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Global Update: April 7

Leading industry analysts assessed that global airfreight capacity has fallen 35% year-over-year, and projects further decline. Several states, non-government organizations, and businesses have initiated relief efforts in response to the economic effects of the ongoing COVID-19 outbreak: Singapore announced two economic stimulus packages totaling S$60 billion ($42.1 billion), the Australian government has approved a $110 million International Freight Assistance fund to subsidize perishables exporters to Asia destinations, the US is discussing a possible fourth relief package, and the EU signed a £50 billion ($61.5 billion) aid package for affected British businesses—EU states have enacted their own relief measures, and the EU Commission passed a €37 billion investment package along with a temporary framework for state aid.

Air carriers have largely switched over from passenger to cargo flights to avoid idling their fleets, with select planes allocated for evacuation and repatriation purposes. However, the lopsided supply and demand will affect rate volatility, especially in Transpacific and Eurasia lanes.

There is a significant uptick in the handling and transportation of medical devices and pharmaceutical products; however, some governments are restricting importation/exportation of specific products due to production shortages. Others are working directly with manufacturers, carriers, and logistics providers to allocate space. Certain industry verticals are struggling to maintain supply chain operations in the Southeast Asia region as countries restrict ports of entry.

Due to the lack of coordination between some countries, port terminals, and logistics providers, the International Federation of Freight Forwarders Association (FIATA) has issued a statement calling for ocean carriers to reduce demurrage and detention charges. Some steamship lines are also canceling surcharges as demand and oil prices fall, while others are avoiding specific ports due to low volume of outbound/inbound shipments. Kneejerk space cancellations in the early months of the outbreak have produced a significant number of blank sailings for this month. Changing consumer trends and bureaucratic yellow tape will affect negotiated rates and contracts in the coming months.

 

Country Focus

BANGLADESH

State Civil Aviation Authority’s flight suspension has been extended to April 14. Due to space shortages, the national railway service has suspended cargo operations between Dhaka and Chittagong. The Chattogram (formerly Chittagong) port is congested with import containers, and trucking delivery is slowed due to government restrictions.

BRAZIL

The Sao Paolo quarantine imposed by the government has been updated to end April 22, five days shorter than its original schedule. International travelers will be barred from entry via air until April 27 pending further notice. Perishables exporters report that falling demand from Europe will raise rates and affect production in future quarters. Container imbalances mean temperature-controlled shipments will need to be booked weeks in advance. Port authorities report that operations remain normal, but there is a possibility of union strikes and port shutdowns if the situation worsens.

CHINA

The Wuhan Airport has undergone full disinfection over the weekend and hopes to resume operations by April 8. As airfreight rates continue to rise because of near-max freight capacity utilization, China-Europe rail sees a slow rise in demand. Ports in China are operational and throughput tonnage has recovered from February, but cancellations throughout the past months have dropped demand, raised idle fleet capacity, and resulted in many blank sailings for the month.

HONG KONG

Importers based in Hong Kong warn that cargo flight volumes will fluctuate unpredictably in the coming months. A portion of chartered capacity has been allocated for emergency medical supplies, and as passenger travel has been reduced to 2%, freighter now makes up most of the available capacity. Some steamship lines are suspending services between Hong Kong, other Chinese ports, and Australia after April 22 until at least second quarter.

INDIA

There is a national lockdown until April 14, which will impact handling services. Some airlines, including India’s flag carrier, have suspended all domestic and international routes until April 30. Some steamship lines are skipping certain India ports due to lack of exports from manufacturers. While passenger flights are inaccessible, freighters are allowed to land.

Land borders remain closed, and there is continued shortage of truckers and customs agents due to the lockdown.

INDONESIA

Some airports are cutting their operational hours in attempts to slow the rate of infection, potentially slowing operations. The government has temporarily relaxed import and export regulations for personal protection equipment and health equipment until June 30; however it has not yet called for a nation-wide lockdown. Regional officials have started to enforce curfews which may affect trucking.

