Transport Update 1st September 2021

Welcome to the Zencargo weekly freight market update – the latest news from our freight and procurement teams on the real experience of shippers.

This week: China’s air capacity crunch, US congestion keeps rates high

• Ocean

• Air

• Road

In Focus: The brewing storm for Chinese air freight

A range of factors are coming together to create an ominous outlook for Chinese air freight, with high rates, limited capacity and changing conditions highly likely as we head into peak season.

The primary issue is manpower on the ground. Quarantines, anti-covid working practices (particularly 7-7-7 schedules) and workers quitting have sharply reduced the available staff to handle flights. With no one to load and unload their cargo, many airlines are cancelling schedules.

A clear example is Shanghai, which we discussed last week. Shanghai Pudong Airport has implemented an Epidemic Management policy that will see airlines cancel up to 40% of their flights to ensure there is enough ground handling manpower to load and unload the aircraft, meaning there will be a significant reduction in capacity out of China in the coming weeks. To add to this, there is at least a week’s worth of backlog on the tarmac to be cleared and with Golden week approaching we can expect more delays and more rate increases.

In the past two weeks, rates from China to the US west coast rose to more than $10 per kg, while forwarders reported $11.50 to Chicago. Price increases then incentivise carriers to shift capacity from other lanes, such as China-Europe, in order to capitalise on revenue potential.

With demand sure to far outstrip capacity, shippers should look to lengthen their booking windows while being ready for changes in schedules and rates.

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Ocean

Asia

US market

• Rates have increased and space is extremely tight
• LAX is one of the worst affected destinations, as they have had the most flights cancelled
• Uplifts are expected to be delayed and transit times will be longer
• Rates and space must be checked on a case by case basis.

EU market (base airport like FRA/AMS/LUX, etc)

• Rates have increased and space is extremely tight
• AMS is one of the worst affected destinations, as they have had the most flights cancelled
• Uplifts are expected to be delayed and transit times will be longer
• Rates and space must be checked on a case by case basis.

UK market

• Rates have increased and space is extremely tight
• Uplifts are expected to be delayed and transit times will be longer
• Rates and space must be checked on a case by case basis.

Americas

• Rates to PVG will increase in the coming weeks as a result of the terminal closure
• Rates into UK and Europe remain mostly the same this week
• Space remains constricted due to reduced capacity and staff shortages.
• ORD is still over capacity and there are issues over release updates. Forwarders are having to send in trucks to collect without knowing if freight is ready and the ground handling agents aren’t answering their phones
• Forwarders are choosing to use smaller airports as much as possible as there is less congestion. Freight rates will be higher but there is less chance of incurring additional costs for attempted pickups, waiting time and storage.
• LAX is still a challenge, there are usually waiting time charges applied to most shipments due to the long queues to collect/deliver into the ground handling agents warehouse

Europe

• Rates from PVG will increase in the coming weeks as a result of the terminal closures
• Rates to the US remain the same with no real increase
• Capacity to most regions is still restricted

Road

Availability

Availability generally reliable across all routes and regions.

Rates

Rates remain stable across consolidated, groupage and dedicated trailers on other routes.

Customs

• From 1 October, there will be new safety and security requirements surrounding exports with an expanded list of movements requiring exit summary declarations (EXS), raising complexity in GB-EU supply chains.
• From the end of next month, shippers will be required to supply an EXS for further movements, like empties being moved under a transport contract to the EU and goods moving by ro-ro vessels where there would otherwise be a requirement for an EXS.

The route ahead

The information that is available in the Weekly Market Update comes from a variety of online sources, partners and our own teams. Click below to learn more about how Zencargo can help make your supply chain your competitive advantage.

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