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Ocean, Air, Road market insights – April 2022

Ocean: rates begin to soften despite ongoing lockdowns 

  • Prolonged lockdowns in China are continuing to cause congestion and closures at origin ports. The situation is affecting demand too, which was down 10% YoY in January1. This is mainly due to factory closures and trucking issues caused by strict zero-Covid quarantine policies, as well as inflation caused by climbing oil prices caused by the war in Ukraine.  
  • Capacity: as average vessel delays remain high (+7 days), schedule reliability is predictably low, hovering at 34.4% for Feb 22 (vs. 73.6% in Feb 19)2. Due to closures in Shanghai, carriers are shifting to alternative ports like Ningbo when possible. Backlogs are growing as a result. 
  • Rates: though last year’s Yantian closures caused ocean rates to spike, so far we are seeing the closures in Shanghai have the opposite effect. However, due to market volatility, we expect this to remain precarious for the next 2-3 months. 

1. JOC, Congestion worsening 
2. Sea Intelligence, Schedule Reliability

Air: rate instability amidst Covid-related flight cancellations   

  • As with ocean freight, prolonged labour shortages in China are slowing operations. With fewer goods to ship, air cargo demand from Shanghai is decreasing, and in response, air carriers are cancelling flights from Shanghai Pudong (PVG)1.  
  • Capacity: in addition to capacity reductions, flight times are increasing (+3.5 hours on average) due to the closure of Russian airspace and ongoing diversions from Shanghai2. Timelines for this resolving remain uncertain. 
  • Rates: despite the drop in demand, staff shortages, limited capacity, and the rising price of crude oil appear to be enough to push rates up3. We expect these capacity limitations to keep rates volatile throughout 2022. 

1. Loadstar, Air cargo
2. Reuters, How sanctions affect air cargo
3. Freightos, Freightos air index region view

Road: retail fuel prices remain high whilst EU capacity is set to reduce

  • Capacity: new elements of the EU’s Mobility Package come into effect this month, and may reduce haulage capacity by up to 15% as a result. The new legislation requires drivers to return home every three weeks, and empty trucks to return to base every eight weeks1. Meanwhile, waiting times at the channel crossing in Dover are increasing due to a ferry shortage caused by bad weather, and the recent P&O Ferries fall-out2.
  • Rates: retail fuel prices remain highly volatile on account of the ongoing crisis in Ukraine, with prices fluctuating by €0.40 per litre within a few days (normally lag times between barrel price and pump price cover several weeks)1. We expect haulage rates to be impacted and demand to decrease as a direct consequence of these spikes in fuel price. 

1. Loadstar, European haulage struggles
2.  BBC, delays at Dover channel crossing

Q2 2022> make visibility the priority 

  • Allow time for delays. Plan ahead where possible to mitigate disruption caused by congestion and increased delivery times caused by the ongoing closures in Shanghai. We recommend factoring in time for delays, and keeping on top of suppliers for regular updates.
  • Track goods whilst they’re moving. Use real-time ETA data to follow goods as they’re moving. Recent research has shown that as well as helping adjust to disruptions, this information can reduce delay-related expenses by up to 60%. 
  • Plan ahead. As consumer prices rise and gaps on shelves become more common, the opportunity for companies with slick supply chains has never been bigger. Take advantage of these changes with improved inventory planning to manage safety stock.