As we approach the last quarter of 2021 capacity is really tightening in all modes of transportation, the term “silly season” is more apt than ever this year. This is in part due to the increase in orders as retailers try to stock up before the peak hits, and part due to COVID related closures in Asia. New waves of cases in China, Thailand, Vietnam and Malaysia have caused additional challenges in freight capacity as well as operational efficiency, with delays seen at ports and airports.
Air Transport: The Shanghai Pudong International Airport, China’s largest cargo airport, was closed to freighters for several days in August due to COVID-19 cases among cargo workers. Before the closure, the airport was only operating at 33% capacity due to quarantine measures. As a result, all-cargo carriers in Shanghai were experiencing delays and cancelled flights due to staffing shortages. Air export rates from China have increased by up to 25% on some trade lanes.
Due to China’s zero-tolerance COVID policy, freighter flights cannot operate again until it is considered completely safe. Even though airlines are diverting flights to the south and west of China, this will result in a serious backlog for the next few weeks.
Ocean Transport: Ocean transportation has also been affected by COVID-19 shutdowns in the last month. The Ningbo-Zhoushan port in China experienced a shutdown that has slowed the freight movement in and out of this port. As more variants become more prevalent carriers are adding clauses to their contracts, so they do not have to pay for stranded ships.
This latest shutdown is raising fears that this will occur at other ports and slow the flow of goods, just at a time of increasing demand with economies reopening and a surge in manufacturing. The Baltic Dry Index, which is a benchmark for bulk shipping prices, has risen more than 10% as compared to the previous month.
Container Ship operators have advised of a new surcharge on imports from South China ports to the US and Canada – This will go live on September 15th is aptly named Congestion Surcharge. This surcharge ranges from $1000-3000 USD depending on container size and port of delivery. Los Angeles port is a perfect example of the current congestion issues with up to 40 container vessels awaiting berth space at any one time.
Overall, container shipping demand has been high throughout Q3. Increased goods consumption along with the opening of hospitality and entertainment venues is expected to drive higher container growth and containers rates as a result will remain high.
Ground Transport: Fleets should not expect a decrease in demand until 2022. Trucking started transporting seasonal items in July and will end with Christmas orders. Apparel volumes are expected to be high as consumers re-enter the workforce and children go back to school so dry vans will be needed for transport. Carriers will need to order more equipment and hire more drivers for the upcoming season.
Trucking supply chain issues and challenges continue to be dominated by the ongoing driver shortage and is without an end in sight.
E-commerce: Retail activity will remain high through the remainder of the year, as is always the case as we approach Christmas.. With many schools, workplaces, and universities opening back up now, a switch to purchasing apparel and footwear, electronics, and office supplies will take place. Inventory re-stock by retailers will keep trucking busy for several months.
Horizon International remains committed to help minimise supply chain delays. Our offices across the UK, The Netherlands, Spain and the USA continue to work closely with customers and suppliers to ensure services are closely monitored.