (14M people) Nucleic Acid Test which targets Tianjin permanent residents and people from other cities/countries currently resided in Tianjin from January 9 to January 11, 2022. A further 53 positive cases have been detected.
   
  • Latest Operational Impacts
    Xingang port/terminals is operating as normal, but efficiency is low as employees are required to show 48 hours negative NAT results. The container yard is in operation and the CFS (Container Freight Service) operation has reopened for inbound LCL shipments.
    
    There are no flight cancellations reported at TSN airport, however air import operations may be impacted. Efficiency is also low due to the same reason (manpower).
    
    Road transportation may be delayed as truck drivers are required to present negative COVID-19 nucleic acid test results taken within 48 hours. Tianjin local trucks are not allowed out of the city and outer trucks are suspending service due to the 14-day isolation that may be required after entering.

• Xian: Due to newly discovered COVID-19 cases, the local government has prohibited movement of vehicles and pedestrians as of December 23, 2021.
   
  • Latest operational impacts
    Most air shipments have been canceled.
    Trucking: the pickup and delivery of cargo are suspended. 
    Rail: is available, but is congested. Truckers are not keen on entering Xian (due to mandatory isolation afterward), cargo are now scheduled to move with different CFS (SHA).

 

AIR FREIGHT UPDATE
 

Air Freight - Asia

As previously reported on January 7, 2022, Cathay Pacific announced cancellation of its freighter flights out of Hong Kong. 

This and the ban on passenger flights into Hong Kong from various countries with high COVID-19 rates (which covers the period of January 8 to February 4th, 2022 (AU/CA/FR/IN/PH/PK/GB)) will have a significant impact on overall capacity out of Hong Kong. In addition, Hong Kong has placed a ban on transit flights from over 150 countries to try and control the most recent wave of infections and avoid the risk of further imported infections.

Below details of how this reduction will affect different trade lanes.

It is expected, both the Chinese New Year holiday (January 31 to February 6, 2022) and the Beijing Winter Olympics (February 4 to February 20, 2022) will further impact the movement of goods within China and build further backlogs and peak season type behavior.

The gap between air and ocean pricing has shrunk.

Mexican airline Aeromexico cancelled over 140 flights due to Omicron cases increase in their staff.

COURIER UPDATES

DHL Express notified Jabil Logistics on January 12 of a positive COVID-19 case in their Shenzhen (SZX) Gateway in China. Per the protocol issued by the local authorities, they have had to suspend operations within the facility with immediate effect, until further notice.

They immediately activated contingency plans. However, with the temporary suspension of the Shenzhen Gateway operations, they expect a wider impact on their processing capacity out of the South China region.

To cope with the limited processing capacity out of the South-China region, we need to implement a temporary weight limit restriction of 100 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. Hong Kong (and the rest of China) is not included in this restriction.

This temporary restriction will apply from Wednesday January 12 until Sunday January 23, 2022.  Further updates will be provided to confirm whether we can resume normal operations without any restrictions on Friday January 21, 2022.

On December 20, 2021, DHL Express notified us that effective December 26, 2021, the temporary weight limit restriction of 300kg per pick up (customer collection) per day will be changed to 1000 kg per pick up (customer collection), per day from China and Hong Kong to all destinations globally.

This increased pickup weight still applies to Hong Kong and all other parts of China except these noted in the above paragraph.

Courier Update - Europe

The DHL Express surcharge on shipments between the EU and UK, which was implemented in January 2021 (this surcharge applied to all dutiable shipments between the EU and the UK, both import and export. This had been set at € 0.25 per kg with a minimum amount of € 5 per shipment.) was discontinued on January 1, 2022. While this surcharge has been discontinued, DHL has increased the cost of standard tariffs.

ROAD UPDATES

Road Freight - Asia

Significant constraints for the cross-border truck mode from CN/HKG to Southeast Asia passing through the CN/VN border crossing of Ping Xiang and Dong Xing.

Freight has become stuck in recent days at the land border crossing between China and Vietnam as the border is closed due to COVID-19 induced lockdowns in China’s Guangxi province. Due to the infections rates rising at VN, CN authorities have implemented strict measures at this border crossing resulting in slow and delayed clearance, giving rise to congestions/bottlenecks.

The Chinese authorities are working through the backlogs, however, there is still a queue time of around 10-15 days. The outlook foresees this congestion will remain until after the Chinese New Year. 

