Ocean, Air, Road market insights – January 2022

Ocean: new lockdowns, factory and port closures continue causing congestion, slowing any signs of immediate recovery

• As port congestion builds following the spread of Covid outbreaks in China, we expect supply chain disruption to continue through H2 2022. We predict that low inventory levels, an early Chinese New Year, and the Beijing Winter Olympics will combine to exacerbate the backlog built over the last quarter¹.
• Capacity: space remains restricted due to port congestion (12-15% of global container capacity was taken offline in 2021) and network disruptions as carriers attempt to mitigate future disruptions by omitting ports. Covid outbreaks in Zhejiang (Ningbo, Shaoxing and Hangzhou) have resulted in factory closures, whilst new quarantine measures impact feeder services between cities and major ports². There are however some improvements; with delays reducing by 2 days MoM at major southern and northern Chinese ports.
• Rates: spot rates rose in December by 9% MoM (China – UK) to an average of $18,854 (+117% YoY). We expect these increases to continue through January, following a pre-CNY spike and ongoing port congestion^3,4.

1. Splash247, ANother lockdown at Ningbo, link
2. Reuters, Covid-19 rattles major Chinese manufacturing provinces, link
3. Xeneta, Monthly freight report, link
4. Drewry monthly sea and air insights

Air: demand remains elevated as the squeeze caused by Covid cancellations continue to impact

• Demand for air freight remains high as Covid outbreaks across Europe have led to widespread test-shortages (as a consequence, space for these has been prioritised over other goods), businesses rush to restock low inventories, and enduring customer demand is compounded with congestion and long lead times across other modes. Globally, supply remains elevated with Oct 2021 figures tracking a 15.6% uplift, compared to the same period in 2019¹.
• Capacity: rolling lockdowns and quarantine measures will test cargo capacity through Q1 2022. We expect capacity to be limited by low inventory levels, elevated consumer demand and ongoing congestion across ocean freight². Strict rules for aircrew may continue disrupting schedules (e.g. Hong Kong) hampering capacity across passenger and dedicated freighters. We expect this to delay any recovery.  
• Rates: rose 6.6% MoM in December (+51% YoY) driven by last-minute inventory replenishment before Christmas and demand for rapid test kits in Europe³. Rates are expected to remain elevated until Chinese New Year.

1. IATA, Cargo chartbook Q4, link
2. JOC, No return of air-freight capacity, link
3. Financial Times, Air freight costs soar, link

Road: Brexit impact, fuel prices and capacity updates for the New Year

• Following the recent regulatory changes brought about by Brexit on 1st January, imports into the UK have transitioned smoothly with no significant delays at border crossings. Clearance documents for customs checks are now required upon arrival to the UK (ideally completed when goods are loaded at origin), further physical checks to consignments have also been introduced at border sites. Demand across Europe remained stable in Q4, with diesel prices rising 23% in 2021¹. Customs delays are however being experienced when shipping to/from Switzerland, East Germany, North Italy, Hungary and Romania.
• Capacity: availability of trailers was low in December due to overwhelming demand for freight ahead of annual holiday peaks. Capacity index (availability of trailers within the EU) remained down 12.7% YoY in December, and 8.8% lower MoM².
• Rates: haulage price indexes are up 17.5% YoY in December, and +6.9% MoM within the EU, as capacity continues to remain restricted and rising fuel costs experienced throughout 2021.

1. Bloomberg Supply Lines
2. Transporeon, Market radar

H1 2022> plan ahead to secure capacity however you can

• Diversify where possible. As uncertainty continues, companies are trying to embed lessons learned since the pandemic began. Some ways of boosting your ability to withstand future shocks include prioritising visibility, taking a multi-forwarder approach and geographically diversifying the supply base with nearshoring.
• Push on with forward planning. With a digitally connected supply chain, it’s easier to make informed decisions about prioritising which goods to restock and spreading shipments out. Improve stock management with tech-enabled visibility tools – we recommend reviewing historic shipment data to better plan ahead.
• Don’t lose hope! With luck, Omicron will not prove to be as devastating as previous variants. We’ve seen media outlets recently positing that 2022 could see the pandemic “fade away” (The Economist), and with vaccination rates increasing, we have reasons to be hopeful, though the high number of cases is likely to continue forcing logistics workers to isolate.

‍