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Ocean & Air freight updates
Ocean Freight
Ocean container lines are fighting a losing battle to inject sufficient capacity into the market, as schedule delays absorb the vast amount of additional tonnage that has already been deployed on key trade lanes. While shipping data is showing a very modest global demand growth, and a genuine demand boom only into North America, most freight rates continue to set records and shippers find themselves in a situation of fighting over available capacity. The current predicament is driven mainly by a lack of capacity, not by a demand boom.
In practical terms, a carrier offering a weekly service using 10,000 teu vessels on the transpacific lane would need six ships for the six-week round trip. However, if this were delayed by a week due to port congestion at either end of the voyage, an additional vessel would be required to maintain the same capacity.
On a pure year-on-year basis, carriers are increasing capacity by more than 20%, but this increase is more an effect of the sharp drop in capacity in spring 2020, than of an actual increase. Compared to 2019, capacity has shown an average annual increase ranging from 5-10%.
Irrespective of whether we measure year on year or comparing to two years ago, the net capacity development is negative. This means that despite the injection of significantly more vessels into the transpacific, the cargo-carrying capacity on a roundtrip-basis measured in teu/days has actually declined.
Sea-Intelligence liner schedule data showed that in February, almost 12% of global capacity was absorbed by delays. By April, this had dropped to 8.8%, but has since increased to 9.6% in June 2021.
Building more vessels will not materially solve the problem, partly because vessels ordered today mainly get delivered in late 2023 and in 2024, and partly because injecting more vessels compounds the bottleneck problems in ports, effectively increasing the delay time.
Airfreight
In terms of the global airfreight market, it definitely has benefitted from the ongoing issues in the ocean freight market, as cargo owners look for a quicker alternative to move their freight. In addition, as ocean freight becomes more expensive, it has made the price of airfreight easier to rationalize. Air cargo was over twelve times more expensive than ocean shipping prior to the crisis, but this fell to a ratio of six in May 2021. This has resulted in companies using airfreight to move goods not typically transported via plane.
While the global air cargo market now seems to be getting slowly back on track, we expect air cargo capacity to remain constrained through at least the first half of calendar year 2022. Recovery will be slow, potentially episodic, and a full recovery is not anticipated until 2024.
The recent uptick in passenger air travel has seen a significant number of passenger freighters (preighters) returning to passenger mode, raising fresh concerns that the air freight capacity squeeze is set to intensify as the peak season approaches.
The overall picture of airfreight is also about how this market recovery is playing out, because it’s going to be extremely uneven. Demand patterns for passenger travel have changed dramatically since the pandemic, with some markets now reopening much faster than others. The demand in the U.S., for example, is for domestic travel. In Europe, it’s for intra-European travel.
Unfortunately, this doesn’t do anything to help the capacity situation for international airfreight, which requires widebodies flying internationally, as that demand is still down 80% and we don’t anticipate this improving anytime soon. In fact, we are taking a step in the other direction, as countries continue to lock down as the Delta variant takes hold. So, international demand is going to continue to be down and is going to recover very unevenly.
One key point to make here is that the boom in domestic (US passenger) traffic is actually impacting cargo capacity in a negative way because a lot of the preighters that have been flying in the Pacific, for example, have been pulled back by the carriers to fly domestic passenger missions. Taking a specific example, United Airlines was flying about 1,500 preighters a month in June, but this had gone down to zero in July.
For more information, contact David Lychek, Manager – Ocean & Air Services.
Higher US Customs user fees effective October 1
Effective October 1, 2021, there will be new minimums and maximums for U.S. Customs’ Merchandise Processing Fee (MPF). The minimum will be $27.75 per transaction (previously $26.79) and the maximum will be $538.40 (previously $519.76). The Informal MPF (applies to shipments valued under $2,500 USD) will change from a flat fee of $2.14 to $2.22. The MPF rate of 0.3464% will not change. Goods of USMCA/CUSMA Preferential Origin are exempt from MPF. In addition to the MPF, various other U.S. Customs User Fees are also increasing – please see full list here.
The Merchandise Processing Fee is a fee imposed by U.S. Customs and Border Protection (CBP) to offset the cost of salaries and other expenses incurred in the processing of imports and release of merchandise into the United States.
For more information, contact Brian Rowe, Director – Customs Compliance & Regulatory Affairs.
Unprecedented congestion at Ningbo & Shanghai ports
Ningbo-Zhoushan and Shanghai ports in China are ranked as the world’s top two ports, however, they have been plagued by a series of incidents which have resulted in an unprecedented volume of tankers, bulk carriers and containerships backing up into the East China Sea.
The two ports were affected by a typhoon which ravaged both areas late last month and have also seen productivity decrease as new anti-COVID measures are being introduced to thwart the spread of the Delta variant over the past month. Since July 20, community-spread infections have been confirmed in approximately half of the provinces in China, most recently at Ningbo’s Meishan terminal. Most ports in China require a nucleic acid test for all crew, with vessels remaining at anchor until negative results are confirmed. Additional measures include vessels having to quarantine for 14-28 days if they previously berthed in India or performed a crew change within 14 days of arriving in China.
This congestion has severely affected carrier services, cutting available capacity as vessels sit at anchorage awaiting berths to load and unload cargo. Carriers have also advised that they are considering a new round of blank sailings from Asia around China’s Golden Week holiday (beginning of October), which will further exacerbate the situation.
For more information, contact Debbie McGuire, Manager – Freight Solutions.
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This tourist attraction is
137 meters (450 feet) tall. |
Name the city whose National Monument is also known as MONAS
- The world’s second largest city after Tokyo, Japan, it covers a total area of 661 square kilometers (255 square miles).
- This city was known by the name of Batavia until 1949.
- This city loves shopping and has over 130 mega-malls which are open 24 hours per day, 7 days per week.
- The presidential palace, Istana Merdeka, sits in the center of the city, located close to Merdeka Square.
- Home to over 10 million people, this city is extremely multi-cultural, creating a true cultural melting pot.
- Known for its notoriously bad traffic, as the city has more cars than people.
- Dunia Fantasi, Dufan for short, is the city’s theme park with over 40 rides and attractions and is divided into eight regions.
See the answer
Answer: Jakarta, Indonesia
For more information about shipping freight to or from this city, contact Debbie McGuire, Manager – Freight Solutions.
Consolidate decision making
Do you have more than one person making freight decisions?
Try a reorganization that gives one person responsibility for all freight movements, a change that often makes it much easier to get the best price and service.
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Veena Ramesh, Office Manager – Toronto Airport |
At Your Service: Veena Ramesh, Office Manager – Toronto Airport
Veena Ramesh joined our Airfreight Services team in August 2014, working out of Universal’s Toronto Airport office.
Initially, Veena’s focus was on air imports, however, she quickly became involved in all aspects of our Airport Office operation, and in November 2015 Veena was promoted to Team Leader – Air Services. Veena has excelled in all aspects of her role, given her extensive import and export airfreight knowledge, at the same time providing top level service to our clients.
In July 2021, Veena was promoted to Office Manager – Toronto Airport. In her new role, Veena will focus on the growth and development of our air import & export services and, as always, ensuring the needs of our clients are fully met.
Veena can be reached by phone (905) 676-2763, ext. 2021 or by email. |
