INTERNATIONAL TRANSPORT: WHAT ARE THE ACTUAL GAME CHANGERS?

Posted in News

Dear Partners,

We are all hit by PSS (Peak Season Overload) surcharges, equipment shortages or even supply reduction of air and maritime transport services. How did such an unprecedented situation arise?

  • December 2019: Social movements and "dead port" operations by the dockers and port workers of the National Federation of Ports and Docks are surely to cause significant disruptions until mid-February. As blank sailings rise, rollovers increase. French then European ports are saturated, increasing vessels waiting time.
  • Mid-March 2020 Lockdown: Originating in China, the Covid-19 breakout reaches France. Not only does it challenge all area of global economics, but it also slows down considerably all French and European industrial activities. While the government is working hard to keep the supply chain, further disruptions are upsetting the world of transportation as a whole.

THE COLLATERAL DAMAGES OF NAVIGATING THROUGH COVID-19

SAILING SCHEDULES ARE NOTHING SHORT OF CHAOS! SEVERAL FACTORS ILLUSTRATE A LACK OF RELIABILITY:

  • Vessel rotations are either cancelled or severely disrupted as many ports are no longer on the freighting route.
  • Q1 2020 suffered from significant capacity reduction with the lockdown on China and the outbreak of the COVID-19 pandemic.

A STRONGER-THAN-EXPECTED Q4 ECONOMIC ACTIVITY:

  • Generally, October and November are intense months, but this year, volumes exceed the most optimistic forecasts.

A COST-EFFECTIVE, TIME-SAVING STRATEGY:

  • The shipping companies chose to supply empty containers on the Transpacific (USA-China) at first and then on the Asia-Europe trade route, being the most profitable (freight rate X3 within a month, up to USD 5400/40 in December).

GREATER CONTAINER DETENTION NEEDS:

  • With a government firmly committed to maximum telework, staff throughout the logistics and industrial chain have been severely disrupted, leading to longer delays in handling activities, thereby increasing the need for container detention.

LATE PRODUCTION OF NEW CONTAINERS:

  • For several months, production of empty containers to regenerate equipment fleets stopped due to the lockdown in China (the primary producer), resulting in the removal of obsolete containers without being able to replace them.

As TLF Overseas puts it, "the global maritime trade is overheating, and we are bearing the cost of a major disruption in supply chains."

 

THE COLLATERAL DAMAGES OF FLYING THROUGH COVID-19

One thing leading to another, COVID-19 is also taking the air transport industry into unchartered territory.

A SIGNIFICANT DECREASE IN CAPACITY:

  • With the cut of international passenger flights, around 90% of traffic has dropped.

DISTURBANCE OF ROTATIONAL DELAYS:

  • Heavy congestion in the majority of hub airports leads to a significant turnaround and a considerable increase in almost systematic delays (6-7 days France-China).

AIRFREIGHT RATES ARE UNCONTROLLABLY FLYING HIGH:

  • The coming end-of-year holidays together with the large-scale trade operations are certainly going to make matters worse. They will most likely increase the phenomenon (Europe-US Axis + 30 % // Eurasian Axis + 25 %).
  • Priority given to health and health products.

PERSPECTIVES

China's New Year in sight!

We are all relatively unanimous in visualising a return to normal after the Chinese New Year, at the end of February, provided that shipowners release additional capacity and that international passenger flights can resume at minimum.

For the next three months, our recommendations remain the same as the previous weeks:

  • Maximum anticipation of your orders (import/export, all trade). Companies that can provide forecasts over several weeks or even months should do so.
  • If the value of the goods allows it, ask your trading contacts to consider higher boarding priority at a higher price than the current market.
  • Do not hesitate to ask to substitute Dry 2x20' i/o for a Dry 40'. Load in dry containers rather than High Cube.

Our teams remain, more than ever, your trusted partner. Finding solutions is our 1st goal!

 

BALGUERIE

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