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In the latest Baltic Exchange market round-up, Chan said that despite a year on year drop in demand over recent months, supply chains remain congested and there could be a surge in production when factories in China re-open following Covid curfews.

“Early in the year, I expressed some level of surprise that we were not seeing even more upward rate trajectory based on the removal of air cargo capacity due to ongoing conflict in Ukraine,” said Chan. “I posited that upward pressure there was being offset, in large part, by a production vacuum in China as a result of widespread Covid-related lockdowns.

“For context, the percentage of the population under lockdown in China right now is estimated to be larger than the entire population of the US.

“And, while critical economic functions are still technically operational, the systemic nature of the quarantine restrictions means that production output from some of the country’s largest manufacturing centers are at their lowest levels since the initial shutdown in early 2020.”

He said that as well as a clearing of backlogged China freight, other factors that could again disrupt the market include ongoing capacity reductions related to the conflict in Ukraine and if US west coast port and labour negotiations result in strike action.

“Assuming no sharp and sudden deterioration in baseline demand levels (which cannot be guaranteed), there is a distinct scenario in which airfreight rates spike again, even from these elevated levels,” Chan said.

He pointed out that even though the market has softened on the demand side in recent weeks, due to pressure on consumer spending and a post-Covid rotation from goods to services, rates in April remained at historic high levels – although there have been some signs of pricing easing on some trades since then.

The latest figures from the Baltic Exchange Airfreight Index (BAI) show that in April the average rate from Hong Kong to North America reached $9.57 per kg, which is 12.9% up on a year earlier.

From Hong Kong to Europe average rates in April stood at $6.01 per kg, which is up 30.4% compared with last year.

“Logistics networks remain very congested and there is a real possibility that any temporary pull back in bottlenecks and rates are ‘head fakes’ and volatility will continue to be an issue until the core problems are resolved,” Chan said.

Peter Stallion, head of air and containers, at derivatives broker Freight Investor Services, agreed that many had expected prices to have weakened in April, although he said spot market prices are likely to be lower than index rates which also incorporate pricing on longer term deals.

“While we may have expected a drop off in rates from the first quarter of this year, the removal of Russian-owned airfreight capacity has artificially levered up the constraints for airfreight shippers,” he said.

“Asia to US rates have also seen a sharp increase, posting double digit rate percentage point increases following a collapse of available airfreight demand. However, this increase is still quite muted versus the true spot price.

“Transatlantic prices continued to jostle as they have done all the way through since second-quarter 2020.”

Stallion added that higher fuel prices are also likely to impact rates.

“The impacts of this fuel demand is reasonably clear, with Singapore Jet Fuel closing back up towards its previous high of $150.39/barrel (now $138.73/barrel).

“This will feed through into fuel surcharges and forms a component of general inflation that bleeds through into the cost of running airfreight operations.”

Source: www.aircargonews.net

Image: www.pexels.com

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The latest figures from CLIVE Data Services, which is part of the Xeneta rate benchmarking platform, show that demand for March was 4.5% down compared with a year earlier – and 6.5% down on pre-Covid 2019 levels – marking a “sudden interruption to the recovery trend of recent months after the peak Covid disruption of the past two years”.

Capacity in March was down 3% compared with last year and 14% against 2019 levels.

As a result, dynamic load factors – accounting for both weight and volume – stood at 66%, which is the same level as recorded in 2019 and six percentage points lower than 2021 after record levels were reached that year.

Despite aircraft being less full in March than they were a year ago, rates have actually increased by 27% year on year and are up by 141% compared with two years ago.

Niall van de Wouw, chief airfreight officer at Xeneta, said this was down to disruption on the ground.

“There are also still many issues with capacity on the ground. One bottleneck got replaced with another one,” said van de Wouw.

“Load factors are lower this year than they were last year, but prices are higher. The latest disruption in Shanghai is not unexpected but it adds to the worldwide issue of staff absence because of high Covid cases.

