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Dear Valued Customer,
The re-opening continues for most countries around the globe with more and more industries kicking into gear again. As a result of this, lockdown restrictions are gradually easing up, enabling cargo to move around again with less hassle. Especially the airfreight sector having been hit the hardest on the capacity side is seeing a slow, but steady return of commercial bellyhold capacity as more and more airlines resume flights
As much as the peak of the pandemic seems to have passed, it however remains apparent that the effects from COVID-19 will be long lasting evidenced by a number of airlines fighting for survival resulting in a very unpredictable capacity situation mid and long-term.
Consequently, a very volatile market environment on both ocean and airfreight is expected up until Q4 2020, both in terms of capacity as well as freight rate development where volatility remains high.
Ocean freight pressure is peaking – Asia to Europe trade now also impacted
Ocean freight continues to be heavily impacted by blank sailings putting further pressure on both space and equipment on more or less all trades. Some industry analysts suggest that carriers in an effort to save costs have cut more capacity than needed, resulting in a situation where demand far exceeds supply.
After a number of weeks with heavy pressure on the Eastbound trade from Europe to Asia which remains status quo, we now also register a high space pressure on the Westbound trade from Asia to Europe resulting in a high number of cancelled and delayed shipments. This is supported by the SCFI development which despite a small drop of USD 4/TEU this week, remains at the highest level since week 8 and comparing to same week in 2019 is USD 84/TEU above. Overall this cements the notion that carriers maintain a strict pricing discipline and will cut capacity to the needed level and even beyond to sustain rate levels.
This also means that despite sporadic speculation on the financial stability of the major carriers, it is assessed that unlike the airfreight industry there is only limited risk for any of the carriers entering a bankruptcy scenario.
Overall, we encourage for a very close and pro-active dialogue in order to ensure proper forecasting and prioritization of all shipments. Please also note the changes in a traffic light update further below as a result of the worsened situation.
Airfreight remains seriously impacted, however with small signs of improvement
Despite the slow and steady return of commercial bellyhold capacity, the situation overall remains critical in terms of ensuring timely uplift of all volumes. PPE volumes (Personal Protective Equipment) continue to surge, as governments around the world continue to build stock in order to avoid a similar situation as when the pandemic initially broke out.
In China the extensive customs check procedures on PPE cargo continues to cause heavy delays
Zooming in on the capacity situation status is currently a historic and massive average decline of 26 % compared to last year with some trades seeing a decline of up to 60-80 %. |
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Note: Thickness of arrows is representative of January 2020 capacity in metric tonnes, direct flights only; all flows indicate region-to-region capacity; regions are indicated by color coding; 1) Total cargo capacity includes widebody passenger and all freighter flights; 2) Same week last year defined as 12 – 18 May 2019, all dates measured in UTC; Source: Seabury Consulting, Part of Accenture Capacity Tracking database, Seabury Consulting, Part of Accenture analysis (May 2020). Graph from: https://www.accenture.com/dk-en/insights/travel/coronavirus-air-cargo-capacity |
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As a result, rates remain at a historic high level, however with first signs of a slight downward trend as a result of the improvement in capacity supply.
The main topic is now how the situation will look like longterm with a number of the global airlines having announced major cost-cuttings and lay-offs. In the case of amongst other Thai Airways, Virgin Australia, Flybe and Avianca Airlines the outcome has been bankruptcy, however in most cases some form of restructuring plan is expected to come in the coming weeks and below.
It is a historic and critical situation with the potential to cause fundamental and systemic changes for many years to come, documented by below overview of airlines having already declared bankruptcy.
On another note the extensive customs check procedures on PPE cargo in China continues to cause heavy delays with airports in South China, including Shenzhen now also affected. We remain in a situation where we are able to handle all volumes by use of both alternative routings as well as our Sea-Air products, however similar to the situation on ocean freight we encourage a constant and proactive dialogue in order to determine which solutions will fit your business best.
Rail freight remains the safe choice
The situation remains “as is” with disruptions on ocean and airfreight continuing to support the positive volume development within rail freight. It is increasingly becoming a recognized solution to cater for shipments both from Asia to Europe, as well as Europe to Asia. Rail freight provides a cost and time efficient alternative with on-time reliability remaining high and the capacity situation remains stable.
Road freight continues to operate smoothly
The trucking sector overall runs basis business as usual with only a few sporadic delays. Capacity remains available as well, and shipments are moving without major disruptions.
Following ferry connections remain cancelled:
For further details on specific countries and mode of transport, see our overview here.
All information in this advisory is offered to the best of our knowledge and is prone to change. If you have any specific questions, please reach out to us.
Yours sincerely, |