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COVID- 19 Market Update: April 2

COVID- 19 Market Update: April 2

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The demand remains high for pharmaceutical and food supplies. However, freight capacity has fallen sharply, with belly-hold capacity declining due to progressive cuts to passenger flights. Global airfreight capacity across all trade lanes is lower year-over-year by more than 20% and is expected to decline further.
As more countries restrict air travel or close their borders, the global rate of decline in passenger flight capacity is still greater than increasing freighter capacity rate. Some governments are easing port-related charges and fees to expedite delivery of goods and return of empty containers and authorizing economic relief for the transportation and logistics industry.

World Map

World Map

Country Focus

UNITED STATES: After numerous air traffic control and operations personnel tested positive for coronavirus, select airports and air traffic control towers were temporarily closed for cleaning throughout the week, impacting flight schedules across all regions. The government extended the national shutdown until April 30, and has increased screening at border checkpoints with Mexico, although it has not closed land borders yet. Airlines are repurposing passenger planes for cargo operations after the number of travelers dropped by more than 80% since early March. Several blank sailings are expected for April due to supplier cancellations from the previous month.

BANGLADESH: As of March 26, the government has declared a 10-day national holiday/lockdown to reduce infection risk and restrict the flow of goods entering ports. Chittagong seaport continues to face heavy congestion, and only essential commodities are being released by customs. Intermodal capacity has been doubled to increase container transportation. State Civil Aviation Authority will continue flight suspension until April 7, with only passenger connectivity to China. Cargo flights will remain unaffected.

CHILE: Chilean ports are operating normally, with back-office employees working remotely and on-site worker shifts staggered to reduce infection risk. Carriers and customs have authorized digital customs clearance, with a 30-day window to provide paperwork as required. Airport operations staff are reduced, which may delay cargo receipt and handling.

CHINA: The Civil Aviation Authority of China has placed more restrictions on passenger flights, limiting the number of routes airlines can use starting March 29—passenger jets used as freighters are exempt. Domestic passenger flights resume in the Hubei Province sans Wuhan International Airport starting April 8. Port congestion is easing as workers return to normal operations, but imbalances in empty containers slows cargo movement and drives freight rates.

ECUADOR: Airports are operating under 50% capacity for cargo handling, and only freighters can land due to presidential decree. Sea ports are operating normally with reduced hours, with no service cancellations announced from steamship lines.

HONG KONG: Freighter capacity continues to increase, but scheduled freighters ex Hong Kong are full, and rates remain high and volatile. Ad-hoc rates are applicable for expedited shipments.

INDIA: The national lockdown is extended until April 14, which will impact handling services. Transit time to Asia destinations remains impacted and will remain at 4-5 days for US & EU lanes. India’s flag carrier is taking consideration to use idled passenger planes for chartered freight services. On March 27, the government set up an air cargo management group with resident state/territory commissioners to unify air freight operations strategy. All inter-city borders are closed, and there is a shortage of trucking due to lack of government permits. Shortage of customs house agents and port staff are exacerbating the cargo bottleneck.

INDONESIA: Several Indonesian airlines are laying off employees and suspending local operations due to loss of revenue stream as industry associations report nation-wide flight reductions of 50+%. Regional authorities have been authorized to impose lockdowns; Papua has shut down all airports, seaports, and border crossings beginning March 26.

KOREA: Korean Air (KE) executives will cut their salaries by up to half starting April to manage its financial structure, in addition to using passenger planes as freighters. Some South Korean ports are seeing reductions in cargo re-routed from China.

MALAYSIA: The country’s flag carrier will reinstate some international flights from April to May, but currently belly space is dedicated to the transport of medical
devices and supplies. Congestion at the ports of Klang, Penang, and Johor is clearing after the government ordered expedition of containers with the help of local
police, and local port authorities are considering storage fee reductions to ease the strain on freight forwarders.

MEXICO: Many airlines are canceling flights and canceling contract rates renewals, with valid rates subject to space availability. Airport operations have reduced personnel and slight delays are expected. Cargo movement is unrestricted, but screening measures have been installed at all land ports of entry, and regional officials have called for flight suspensions to destinations with outbreaks.

