Ocean: South China port closures stretch supply chains to the limit
- Capacity: remains tight due to equipment shortages and port congestion caused by Covid-19, and further impacted by port closures at Yantian. We expect these constraints to last through H2 2021.
- Rates: as retailers prepare early for peak season, demand on the Asia – Europe trade lane is set to rise. Coupled with container shortages caused at China’s main ports, rates should remain elevated throughout H2 2021.
- Ongoing disruptions such as Yantian port closures reduced schedule reliability by 33% globally, with an average of 16 days delay. Ripple effects may include delayed delivery times and supplier payments which may further squeeze SMEs’ working capital.
Air: competitive advantages of air cargo as ocean rates keep rising
- Capacity: despite slow vaccine rollouts and the emergence of new Covid-19 variants, capacity restrictions are starting to ease. Total available capacity is up 32% from its lowest in April 2020, though currently it is 9.7% below pre-Covid times. Demand for space is set to stay high due to increased consumption, low inventories and ongoing supply chain bottle-necks.
- Rates: index rates on the Asia-Europe westbound decreased by 8% MoM in June. We anticipate this reversing as demand resumes, pushing rates up further through Q4 2021.
- Air vs. ocean: ocean rates have risen 721% YoY, compared to air rates which have decreased by 4%,. If the gap in rates continues to get smaller, shifting mode towards air becomes more viable. Get in touch if you’d like to discuss increasing your air freight capability.
H2 2021 > exploring other options as ocean rates stay elevated
- Ocean: There’s no sign of rates easing in the short term. To minimise the financial hit, some businesses are raising prices for their end customer and proactively prioritising which cargo to ship today.
- Air: With consumer demand strong and container shortages expected to last through 2021, air cargo provides a viable alternative to Ocean. We expect this to develop as commercial travel increases leading to greater capacity availability.
Other options: As supply chain disruptions continue having global impact, it has become evident how interconnected global trade is. As well as changing mode, businesses are increasingly relying on supply chain finance as an option to ease the strain on their cash flow. Contact [email protected] to learn more.