Ocean & Air market insights – May 2022

Ocean: delays and congestion mount as Shanghai lockdowns continue

• Uncertainty continues around the duration and impact of Shanghai lockdowns, as port congestion mounts, and factory production slowly resumes. Offsetting this are broader shifts that are impacting demand, such as reduced consumer confidence caused by the rising cost of living, as well as seasonal lulls after Chinese New Year.
• Capacity: carriers are using blank sailings to manage delays as the number of containerships waiting near Shanghai port increases (+34% MoM³). Through this squeeze, premium services have proven most reliable in terms of moving goods on time.
• Rates: are continuing to come down, in line with reduced demand and seasonal lulls (since Jan ‘22). Based on yearly trends, we can expect the spot market to settle at $10-12k per FEU in Q2⁴, before potential increases at the start of Q3.

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

Air: capacity out of Asia recovering, due to low demand  

• As lockdowns in Shanghai continue, airfreight diversions are clogging other major Chinese airports such as Zhengzhou, Beijing, Guangzhou and Shenzhen. Though product volumes are down due to recent factory closures, many airports have run out of space for cargo storage.
• Capacity: whilst space out of Asia continues to be impacted by Covid, the reduced demand is allowing capacity to recover. For broader context, Cathay Pacific said, in a recent interview with The Loadstar, that though “cargo flight capacity has recovered over 40% compared to the lowest point in January, it remains just 29% of pre-Covid levels”.
• Rates: remain elevated due to ongoing capacity restrictions, whilst volatile supply and fuel costs have driven a shift towards spot rates. However, as capacity recovers, we can see these rates stabilising.

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

Q2 2022> plan for delays, and minimise risk

• Allow time for delays. Speak with your freight-forwarder to see how blank sailings could affect your ocean shipments. Where possible, make bookings early (ideally 2-4 weeks before your Cargo Ready Date).
• Consider premium services.Through capacity squeezes, premium forwarders and carrier supply have demonstrated a more reliable service, with Beacon data showing that they’re twice as likely to move on time than cheaper market options¹.
• 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%.

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