“Pilots, cargo handling workers, truck drivers etc, unlike many others, cannot work from home. It’s hardly surprising then to hear the International Monetary Fund (IMF) blaming soaring shipping costs for driving up inflation rates.

“Right now, the airfreight and oceanfreight markets are in general a mess, with shippers and consumers having to pay the price. In the first two months of 2022, we were talking of growing resilience in the airfreight market and a recovery to pre-Covid levels. March data shows how quickly this can change.”

CLIVE also noted an increase in the placement of capacity into the spot market on certain trade lanes, such as Europe-Japan trade, where the amount of chargeable weight at a spot rate increased to 60% of the market, or 20 percentage points higher than February’s spot share.

Rates from Japan to Europe increased to around €5 per kg, nearly 50% higher than the weeks preceding the Ukraine war.

Carriers on the route had removed capacity as they sought flight paths that avoided Russian airspace.

“In overall air cargo market terms, March was a step back from the trend we saw late last year and earlier this year. We have been reminded of how the limited control the general airfreight market has over its own destiny and how it is impacted by passenger traffic trends, disruption in the ocean freight market, and geopolitical events,” said van de Wouw.

He added that ongoing disruption in ocean shipping could provide a boost to air cargo demand while higher inflation could have a negative impact.

“Although it is too soon to tell what the skyrocketing inflation numbers in the US will result to, the logistical difficulties on the water between these two continents must put some wind into the sails of the air cargo market.

“With continuously declining schedule reliability of the ocean liners, logistical departments will likely be required to resort to airfreight because of disruptions to their supply chains caused by these record low service levels,” he said.

Source: www.aircargonews.com

Image: www.pexels.com

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Around September last year, the air cargo industry was tentatively hoping that the market could be setting out on the road to normality.

Major economies were slowly opening up as Covid case numbers were showing signs of easing and passenger operations were beginning to get back underway as travel restrictions were lifted.

Then November arrived bringing with it the Omicron variant. Lockdowns, travel restrictions, supply chain issues and reductions in bellyhold and freighter capacity on major trade lanes ensued.

Adding to those challenges, the start of the year also sees the industry having to contend with the two-week Chinese New Year holiday, which typically sees a surge of cargo ahead of factory closures, and this year the Beijing Winter Olympics is expected to cause further disruption.

With the year off to a challenging start, Air Cargo News caught up with a cross section of the industry to find out their expectations for the remainder of 2022.

DSV vice president and head of the DSV Air Charter Network, Mads Ravn, tells Air Cargo News he expects a roller-coaster market with Covid continuing to disrupt supply chains, while bellyhold operations will be slow to return.

“Demand will remain strong in every sector and, as the year has already proven, Covid will continue to play a major role in whether capacity will return,” Ravn says.

“Especially on key routes from China and Hong Kong – where they continue to have some of the most severe restrictions – we need some sort of consistency throughout the year.”

He adds: “Belly carriers are trying to piece a programme together with multiple new seasonal destinations that will not necessarily benefit the lack of capacity in the market to and from core manufacturing sites.”

DSV believes that the return of belly capacity to pre-crisis levels is being pushed further out.

“The initial anticipation of 2025 is likely not happening and destinations serviced will change as business travel is very slow to come back,” he says.

“Therefore, we are focusing on maintaining and developing our own DSV Air Charter Network so we can continue to provide as much reliable and flexible capacity as possible for our customers.”

Ravn says handling operations are also likely to come under pressure this year.

“To secure enough people on the ground is perhaps the most severe challenge in several gateways in North America and Europe,” he says.

“This, combined with outdated US infrastructure and lack of staff returning to work, will also influence and slow down recovery.”

Scan Global Logistics (SGL) says it expects the unpredictability of 2021 to continue into this year.

“We expect the market to be pretty much the same as in 2021; travel-restrictions, no clarity about Omicron and potentially other [variants] to follow, and no, or only limited, additional freighter-aircraft to be supplied to the market.

