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COVID-19 Market Update September 11, 2020

COVID-19 Market Update September 11, 2020

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Data published by the International Air Transport Association (IATA) shows a gritty July with a 91.9% year-over-year fall in passenger demand—the industry group stresses that governments need to provide more financial relief for airlines and reopen borders for travel. However, air cargo demand remains a “one of the few bright spots,” dipping only 13% year-over year in July even though capacity “is still between 30-40% down on what it was [before the pandemic.]” A new proposal agreement between the EU and the US will retroactively reduce tariffs for a number of goods beginning August 1. Ratification of the EU-Mercosur deal has been delayed as Germany rejects the framework on environmental grounds. Container shortage has spread through major East and Southeast Asia seaports as blanked sailings and capacity volatility become the norm. Economic recession in major Asian economies such as Australia, India, and Japan paints a worrisome picture for global shippers, as government officials work hand-in-hand with suppliers to boost trade sectors.

Country Focus

Canada: Returned production in the automotive sector has lifted Canada’s imports and exports by 12.7% and 11.1% year-over-year in July, respectively. Official talks have restarted over a potential UK Canada Free Trade Agreement following a revision to the British government’s tariff strategy.

Bangladesh: Contradicting data between the Export Promotion Bureau (EPB) and the National Board of Revenue has officials questioning the veracity of a recorded 2.17% year-over-year growth in total exports. A power stoppage and exporter protests temporarily halted cross-border trucking in one land port between India and Bangladesh on September 7

Brazil: The country’s agricultural sector remains strong but can no longer hold up Brazil’s consecutive gains; total exports fell 6.6% year over-year in August according to government sources. Automotive manufacturing and exports, while improved, still fell 22% and 23.4% short year-over-year in August, respectively

China: Several exports such as disposable face masks, respirators, and Bluetooth tracking devices have been exempted from Section 301 tariffs by the US until the end of 2020, bringing comfort to some as the ever-rising shipping costs of Transpacific sea freight trade lanes loom over fall peak season. Direct passenger flights from Beijing to eight countries including Canada, Greece, and Sweden resumed on September 3. Antisubsidy measures are anticipated to be imposed on NPropanol—a chemical with diverse product applications—exported from the US on September 9.

Hong Kong: Under the Regulated Air Cargo Screening Facility regime (RACSF) by the Civil Aviation Department (CAD), mandatory screening increases to 70% of cargo handling volume in September
Korea: Ports in the southwest were temporarily closed until September 4 as Typhoon Maysak made landfall in near Busan followed closely by Typhoon Haishen, adding between up to two weeks of backlog clearance. The rolling success of K-Pop has contributed to a 371.7 billion won ($312.7 million) increase in related  consumer goods, according to a recently published government analysis. A Free Trade Agreement with Israel is in its final stages of negotiations with a potential signing in the coming weeks. Korean Air’s two proposed passenger-to-cargo conversions were officially placed into dedicated cargo service on September 9.

 India: Data shows recovery for rail freight although cargo throughput at India’s 12 major ports has fallen 16.6% year-over-year in August. Revised Rules of Origin, issued on August 21 to curb the dumping of low-quality goods, are set to go in effect September 21. A new anti-dumping probe on aluminum products imported from China has begun and will review data between Fiscal Year 2017 to 2019, while another probe into PVC resins imported from Japan has resulted in the ratification of a safeguard duty

Mexico: Production and export of automobiles in Mexico has dropped year-over-year in August by 13.15% and 8.6% respectively, owing to economic slowdown of its two largest buyers: Canada and the US. Meanwhile, the Mexican government approved a temporary import tariff exemption on September 3 for new EV vehicle imports. Cross-border trucking jumps back at record pace thanks to shortened wait-times and a strong stateside demand for large machinery.

Indonesia: In response to an increase in consumer behavior, the government has placed import controls on shipments of bicycles, as well as footwear, air conditioners, and other goods

Japan: A group of major industrial conglomerates announced an increase in manufacturing antigen coronavirus tests, receiving government approval on September 4. Travel bans on Singapore, Cambodia, and Malaysia have been eased for expatriates and foreign workers in September.

Pakistan: Government data shows a year-over-year drop in exports of 19.5% in August due to heavy monsoon rains and infrastructure challenges. Rates have not changed from the previous week. 15,000 containers are reportedly stranded at Karachi Port after borders closed between Pakistan and Afghanistan: transit congestion has increased due to a new measure to screen 100% of shipments.

