Pudong

Demand for Shanghai sea exports may divert to air freight

May 30, 2022 | , , ,

As COVID lockdown measures are gradually relaxed in Shanghai it is uncertain how quickly export sea freight volumes will rebound, but many experts are anticipating a strong and sustained spike in demand creating a backlog of shipping containers, which could once again result in ocean shipments diverting and putting pressure on air freight, which is already experiencing reduced availability due to the lack of passenger aircraft, restricted movement through Russian airspace and carriers not finding the long haul route economically viable.

Shanghai port - the world’s largest container port - has remained open while the city’s lockdowns have disrupted manufacturing, trucking and freight operations for the past two months and the strength of the city’s manufacturing output recovery will determine if freight rates, which have stagnated, will increase sharply as peak season approaches.

While some believe that factories will recommence manufacturing steadily over coming months and ocean container shipping will resume the seasonal ups and downs we’ve been accustomed to before COVID-19, others point to the tremendous amount of cargo that is already awaiting shipment, estimated at 260k TEU, which combined with pent-up demand, can only result in a surge of pressure on container movements from the region.

The port is basically bursting with containers, and if not cleared or substantially reduced, there may be little room for export loading movements to occur as smoothly as they normally do, which in turn could pile on the pressure at Shanghai Pudong (PVG) airport.

Vessel traffic around the port is increasing with currently more than 3% of the global container fleet capacity stuck there and wider congestion is still having a profound impact, with serious congestion in both American and European ports causing sailings to return to Asia late, resulting in additional delays and blank sailings.

Meanwhile the huge backlog of containers at Shanghai grows, with no capacity to shift it and when you have all this capacity constraint and demand on the ocean freight side, cargo will simply begin diverting to air freight, to recover failures and delays in the supply chain. 

Importers who need their products to meet market demand, or to use in production, will use air to get those products as quickly as possible and that will also have an influence on capacity, which is more scarce today than it was two years ago. We know this as distressed sea freight and add this to the planned air freight for higher value products, with peak season due at the end of Q3, then there is likely to be a spike once production flows are recovered in the factories.

This could contribute to already elevated air freight rates, which have remained elevated due to the lack of capacity that followed airspace restrictions and the Shanghai lockdown.

Shanghai is loosening lockdown restrictions now, with the normal manufacturing and logistics environment likely to return in June and when it happens, we expect to see a surge in air freight volumes as shippers expedite products, that are needed on shelves the UK, Europe and the US.

We will continue to closely monitor the situation and update you as changes occur, but we do recommend checking with your vendors, to clarify the status of your orders.

We hope to see supply chains start to flow freely again quickly, as the pent-up demand for delayed goods could quickly create congestion, if operations are not running optimally.

We expect demand for space and spot/ FAK rates to increase very quickly and would suggest you start talking to us now about your potential requirements, so we can put appropriate plans in place.

To discuss how we support and protect your supply chain, please contact Elliot Carlile.

FXT slave loading

Avoiding container demurrage and storage charges over the Platinum Jubilee

May 19, 2022 | ,

As the country prepares to celebrate the Queen’s record-breaking reign, with an extended bank holiday, we consider the potential penalty traps waiting to catch out the unwary shipper during the break and how you can avoid demurrage, detention and port charges.

Shipping lines and ports levy time-based charges, to encourage swift return of containers and to penalise for extended use, or port space used.

Avoiding demurrage, detention and port rent charges, are always a race against time, because the clock is ticking from the minute a ship docks, with inbound containers, or an exporter collects an empty container for loading.

And that clock keeps ticking through bank holidays, which could be critical over the 4 day, Platinum Jubilee. Freight movements and related costs do not stop for weekends, holidays or the arrival and departure of vessels or aircraft, regardless of the circumstances, unfortunately.

As always, we want you to avoid these unwelcome fees, which is why we recommend best use of any free period, by planning ahead, to ensure your documentation is complete and delivery bookings are confirmed and completed before the 2nd June.

The run-up to the extended bank holiday will be particularly challenging for hauliers and we would urge you to coordinate your warehouse slots and labour availability, with booked deliveries, to avoid mishaps and penalties.

For more information on how we can help you avoid demurrage and detention fees, please get in touch with our sea freight team. Led by Andy Smith, Metro's sea freight director, they can advise and recommend the best solutions to avoid unnecessary costs. Sharing your forecasts, will aid scoping and planning, to agree best progression.

graph rising

Logistics companies struggle with continued rising costs

May 19, 2022 | ,

A members survey by freight trade association, Logistics UK, found that 40% of respondents had experienced transport costs rising by 25% or more and with margins typically very low, particularly for road freight, many will not be able to absorb these increased costs.

In the survey 71% reported an escalation in the cost of transporting goods during Q1 2022, with sharp increases in the cost of fuel and other global supply chain pressures with 40% reporting increased costs of 25% or more.