“This will keep constant pressure on the capacities and rates. [Covid] test kits, ocean challenges, airport/ground handling issues etc will remain, leading to increasing charges.”

Looking at seasonal trends, SGL says that the first quarter will remain challenging with rates elevated, the second quarter and early on in the third quarter may see an easing of the situation before the peak season ramps up in mid-September.

On the return of bellyhold capacity, SGL’s global head of airfreight, David Wystrach, says: “Mid-term on this side of the summer, travel restrictions and uncertainty will continue to limit leisure travel.

“Business travellers will not be back to anywhere close to pre-Covid-times. This will limit number of flights and served port pairs.

“Some routes added to the network may be less cargo friendly, e.g. leisure destinations on transatlantic routes.

“On top of this, the current Omicron [variant] will as well impact crews and pilots and with this further reductions on rotations are to be expected.”

Wystrach is also expecting ongoing labour issues across the market to affect ground handlers, forwarders, airlines and trucking companies.

Hervé Bonis, deputy chief executive, Seafrigo Group, says Omicron and seafreight issues will drive demand in the air: “The overall global environment remains uncertain in the first quarter of 2022 due to the high circulation of the Omicron variant of Covid-19 in most western countries.

“This is already impacting on airfreight capacity, especially regarding the China/Hong Kong trade lanes where stringent rules for pilots are in place.”

He adds: “The biggest challenge is definitely to get back to normal regarding intercontinental travel, which then brings back the belly capacity that is not currently available in the market. I expect belly capacity to increase during second half of 2022.

“Regarding our overall volumes, I consider that we will still face seafreight disorganisation, including port congestion, and this will bring opportunity in terms of airfreight volumes.”

Crane Worldwide Logistics chief executive Keith Winters is another expecting labour issues to affect the market.

“There is no question that we are still expecting some turbulent times ahead,” Winters says.

“Currently, with the resurgence of Covid, new vaccine boosters need to be moved and there is still the possibility of borders closing as countries cope with the influx in cases.

“With blank sailings and the Lunar New Year ahead, it’s expected that the first quarter will create more demand which will continue to add pressure in terms of cost.”

On the return of belly capacity, Winters says this is highly dependent on borders opening up.

“We can be hopeful that the new variant will see the end of the pandemic, but there are still so many unknowns,” he says.

“With new aircraft being lined up for charter flights, there will be options, but for now I think we need to look further afield than 2022 to return to what we consider ‘normal’ bellyhold capacity.”

Airlines are also expecting demand to be tight over the coming year.

Roger Samways, vice president commercial, American Airlines Cargo, says that despite some return of passenger flights, indicators suggest that demand improvements and congestion in other modes will contribute to capacity shortages in air.

“Continued capacity shortages in the market, relative to demand, as well as infrastructure challenges at airports, will present ongoing challenges for the air cargo industry,” says Samways.

“We have faced capacity shortages since the start of the pandemic, but we’ve seen innovative, creative solutions across the industry as carriers have tried to support the needs of our customers.”

Samways adds that belly capacity will improve in 2022 compared with last year but won’t get back to 2019 levels due to changing government travel restrictions and possible future Covid-19 outbreaks.

“Our current expectations are that widebody capacity will grow around 20% compared to 2021. The key for our cargo customers, though, is where that capacity is going to be deployed.

“Unlike in 2021 when many of our widebody aircraft were operating on short-haul leisure markets, such as the Caribbean and Mexico, in 2022 our widebody fleet will primarily be deployed on long-haul international markets which is great news for our cargo customers.”

Charter outlook

Charter brokers are also bracing for another busy year. Dan Morgan-Evans, group cargo director at Air Charter Service (ACS), says the disruption experienced over the last couple of years has been too great to unwind completely during 2022.

“The longer time goes on, the more balanced it will become but we are still seeing very strong demand in the short term and long term, with a record number of forward bookings even into 2023,” he says.

“The whole supply chain has changed over the past two years and, unless we suddenly revert to pre-pandemic passenger numbers and all travel restrictions are lifted, then we will continue to see strong demand.”

