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Ocean and Air market insights – June 2022

Ocean: freight rates start to rise as Shanghai’s two-month  lockdown is lifted

  • Pent-up demand begins to build as Shanghai reopens after months of Covid-related closures. From the start of June, manufacturing and shipping activity resumed, with production lines reopening and trucking capacity picking up.
  • Capacity: although Shanghai port isn’t yet congested, backlogs are likely to build in the coming months. Based on Drewry’s estimations, around 260,000 TEU of export cargo was missed in April due to the lockdown. Analysts expect this will take more than two months to clear, with tighter space potentially driving up rates. 
  • Rates: long-term contract rates remain at high levels following the unexpected inversion of spot and contract rates in February. The spread between them has widened since, signalling slowing demand and growing uncertainty around supply chain disruptions. On a macro-level, high inflation, low consumer confidence and the war in Ukraine are contributing factors. 

1. JOC, Congestion worsening 
2. Sea Intelligence, Schedule Reliability
3. Reuters, Shanghai Ship Count
4. Xeneta and SCFI Rate Intelligence

Air: rates begin to level off as a result of increased capacity

  • Capacity: as consumer demand for post-pandemic travel picks up, May’s daily flight count hovered consistently around 2021’s full year peak levels (usually experienced in late summer). This increase in travel demand equates to increased cargo belly capacity. The number of daily flights is growing consistently, at a rate of +3.5% MoM in May ‘22. For reference, when comparing to pre-pandemic levels, May ‘19 saw a +0.6% growth rate.
  • Rates: freight rates from China to Europe since mid-May have flatlined. Meanwhile, decreasing jet fuel prices are now reflecting in the fuel surcharge charged by carriers.
  • IATA has estimated that passenger traffic in 2022 will be ~65% of 2019 levels. To/from/within Europe traffic is expected to reach 86% of pre-pandemic levels, whilst the US will rebound faster reaching 94% of 2019 levels this year.

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

Q3 2022> plan for delays, and minimise risk 

  • Allow time for delays. Speak with your freight-forwarder to plan upcoming shipments flexibly where possible, due to anticipated congestion and delays.  
  • Consider premium services.Through capacity squeezes, premium forwarders and carrier supply have demonstrated a more reliable service, with Beacon data showing these are twice as likely to move on time than cheaper options.
  • Track goods whilst they’re moving. Use real-time ETA data to follow your 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%.