PHILIPPINES: The Manila International Container Terminal announced that it can no longer provide timely cargo operations due to an increasing backlog of containers that have not been picked up, likely a result of temporary business closures. International traveler bans have been instituted as of March 27, but air cargo operations continue.

SINGAPORE: State support valuing $750 million was authorized on March 26 for Singapore’s airlines, with a third stimulus package planned in case efforts fall short. The government has declared in a joint statement to work with Australia, Canada, Chile, New Zealand, Myanmar, and Brunei to keep trade flow unimpeded across all modes of transport.

SOUTH AFRICA: Effective March 27 to April 16, the government has enforced a complete lockdown of South Africa. Except for essential infrastructure, all businesses will be closed for the duration of the lockdown. Flights from other affected countries have been canceled, and over half of South Africa’s inland border posts have closed.

SPAIN: Effective March 30 to April 13, the government has enforced a complete lockdown of Spain. Except for essential goods, Spain will neither import nor export any shipments for the duration of the lockdown.

TAIWAN: Taiwan air operations crews are now required to wear medical protective gear after two pilots were found to have contracted the coronavirus. While some Taiwanese airlines with cargo-only long-haul flights have been less affected by the outbreak, rates remain high and volatile

THAILAND: Civil Aviation Authorities approved eight airline decisions to cancel international and domestic flights and ground airplanes on March 26, as airports install screening services and the government bans entry of all non-resident foreigners without valid permits. Further suspension of services from flag carriers have cut capacity even more, to resume late-April/May. Road access between Bangkok and other provinces is now restricted.

VIETNAM: The country’s flag carrier will extend its reduction of domestic flights until April 15 to comply with imposed restrictions, with new passenger screening requirements. All international passenger flights have been suspended since March 21, which continues to take a toll on capacity and rates. Certain sectors have cut exports to ensure that Vietnam has an adequate supply for the outbreak.

Air Freight

DHL Aviation: Airline looking to add more transatlantic capacity due to high demand.

IAG CARGO Update on Transatlantic Routes: As well as still being open for business on transatlantic routes, IAG Cargo’s global network is still in operation. Destinations around the world from Seoul, to Doha, to Amsterdam, to Milan and beyond – across British Airways, Iberia, Aer Lingus, Fueling and LEVEL – are set up to support getting freight around the world. In addition, IAG Cargo is now opening up the opportunity for freight forwarders to charter their aircraft to support your freight and to help get it where it needs to be.

With more countries imposing travel bans, air cargo capacity declines further. Trade lanes across the world are now seeing double-digit air capacity declines compared to last year; on a trade lane level, there is no clear difference between Asia and other regions anymore. International belly capacity is only 35% of what it was in January. Global capacity is already 22% lower than last year and is expected to continue to decline.

Airfreight prices out of Shanghai are continuing to surge, Freight Investor Services (FIS) and the TAC Index have revealed.

Last week’s air freight rates on routes to the US from China rose 12.6%, to $5.72 per kg, while to Europe they were up 21.16%, at $4.58, “vastly higher than normal Q4 peak prices”, noted FIS. Much of the overall surge in prices to Europe was due to the 55.9% increase in rates to Frankfurt. However, FIS noted that the gains had levelled off slightly, in comparison with the previous week, “indicating a potential market plateau”

The global decline in passenger belly capacity is accelerating as more countries restrict air travel or close their borders altogether; freighter capacity increases to compensate for belly capacity shortages

Sea Freight

Container ports across the world aside from China are set to face imminent congestion as a swathe of boxes sent for shipment from factories in Asia arrive at their import destinations. “This leaves a fair tonnage of goods already on the water on their way to western markets, most bought FOB or FCA, which means the buyer will need to manage them once they arrive,” James Hookham, secretary general of the Global Shippers Forum, told Splash. The inbound unwanted containers are triggering forecasts of congestion in port stacking yards and sparking debate about demurrage charges and storage policies. Splash reported yesterday how the number of blanked sailings for the coming months has rocketed over the past week with 2M partners MSC and Maersk leading the way, cancelling 21% of Asia-Europe capacity in Q2. THE Alliance carriers have now blanked 15 Asia-Europe sailings from week 15 to week 19, slashing their capacity on this trade lane, like 2M, by 21%.