He says that ACS was previously used to seeing single ad hoc flight bookings with the occasional programme for multiple flights. Now, the company is seeing bookings that are predominantly programmes.

“The challenges will be similar,” he adds. “Covid restrictions, lack of capacity, bottlenecks at airports – but these are all the benefits of using a company like ACS.

“The marketplace is complicated. Whether that’s the aforementioned, or people out there trying to take advantage with phantom aircraft and fictitious contracts.”

Neil Dursley, Chapman Freeborn chief commercial officer, cargo, says the continued impact of Covid-19 shows little sign of slowing down and there is no return to “business as normal” insight.

“What we are seeing in the first weeks of this year is ‘more of the same’; a distinct lack of widebody availability and supply chain challenges impacting the major ocean ports of the world with new restrictions due to new Covid outbreaks in strategic ocean ports. This continues to force more and more cargo into the air.”

Dursley adds that there has been a surge in demand for Covid test kits. The broker has just completed “an enormous programme of flights” utilising multiple AN-225 and AN-124 flights, including on Christmas day.

“Never before in our history, or I believe in the history of the AN-225, has it ever operated so many back-to-back missions,” Dursley says.

“The good news for our clients is that pricing on widebodies from Asia to Europe, as well as transpacific routes, has reduced in January vs December, but we anticipate that this will again increase following the Chinese New Year.”

He adds that freighter operator Magma Aviation, a Chapman Freeborn Group subsidiary, continues to operate at full capacity to and from a range of origins.

He says: “Restrictions on crew due to Covid outbreaks in key locations is creating issues but ones which our partners are supporting so that supply chain continuity isn’t impacted.”

Looking at sectors driving demand, Dursley says that the company is heavily involved in humanitarian related movements for vaccines, test kits and emergency supplies.

“Likewise we see increases in automotive, hi-tech and oil & gas related activities.

“We have continued long-term programmes of e-commerce related movements using passenger-cargo aircraft as well as full freighters utilising both group assets and many third-party airline partners.

“So this storm rages on and with it we are expanding rapidly and recruiting currently over 100 full time employees to support our clients as well as opening up multiple new offices around the globe.”

Navigating the challenges ahead

With another year of disruption and unpredictability ahead, what steps are companies taking to try and navigate the challenges that lie ahead?

Crane Worldwide Logistics’ Winters says that close collaboration, information sharing and flexibility are key to managing the current market conditions.

“It takes all key members of the supply chain to work closely with clients, manage expectations and find solutions that will work in the long term.

“Supply chains are being reassessed by many organisations and are also at the top of priority lists in 2022.

“There is evidence that companies are reverting to nearshoring, alternative routings, transportation switches etc.

“We believe that working together closely with our clients, we can bring the expertise needed to provide solutions, not only the urgent situations, but also in the long term.”

He says these solutions could be additional charter capacity, extra 3PL warehousing or alternative methods of transportation such as rail freight.

Ravn of DSV says that forwarders will need to invest in their own controlled capacity to add some consistency and longevity for customers that commit to capacity and rates.

“Most air carriers have become transactional during last year and there is an intense battle to secure the best commitments in the market,” he says.

“It puts clients, who have been consistent supporters on particular lanes, in a very [difficult] situation, hence they are turning to forwarders like DSV with own controlled charters to leverage their spend, which is often connected to other parts of the supply chain.”

From an airline perspective, Samways of American says that the airline has learnt to expect the unexpected.

He agrees that collaboration across the supply chain is key to managing the situation.

Samways says: “From an industry perspective, increased investment and closer working relationships with industry partners will be important in helping to ensure that we are able to operate efficiently and accommodate as much cargo is possible.”

He adds: “For American, that has included working with our network planning team to help ensure the rebuilding of our widebody network meets both PAX and cargo needs and looking at how we can best utilise our existing narrowbody and trucking networks to help bridge routes and create more options for customers.”

He adds that the airline has already made plans for nearly all its widebody fleet to be dedicated to long-haul international routes, which is ideal for the cargo division.

