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.
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