Ocean: distribution networks remain congested by Covid-related port closures and equipment shortages
- Knock-on effects caused by Covid-related port closures have continued fuelling bottlenecks, delays and container shortages this month. The two-week shut down of the Meishan terminal in Ningbo during August was the latest in a string of port closures to impact already constrained supply chains. In this instance, carriers diverted ships and suspended bookings while nearby ports did their best to support re-routed cargo.
- Capacity: upcoming peak season is set to compound these disruptions, causing capacity to struggle against rising demand. A new round of blank sailings from Asia is being considered by carriers as a means to manage China’s Golden Week holiday (1st – 7th October).
- Rates: increased demand and capacity shortages are keeping spot rates high at $17,000 per FEU (8xYoY). These are expected to remain elevated through the peak season, up to Chinese New Year.
Air: freight rates set to increase as Covid-related restrictions compound upcoming seasonal demand
- Air capacity and rates have faced challenges over the last month, as Covid outbreaks amongst ground handlers in Shanghai, Beijing, Guangzhou and Xiamen airports caused a flurry of flight cancellations and uncertainty. In addition to this, lengthy quarantine restrictions for airline staff in China resulted in mass resignations, and further delays.
- Capacity: upcoming seasonal peaks combined with last month’s delays (which contributed to a 10% drop in volumes from China to Europe1) are set to keep capacity tight through Q4, 2021. There is no sign of this abating in the short-term.
- Rates: air index rates on the Hong Kong-Europe westbound remain elevated (up 44% YoY) with a small increase of 1% MoM in August2, This can be attributed to the capacity reductions mentioned above, airport closures and the increased demand caused by severely distressed sea freight.
Q4 2021> plan ahead and prioritise before seasonal peaks start
- Prioritise shipments: Be flexible where you can, and consider prioritising essential cargo in the run up to peak season. Visibility platforms can help enable prioritisation, spreading shipments, and converting modes.
- Book ahead: Continue to book well in advance of Cargo Ready Dates (4-6 weeks), and encourage suppliers to support departures from different origin ports if possible.
- Other options: As well as planning ahead, supply chain finance could be another option to help bridge cash flow gaps and shipment delays. Contact [email protected] to learn more.