The Port of New York and New Jersey remains fully operational to facilitate the movement of cargo locally, regionally and nationally. Supply chain fluidity remans a priority of the Port in order to continue providing essential goods to stores and homes as well as critical commodities to support the healthcare system

“It’s more difficult for shipping lines at this time than ever before to control equipment flows and have equipment where it’s needed because of all the blank sailings and because the trade flows are significantly different than they were before. “Before, everything was consistent. Shipping lines knew roughly how many containers they needed on a weekly and monthly basis in any single location. So, for example, for a location like Memphis, once they had enough bookings [to move the necessary equipment there], they would start raising prices on the spot market to reduce equipment flows. But because of all that’s happening, I think they’ve given up on that. They’ve lost their grip on where the equipment is flowing and it’s going to take months to clean all this up. “Another issue is the annual contracting season for shippers and carriers. There is a lot of speculation that given the extreme uncertainty, this process will happen later this year.

Mainline trades: In the mainline east-west trades (trans-Pacific, Asia-Europe), MSI sees “extraordinary downward pressure given a looming collapse in consumer spending in Europe and increasingly, North America.” It cited “near-unprecedented headwinds” for European imports, with the trans-Pacific to face the same shock as the Asia-Europe lane, but with a lag. “While liftings data from March should remain reasonably positive, thereafter it will become a question of ‘how bad can it get?’” said MSI, which believes the full-year 2020 slump won’t be as severe as 2009’s but that the second quarter of 2020 could match financial-crisis-era lows. The consultancy projects that the total volume in March-May will fall 17.8% year-on-year on the Asia-Europe route, 15% on the trans-Pacific (U.S. West Coast) route and 13% on the trans-Pacific (U.S. East Coast) route

Non-mainline trades: “There is no trade that will escape the impact of the COVID 19 global recession,” stressed MSI, which noted that non-mainline trades are
highly exposed due to capital flight from emerging markets, the surge in the value of the U.S. dollar and sliding commodity prices. “Regional trades will come
under severe pressure, owing to economic contraction, disrupted supply chains and reduced trans-shipment cargoes,” it added. MSI projects that total volume in
March-May will fall 12% year-on-year on the Asia-Middle East-India route, 10% on the Asia-Latin America and trans-Atlantic westbound lanes, 8% intra-Europe and 5% intra-Asia.

Gateway Terminals India (GTI), one of three container terminals operating at Nhava Sheva’s Jawaharlal Nehru Port, has declared force majeure as a result of
impacts on its business from coronavirus. The Indian government declared a three-week lockdown beginning on March 25 to try to curb the spread of coronavirus.
The lockdown has resulted in the mass migration of migrant workers and widespread disruption to services in India’s cities. GTI’s force majeure notice states that
the company cannot perform certain services, including “allotment of berthing windows and receiving and delivering containers from and to container transporters
at the terminal. ”Adani Ports and Special Economic Zone Ltd has declared force majeure at its facilities in Dhamra, Mundra and Tuna.

Market Sources

https://splash247.com/european-and-american-ports-ready-for-box-congestion/
https://www.freightwaves.com/news/ocean-container-volumes-are-about-to-fall-off-a-cliff
https://www.freightwaves.com/news/q-a-flexport-exec-on-coronavirus-past-present-and-future
https://theloadstar.com/new-wave-of-blanked-sailings-planned-for-asia-europe-and-transpacific/
https://theloadstar.com/air-cargo-rates-may-be-levelling-out-amid-fears-of-a-drop-in-demand/
https://www.lloydsloadinglist.com/freight-directory/news/FIATA-urges-governments-to-keep-ports-open/76253.htm#.XoSVaEBFxPZ
https://www.worldcargonews.com/news/news/gateway-terminals-india-declares-force-majeure-63896
https://www.portbreakingwaves.com/the-port-of-ny-and-nj-focuses-on-efforts-to-safeguard-front-line-staff/

This announcement applies to all World Wide Customs Brokers services including our Air Freight, Sea Freight, Ground Freight and
Logistics. World Wide Customs Brokers is continuously monitoring the situation and will provide further updates as the information becomes available.
If you have any questions, please contact your local World Wide Customs Brokers representative.

 

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