The company is also poised to take delivery of more than 40 Boeing 787 aircraft over the next few years, which Samways says will help to support further capacity growth across American’s network.

Wystrach of SGL says that it is important that forwarders remain very proactive and that customers keep a high focus on their approach to planning.

“Keeping up with constant schedule changes, impact of airport/port congestions etc., will require an ongoing agility and solution-driven attitude,” he says.

“This will continuously require flexibility for forwarders and customers in regards to pricing, transit times and routing opportunities.

“Constant proactive communication, including offering multiple solutions enabling our customers to make a conscious decision on how to balance cost and supply chain risk, is and will remain a key priority for us.”

Source: www.aircargonews.com

Image: www.pixibay.com

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1. Greece – $84.079 billion
2. Japan – $80.169 billion
3. China – $68.333 billion
4. Singapore – $38.052 billion
5. United States – $34.432 billion
6. Germany – $31.544 billion
7. Norway – $30.427 billion
8. South Korea – $21.204 billion
9. Denmark – $19.492 billion
10. United Kingdom – $15.847 billion

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China’s Personal Information Protection Law, which came into effect on Nov. 1, has added to a raft of new rules designed to increase government control over how domestic and foreign organizations collect and export China’s data.

Although there are no specific guidelines on shipping data in the regulations some domestic providers in China have stopped giving information to foreign companies as a direct consequence of the new rules, the sources told Reuters on Wednesday.

The data is relied upon to provide information on cargo volumes and helps optimize logistics by predicting congestion so companies can make key decisions on shipping routes.

MarineTraffic, a top global provider of ship tracking and maritime intelligence, is among those foreign companies now experiencing gaps in vital shipping location data from China, where much of the world’s supply of manufactured goods and some industrial commodities come from.

“If this continues, there will be a big impact in terms of global visibility especially as we come into the busy Christmas period with supply chains already facing huge problems all over the world,” said Anastassis Touros, AIS network team leader at MarineTraffic.

“All of a sudden we do not know when ships are leaving and from where, and we also don’t have the full picture on port congestion which AIS offers us.”

The so-called Automatic Identification System (AIS) provides the locational positions on ships. It is used by other vessels, ports, and many other organisations from banks and traders to search and rescue operations.

From Oct. 28 to Nov. 15 the level of terrestrial shipping data across all Chinese waters was estimated to have dropped 90% according to market intelligence and valuations provider VesselsValue.

“With China being a major importer of coal and iron ore and one of the main container exporters globally, this decline in positional data could cause significant challenges concerning ocean supply chain visibility,” head trade analyst Charlotte Cook said.

Two other sources put the drop in terrestrial AIS data at up to 45% in recent days.

An official with the Guangdong Maritime Safety Administration told Reuters that AIS rules were set by the department’s headquarters in Beijing. Calls to the Maritime Safety Administration’s Beijing office were not answered.

Other Chinese officials did not immediately respond to requests for comment.

A spokesperson with U.N. agency the International Maritime Organization, which adopted global AIS regulations, had no comment when contacted.

The AIS information is taken from continuous transmissions and although it can be collated using satellite data, for heavily congested areas or places where frequent updates are needed, terrestrial data is required.

It was unclear how AIS users will be able to keep tabs on shipping movements if the data gaps continue.

The lack of tracking capability comes at a time when COVID-19 has already exposed the fragility of global supply chains used for everything from food to fashion.

The surge in demand for goods and shortage of containers has created port disruptions around the world, which makes the AIS data even more important to determine schedule times for shipments from key suppliers in China.

Mainland China is home to six of the world’s ten largest container ports.

An employee at Elane Inc, a Beijing-based company that owns an AIS data platform with around 2.5 million users, told Reuters that “all dealings with foreign entities were recently halted”.

“The changes happened last month, we only supply data to domestic users now,” said the employee, who asked not to be identified.

Source: www.marinelink.com

Image: www.pexel.com

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