KOREA

Select steamship lines are creating yard storages at specific transit hubs, including Korea’s Busan port, to deal with delayed import shipments. The Korean government has also announced that it will expand the free-trade zone of the Incheon airport and Busan port. Korea and Indonesia have announced that their planned Free Trade Agreement will be signed as early as possible. Korean steamship line HMM announced its induction to The Alliance on April 6, and plans to significantly increase its European routes, and introduce five new routes to the Americas and two new routes to the Middle East, with an additional 900,000 TEUs to be added as new ships are delivered.

MALAYSIA

Several new categories, including port operations, transportation services, manufacturing, and logistics services, have been exempted of the government’s lockdown orders on April 3-14. Some suppliers have submitted applications and are waiting for approval from the Ministry of International Trade and Industry to continue operations, although an exemption was reversed April 5. The decrease in passenger space demand has allowed the government to provide standby aircraft at two airports for rapid medical response.

The government has also extended cargo release by an additional four days at major ports to ease congestion.

MEXICO

The government has issued a national lockdown until April 30 with only essential businesses to remain open, though no curfew will be enforced. Three more Mexico-based airlines have suspended flights to select domestic and international locations.

PHILIPPINES

Over the weekend, the ports of Manila averted a potential shutdown as businesses withdrew idled cargo containers—port utilization now stands at roughly 75%. While the country’s flag carrier has suspended passenger flights pending partial resumption on April 15, it continues to provide cargo and sweeper flights in coordination with the government. Effective April 6, the government has extended its lockdown of the largest island, Luzon, to April 30. Other provinces have also called for lockdowns and tighter border security, which may impede trucking.

SINGAPORE

The government had announced a national lockdown from April 7 to May 4, with essential service providers exempted. However, there is no restriction on inland transportation within Singapore. The airport and seaport shall remain fully operational with normal customs clearance for export and import shipments.

SOUTH AFRICA

The Ministry of Trade has announced on April 6 that port regulations have been relaxed for the delivery of essential goods. This follows a March 31 announcement by the Ministry of Transport that reverses an export halt made the prior week on mineral commodities. All South African ports remain open during the government’s mandated lockdown until April 16, although worker shortages may impede operations.

SRI LANKA

The government has extended the ban on incoming passenger flights indefinitely and the flag carrier has temporarily suspended all passenger flights until April 21, but will continue to operate cargo flights. The Port Authority has announced over the weekend it will provide concessions for importers who delay pickup of cleared cargo after it was found that over 20,000 containers were stuck in the Port of Colombo last Friday due to curfew impositions. Port entry permits will also be doubled as curfew passes, and permits issued in 2019 will have extended validity until May 20 to ease port-related issues with cargo removal.

TAIWAN

Taiwan-based airlines may begin transporting cargo in passenger planes with permission from the Civil Aeronautics Association, which is expected to release guidelines for the permit.

THAILAND

The government has extended its international passenger flight ban until April 18. Several airports across the country have also been closed, although government use and chartered evacuations are permitted. Some provinces are enforcing lockdowns, curfews, and disinfections of community areas and streets, which may hamper trucking. Four seaports near the Mekong River resumed operations following their March 21 shutdown to decrease congestion in the remaining two ports—however, port operations have been limited to three days a week.

UNITED STATES

Major seaports are congested with cargo as terminal authorities urge importers to pick up their shipments in a timely manner. Steamship lines cannot guarantee transit times, as the global average for late vessel arrivals pushes the five-day benchmark. Thin US trucking capacity compounded with federal and state-imposed lockdowns have also affected transit time reliability. Cargo demand, especially for US and EU origin shipments, is falling, and shipping alliances have begun to announce blank sailings. Reductions in Asia-US trans-Pacific and trans-Atlantic lanes are in effect through April. Many US-based airlines have cut capacity and applied for government grants, with flights to China likely to resume in as early as May to as late as October.

VIETNAM

On April 1, the government issued a 15-day national lockdown, the suspension of public transit services, and travel limitations with exemptions for essential service providers. The country’s flag carrier has also expanded its cargo services to 150 flights for domestic transport and 130 flights for international transport, which may help to ease demand and capacity bottlenecks. The Ministry of Transport has also asked the government to consider reducing several taxes or delaying tax payments for transport businesses until the end of 2020. On April 5, the Ministry of Industry and Trade also requested northern border provinces to work with China to control the management of goods and border entry, which may ease cross-border trucking transit times.

 

 

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