For the upcoming long holidays of the said Chinese New Year in China, the borders will be closed from January 31 to February 6, 2022, with strictly no truck movement during this period. The advice of cut-offs to customers to avoid trucks being stranded at China borders during holiday closure are as follows:

• Ex-South China and HKG - Booking and Pick-up cut-off within January 12-15, 2022.
• Ex Central China - Booking and Pick-up cut-off within January 11-14, 2022.

Road Freight - Europe

European rates in 2022 are increasing due to critical market conditions such as driver shortages, new UK import regulations, EU mobility package,  (new rules which are being introduced in a phased approach beginning in 2021 out to 2026) which increase wages and living/working conditions for drivers, which will most definitely cause increases in freight prices.

Road Freight - Americas

Mexican Ground carriers have increased their rates in some cases up to 15% due to a lack of drivers starting January 1, 2022.

The US is still trying to dig out of the lack of capacity for dry vans and reefer units to move ground truckload volumes. At the end of 2021, the market saw the Load to Truck ratio double across the region. The tightest region is the west coast upper mountain region, with an 18 to 1 Load to Truck ratio.  

                                                                          OCEAN UPDATE

 

The ocean lines are putting anything that can float into the Transpacific and Europe to Asia trade lanes leaving a vacuum in Asia to Indian Sub-continent.

Having enjoyed outstanding financial results during the pandemic, shipping companies have placed record levels of new orders for container vessels during 2021. A flood of new vessel capacity will ease rate pressures, but not before 2023.

However, ocean carriers also seem to have learnt how to manage capacity better in their alliances. They may continue to take capacity out of the system at short notice, reducing the price-dampening impact of new capacity coming on-stream.

It is not expected that the ocean market will stabilize or recover in 2022 due to demand remaining strong, ports not working at full capacity due to port closures due to local COVID-19 outbreaks, and US congestion will continue.

Ocean - Asia

Overall, the market remains full and tight until Chinese New Year, while space situation is expected to seriously intensify around the end of January leading up to the Chinese New Year holiday. Singapore and other Southeast Asia hubs/ports continue to report congestion with large amounts of cargo. Mandatory recommendation remains to prebook 3 to 4 weeks in advance. Equipment is still having a huge impact in overall availability in Asia. 

Vessels Ad Hoc omissions at base ports such as Ningbo, Shanghai, Shekou, and other feeder ports such as Xingang are recurrent. One of the main reasons for port omissions is due to carriers are adjusting their sailing program to “match” actual departure dates, as a result of delays caused by port.

TPEB GRI to the US and CA are envisaged from February 1, 2022.

Ocean - Europe

Since the beginning of the year, Koper port has experienced congestion in both container yards and rail head, but this has mostly affected exports out of the port.

CMA has announced multiple blank sailings on the Mediterranean loop in anticipation of lower volumes leading up to and after CNY. CEVA almost exclusively works with CMA, so this does have an impact on our shipment. The solution is to route via Hamburg, and we have found capacity using this route, but transit time will be increased.

Ocean - Americas

The Ensenada port, in Mexico is facing operation restrictions due to terminal overcapacity. In Rio de Janeiro, Brazil, they are limiting traffic to only allow for essential services. In Valparaiso, Brazil there is limited capacity as only four cranes are working in the port at the moment. Yard utilization in CLVAP is at approximately 71%.

The Manzanillo port in Mexico has increased their operation and is trying to clear the backlog at the port. One of the main terminals (CONTECON) is at full capacity, affecting vessel productivity, operation, and containers gate in/out times.

 RAIL UPDATE

Rail Freight - Europe

Equipment and platform shortage remains a critical issue for westbound shipments. Congestion at the Belarus/Polish border has lessened but there is still a 5-10 day delay. Direct service to HU is experiencing fewer delays, but capacity is tight.

Disruptions:

To date, the unrest in Kazakhstan has no impact on transit rail shipments.

Rail Freight - Americas

Ocean carriers have been metering import rail traffic to IPI points very closely which has greatly reduced the volume of containers coming to rail ramps. We are beginning to see the severity of the impact of this policy with equipment shortages at rail ramps, particularly in Chicago, which typically is a rail hub well supplied with containers.

Due to severe flooding, there has been no rail traffic possible between the port of Vancouver and inland locations.

BNSF has lifted their embargo-imposed November 30 date for rail cargo into and out of LA/LB terminal.

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