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Cargo flows are becoming more uneven across key markets as a natural container imbalance on head haul and backhaul trades is exacerbated by extensive blank sailings from carriers trying to match capacity with declining demand.
Stay-at-home orders and the closure of retail outlets across Europe and North America since early March to limit the spread of coronavirus (COVID-19) has nearly erased consumer demand and stopped manufacturing in many parts of the world. Cargo has been steadily building up in warehouses, port terminals, and inland depots during the lockdowns, according to logistics experts and cargo insurers. “These are primarily non-essential products, for which there is little demand or supplies for production lines that are either static or at reduced capacity,” an insurer noted in a statement this week.
Some of the major carriers are offering “Delay in Transit” options that allow shippers to store import containers at transhipment hubs as cargo owners adjust supply chains. These include CMA CGM and Mediterranean Shipping Co., which this week announced it was expanding its “Suspension of Transit” (SOT) offering by adding four more transhipment hubs where cargo owners can store cargo outside the marine terminal. Maersk Line is offering storage at origin ports in Asia, where goods can be quickly loaded once demand returns.
Mixed picture globally
A recent survey by the International Association of Ports and Harbors (IAPH) shows a mixed picture at ports around the world, with 35 percent reporting an increase in the utilization of warehousing and distribution facilities for foodstuffs and medical supplies, with some ports reporting capacity shortages. The uneven impact on cargo flows can be seen in different verticals and geographies. For instance, auto industry shipments have fallen off and Indian export cargo has come to a near standstill, whereas Latin American markets have so far been largely uninterrupted.
Carriers had to be able to make rapid changes in the network design to be prepared when demand improves, something that has been on display with the extensive blank sailing programs of the alliances. “Our approach is to be cautious in terms of capacity allocation and hope the market comes back better than expected,” one carrier said.
Sourcing PPE Dominates Air Capacity, but More Lift is on the Way
The scramble for personal protection equipment (PPE) has buoyed airfreight, pushing rates to lofty heights. National governments’ determination to secure PPE at almost any cost has been a significant factor, but it has prompted the deployment of fresh capacity that is beginning to put the brakes on prices.
While passenger airlines have slashed more than 90% of their flights and are bleeding cash at alarming rates, airfreight is generating record yields. Rates are in the stratosphere and the price of charters has soared to eye-watering levels.
Carriers are responding to the need by putting additional capacity in rotation. The number of passenger airlines that field widebody aircraft for cargo missions has kept growing, as well as moving to establish regular networks with their cargo flights. On top of 14 weekly freighter runs between China and Europe, Lufthansa is now flying passenger planes twice daily on the Frankfurt-Shanghai sector and one daily flight between Shanghai and Munich. United Airlines is up to 150 cargo flights a week. Virgin Atlantic announced a program on April 21 that uses 787 passenger aircraft for three cargo flights a week between London and Shanghai. On May 2, Emirates Sky Cargo announced it would be launching four weekly cargo flights, with 777-300ER passenger planes, on a Dubai-Auckland-Melbourne-Dubai routing
Air Canada was the first to remove seats, from three of its 777s, to boost cargo capacity, while several others, including Swiss World Cargo, Lufthansa and American Airlines, are considering this option. Icelandair has taken the seats out of three 767s to accommodate the demand.
“The demand for carriage of PPE has been a catalyst for many passenger operators, who were in mid-March originally not keen on operating as freighters, to now do so – also for the commercial market. This has had effect on stemming further increase in freighter rates, as a significant amount of new capacity has been added to the market in the last three to four weeks,” one airfreight expert noted.
While the demand for air cargo is very high at the moment, shipments are being lifted.
Please reach out to your BRI USA Representative to explore your airfreight options.
Chinese Government Announces Quality Restrictions on Medical Items & Non-Medical Masks
As a reminder to our customers, please remember the following new quality standards for medical and non-medical mask shipments:
U.S. Chamber of Commerce Hosting “Protecting Supply Chains During Coronavirus” Webinar on May 19
Acting Department of Homeland Security (DHS) Secretary Chad Wolf will be the featured speaker for the U.S. Chamber of Commerce's "Global Supply Chain Series: Protecting Supply Chains During Coronavirus" webinar on May 19. This virtual event will bring leaders together to discuss key supply chain challenges during the COVID-19 pandemic.
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As a valued customer, we hope that you will continue to trust us to source the best options for your supply chain needs now and into the future. Please feel free to contact your Customer Solutions Representative should you have any queries or concerns regarding USA News.
Keeping you updated.
BRi Customer Solutions TeamBack to News Page