United States: On September 5, the Department of Transportation reversed a previous ruling that banned Indian carriers from providing their own ground handling operations. A huge rebound in sea freight demand has sea ports busier than ever, with record levels of August imports at the Port of Los Angeles. Allegations of forced labor has led the Customs Border Protection (CBP) agency to withhold cotton and tomato shipments from Xinjiang, China.

 Singapore: Manufacturing output slows a second month running according to the Purchasing Manager’s Index, led by strong East Asian demand for electronics. A new fast lane agreement restarted business and government travel with Korea on September 4

Vietnam: The first eight months of 2020 have yielded a small 1.6% rise in exports according to the General Statistics Office. However, slower production (based on the Purchasing Managers Index) and an 11.6% year-over-year decline in garment exports strikes a precarious note on global consumer demand. Strong trucking demand has led Cambodia and Vietnam officials to collaborate on another border crossing between the two countries. International travel remains banned, but officials plan to restart commercial flights to Guangzhou, Seoul, Vientiane, Phnom Penh, Taipei, and Tokyo in mid-September.

Taiwan: Strong demand from China, especially in electronics, makes for a second month of consecutive export gains, jumping 8.3% year-over-year in August. The onset of peak season will see select carriers increasing capacity next month, according to local sources.

Thailand: Container shortages dip further with the uptick in Transpacific Eastbound trade—rates. Flight cancellations to China (via AirChina) and seasonal congestion via US lanes add to capacity woes, but 18 new repatriation flights have been announced by Thai Airways for 18 cities in Europe and Asia; in the statement, the airline confirmed that flights will also transport cargo.

Air Freight

More airfreight providers put premium on pharma service. Companies that invested in logistics for drug makers poised to benefit from COVID vaccine. Several airlines, logistics companies and airports say they are ready to handle a COVID-19 vaccine once one is approved and shipped from factories. The pharmaceutical and life sciences business is more lucrative than general cargo because of its high value and security requirements, but it also requires specialized investments. The International Air Transport Association (IATA) says many of its members have sophisticated facilities and the specialized knowledge to process sensitive shipments. The challenge is there are not enough facilities in all corners of the world to handle a massive vaccine distribution. The trade association is urging governments, nongovernmental organizations, and industry to identify and address areas of need.

Air cargo’s moon shot: Get COVID vaccine to world. International Air Transport Association warns of severe capacity constraints, calls on governments to facilitate supply chain cooperation. It will take more than 8,000 Boeing 747 all-cargo jets to deliver a COVID-19 vaccine to 8 billion people worldwide. If more than one dose is required, the required airlift will be much greater, the International Air Transport Association says. Airline industry officials are warning that an air cargo system suffering from severe capacity shortages and not equipped to move massive quantities of temperature-sensitive cargo will be stretched to its limits without sustained collaboration between governments, aid agencies, transportation providers and manufacturers. Governments should organize public-private partnerships and coordinate with one another to plan emergency distribution, help pre-establish a network of warehouses and transportation capabilities, and remove regulatory impediments to logistics operations, IATA and freight-handling companies say. Whether the equivalent of 8,000 jumbo jet flights are needed for the COVID-19 vaccine is open to debate. Trucks are expected to help deliver vaccines in developed economies with manufacturing capacity. There may be production shortages and some people will refuse a vaccine. But airfreight will be required for long-distance moves. Some volume could also move in the lower decks of passenger aircraft. IATA’s figure, however, illustrates the magnitude of the logistics challenge associated with an emergency distribution effort.

Sea Freight

Typhoons add to troubles for Asian ports already suffering congestion. Back-to-back typhoons and surging shipping demand have meant lengthy vessel delays for ocean freight out of Asia. According to Resilience360, Typhoon Haishen made landfall south-east of Gangneung in South Korea on 7 September, following Typhoon Maysak, which struck near the port of Busan on 3 September with winds of 100 mph. “Supply chains in east Asia are still facing impacts ranging from congested ports to closed production plants,” Resilience360 said. “Due to the short interval between the typhoons, ports have been unable to reduce backlogs at container terminals and closures forced by Typhoon Haishen will further add to the congestion. ”The ports of Busan and Gwangyang have experienced five days of waiting times for incoming vessels, Resilience360 noted, while in China, Shanghai and Ningbo are also dealing with congestion issues. “Shipping lines reported waiting times of 36-48 hours at terminals in Shanghai and 24-48 hours in Ningbo, ahead of Typhoon Haishen last weekend. Both ports were closed for at least 24 hours on September 6 and 7, likely worsening congestion levels as well,” it added.

