The Omicron variant has caused chaos across the globe, negatively impacting trucking, warehousing, port, and air and sea carrier operations. Most countries continue to implement strict Covid protocols, especially China and Hong Kong. A high percentage of long-haul flights have been cancelled as well as terminal handling operations being shut down. The USA for example, has experienced a record number of new cases which is having a detrimental impact across their entire logistics network resulting in severe supply chain delays.
We are in the pre-Chinese New Year shipping peak and various disruptions have already arisen such as trucking shortages, vessel delays, labour shortages, and warehousing and manufacturing closures in various parts of China.
Impact of Covid restrictions in China
China continues to enforce a zero-tolerance policy towards Covid with strict quarantine measures in place. Cluster outbreaks across various regions within China and Hong Kong has already resulted in severe operational disruptions such as suspension of trucking services and manufacturing delays in areas.
This will no doubt cause further delays to both air and sea shipments, and not just pre-Chinese New Year, but also post-Chinese New Year.
Shipment hubs in North China, such as Tianjin, Qingdao and Beijing will be further impacted by various restrictions with the upcoming Winter Olympics starting on the 4th of February in Beijing.
Sea freight update
We will all be holding thumbs that the sea freight market will emerge from continuous disruptions to a more stable environment within 2022.
Early indications across the various trades show that trade continues to be hindered through port congestion, labour shortages, various lockdowns in key areas and volatile shipping schedules.
Such factors can be expected to be around for the next few months, but hopefully the Chinese New Year period will allow the shipping lines, port operators and truckers an opportunity to restore some much-needed stability.
Capacity on all trades remains under pressure as expected. This is largely driven by vessels being caught up in port congestion, sailings delays and bottlenecks. These factors force shipping lines to omit ports or blank sailings and consequentially capacity is instantly removed and in addition places pressure on the proceeding sailings as shipping lines need to load the awaiting shipments.
Feeder capacity in the Far East into main transshipment hubs has generally been prioritized for intra-Asia trade, USA and Europe and this is causing shipping delays for South Africa bound shipments. Heavy containers as well as hazardous shipments are generally not regarded as preferential cargo by shipping lines.
Labour and trucking shortages, especially in parts of China, USA and Europe has delayed cargo being collected and in cases some consolidation facilities have started to decline accepting cargo until cargo backlogs have been cleared.
Despite the challenging environment, we have, in general, managed to consistently secure space through our extensive global network. With our expanded global network, we have gained access to additional capacity which strengthens our service offering to our clients.
We recommend making bookings as far as possible in advance of your required sailing dates for all trades.
Equipment availability has improved in recent months especially in China when one compares to this time last year. Large volumes of containers have been released into the market which is very positive. There are still pockets of container shortages from time to time and most notably in Europe.
Schedule and transshipment reliability is possibly the biggest challenge right now. Predictability across all trades is almost non-existent and this places significant pressure on supply chains. It’s become common for shipping lines to have up to a 4-week delay on their original published schedules.
Shipping lines have been changing their port rotations mid-voyage and without prior notice, transship containers that were booked as direct shipments. Transshipment delays of up to 3 to 5 weeks is also a current reality as well berthing delays across the South African ports.
With the current disruptions, sailing schedules will remain erratic for the time being. We encourage additional time to be factored into your supply chain planning.
It will not be surprising if carriers implement additional blank sailings to reduce capacity and keep demand strong, thereby justifying their rate levels.
There have been no major freight rate increases over the past few weeks. We do anticipate rate reductions on the Far East trade post the Chinese New Year. The consensus within the market is that shipping lines will aim to keep rate levels elevated relevant to market conditions and avoid steep rate reductions over the slack seasons.
It will not be surprising if carriers implement additional blank sailings to reduce capacity and keep demand strong, thereby justifying their rate levels. More shipping lines may start to offer spot rates instead of publishing market rates.
Due to our long-standing strategic relationships throughout our global network, we continue to secure very competitive pricing relative to market.
SCFI (Shanghai Container Freight Index):
The below graph demonstrates the freight rate decline per TEU ex-China to South Africa:
Air freight update
With the rapid global spread of the Omicron strain, airlines were forced to cancel multiple flights across the globe resulting in capacity reduction and cargo backlogs. Labour shortages and quarantine requirements have also contributed to the backlogs as handling of the cargo takes longer. Travel bans to and from South Africa have recently been lifted by some countries and airlines which is positive. Capacity will slowly start being re-introduced and backlogs can start being cleared.
Capacity is under pressure, most notably from the USA and Far East with thousands of flights cancelled over the last week of December and first week of January due to Covid restrictions and bad weather. Airlines and terminal handling agents are also facing challenges with crew and labour shortages. Demand will remain strong over the coming weeks.
Our airfreight network enables us to continue offering flexible solutions that meet our clients’ import requirements.
The biggest impact to increased lead times has been on the leg from cargo collection to departure due to the factors already mentioned regarding flight cancellations, trucker shortages and the implications of lockdowns and Covid restrictions. We encourage you to factor longer lead times into your airfreight shipments and consider booking urgent shipments on a priority service level, especially from the Far East as we approach the Chinese New Year holiday. The same applies for any hazardous shipments.
Freight rates remain elevated, and we anticipate rates to start softening once travel bans and various lockdown restrictions are lifted. Spot pricing will remain a common practice.
With our expanded network we are well positioned to offer a variety of options to meet your airfreight requirements.
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