Current ocean freight recovery may not be sustained. The current boom in volumes, particularly on the transpacific, could be masking what may turn out to be a long and slow recovery for the container sector. “The container shipping industry is particularly vulnerable to changes in consumer spending, which has been severely impacted by lockdowns across the world,” BIMCO chief shipping analyst Peter Sand said in his latest outlook for the sector. While volumes were hit hardest in April and May, in line with the strict lockdowns in place at the time, over the first half of the year liftings were down 6.9%.“Though volumes have started to recover, actual demand for goods is still considerably down,” Mr. Sand said. “The high rates are testament to shippers again frontloading their goods, this time ahead of a potential second wave of coronavirus around the world and resulting lockdowns. ”While frontloading occurred ahead of an increase in tariffs because of the trade war in 2018, total retail sales in the US, excluding food and beverages, were down 1.3% in the first six months of this year and there the risks of higher unemployment and lower consumer incomes are looming as governments unwind state support programmes.

 Trucking

Port commissioner defends unlicensed off-dock trucking. VANCOUVER. B.C. – The controversy surrounding unlicensed off-dock trucking at the Port of Vancouver deepened this week, with the Office of the B.C. Container Trucking Commissioner (OBCCTC) defending the work. “The off-dock container trucking activity Unifor refers to as (a) ‘black market’ activity and the United Truckers Association (UTA) calls ‘illegal’, is not illegal,” Commissioner Michael Crawford said Tuesday. Unifor, Canada’s largest private sector union, had demanded a crackdown on what it called a large container trucking black market at the port, and the UTA is planning to hold a Labour Day protest outside the commissioner’s office to highlight the issue. The two groups say unlicensed truckers are moving containers off-dock within the Lower Mainland area at steeply discounted prices and undermining licensed, fee-paying companies. In a written response to Today’s Trucking, Crawford said that under the Container Trucking Act and Regulation, the commissioner has jurisdiction to regulate and license container trucking work that requires access to a marine terminal. If a trucking company needs access to a marine terminal, it requires a license and then must pay the commissioner’s trucking rates for on and off-dock work, he said. “Trucking companies engaged only in off-dock trucking are not required to have a license, and do not fall within the scope of the Container Trucking Act and Regulation,” he said. The UTA disputed this, arguing that the commissioner does have jurisdiction. “The commissioner is not following his own regulations, and allowing companies to openly break the law,” said UTA spokesman Gagan Singh. “It is time to stand up and fight against these injustices that are hurting container truckers,” Singh said in an interview.

Driver exits could extend capacity crunch. Shippers who are expecting the current trucking capacity crunch to end in the same manner it did in 2018-19, with carriers rushing to hire drivers and add equipment, may be left wanting. The Labor Department reported this past week another 1.4 million jobs were added to the economy in August. One would think the transportation sector would be the beneficiary of many of those positions due to the rapid recovery in the sector starting in May. In actuality, trucking has been slow to add drivers and capacity back into the mix, and the rapid job growth in other areas of the economy may be inhibiting some carriers’ ability to hire and retain workers whose options are currently expanding. Many of the trucking jobs lost in April have not been refilled. According to the Bureau of Labor Statistics (BLS), employment levels for trucking were still 5.8% under February in July on a seasonally adjusted basis — recovering only 0.5% since April. From an annual perspective, employment levels are 6.3% under where they were at the end of July in 2019

Market Sources

https://theloadstar.com/typhoons-add-to-troubled-asian-ports-already-suffering-congestion/

https://www.lloydsloadinglist.com/freight-directory/news/Current-ocean-freight-recovery-may-not-be-sustained/77361.htm#.X1uI8j-SmUl

https://www.insidelogistics.ca/port-operations/port-commissioner-defends-unlicensed-off-dock-trucking-172767/

https://www.freightwaves.com/news/driver-exits-could-extend-capacity-crunch

https://www.freightwaves.com/news/more-airfreight-providers-put-premium-on-pharma-service

https://www.freightwaves.com/news/air-cargos-moon-shot-get-covid-vaccine-to-world

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

 

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