Surging costs are feeding through to freight rates, with more than six in ten respondents saying both air and international road freight rates had increased substantially and 50% confirming freight rates for transporting goods by sea, domestic roads and rail had increased substantially. As if you didn’t know…….

Bulk diesel prices, which constitute about 30% of the cost to operate a vehicle, have risen by 35.7% compared with Q1 2021, with the cost to transport goods and the broader cost of living squeeze beginning to impact demand for goods.

The cost to transport goods is surging at an unprecedented rate amid significant increases in the cost of fuel and the sheer number of companies reporting increases in freight rates and the costs to move goods suggests rising prices are deeply embedded and unlikely to subside in the short-term. The sector is particularly reliant on diesel, the cost of which is likely to remain elevated even as the cost of other fuels subside.

Activity in the logistics sector is a reliable indicator for the broader economy and the survey reveals worrying signs, with more than a third of respondents saying orders are declining, likely as a result of rising costs and consumers cutting back amid a broader cost of living squeeze.

With COVID-19, Brexit, new technology and other disruptive forces driving change in the way goods move across borders and through the supply chain, logistics has never been more important.

Logistics UK represents the freight and logistics industry, with members from the road, rail, sea and air industries, as well as the buyers of freight services such as retailers and manufacturers whose businesses depend on the efficient movement of goods.

YOU CAN USE THIS LINK TO VIEW THE ORIGINAL SURVEY REPORT ON THE LOGISTICS UK WEB SITE

We work tirelessly to keep our operating costs low and to protect our customers from price rises, as much as possible.

From accessing alternative solutions, like our group shipping line (Ellerman City Lines), to leveraging our considerable group buying power in negotiating volume and price contracts with leading air and ocean carriers, our focus is always on deals that deliver the best service at optimum pricing.

Our long-standing investment in technology and innovation is driven in large-part by developing applications and processes that simplify and automate activity, that frees up resources and drives down cost.

Many of these initiatives are supported by our Business Process Outsource operations in Malaysia and India, where our experienced personnel are highly skilled at executing complex data input projects and completing global compliance and regulatory declarations.

If you would like to review your processes and explore your cost-cutting opportunities, talk with Elliot Carlile, who will take you through the options.

expats

Foreign workers leave China and it is likely to continue as China ‘reshapes’ commerce

May 19, 2022 | ,

Strict border controls amid China’s zero-COVID policy is creating a shortage of foreign expertise, with some suggesting the development could become a permanent feature, with ramifications for supply chains and an accelerating factor for consideration of production moving to alternative origins.

China’s foreign national population has plummeted during the COVID pandemic, with hundreds of thousands of expats returning home since 2020 and many have never returned, with more leaving in an exodus since the lockdowns in China were implemented. It is also widely reported in the international press that more non-domiciles will be exiting China and Hong Kong in the near future.

Nearly two years after China introduced a virtual ban on foreign nationals entering, border restrictions remain extremely tight, with work permits requiring an invitation letter from the Chinese government.

Large numbers of expats are effectively stranded outside China, with as many as 100,000 waiting for permission to return to Shanghai alone. It’s unclear exactly how many foreigners remain in China, though a 2020 census estimated there were around 850,000 overseas nationals living on the mainland and websites serving China’s foreign community have experienced steep drops in traffic since 2019.

The expat shortage is causing businesses serious headaches, because foreign staff often have skills and established networks in overseas markets that are hard to replace.

In some sectors, companies have begun offering massive wages to attract international talent. In others, hiring from overseas has become so difficult, many firms have simply given up. Or rely totally on on-line connectivity – this effects all parties involved both within China and overseas.

And the situation could potentially get worse, with The Loadstar reporting that a survey by the German Chamber of Commerce in China shows nearly one-third of foreign employees plan to leave permanently, with 10% aiming to do so before their current employment contract ends.

With many Shanghai expats still unable to leave their apartment building or gain access to basic necessities, Chinese employers are bracing for a mass retreat of foreign talent this summer.

The owner of a rail components manufacturing firm in Northeast China said he had dealt with all sorts of supply problems, but never expected that a shortage of foreign workers would be one of them.

That, however, is exactly what he’s facing two years into the pandemic, as one by one, he lost all of the overseas executives who used to work under him and he says the impact has been devastating, but local hires lack the international experience the firm needs and recruiting foreign professionals has become impossible.

The owners comments are supported by the German Chamber’s survey, which shows businesses allowed to resume production under lockdown are operating at 46% of their total production capacity.

Furthermore, respondents said their company’s production capacity was hampered by lack of logistics availability (69%), missing raw materials and pre-products (69%), missing transport permits (56%), additional workers cannot leave their compound (56%) or their districts (43%) and uncertainty due to rapidly changing policies (41%).

Pressure from international clients is increasing as trust in Chinese supply chains is decreasing. Supply chains can’t be changed overnight, but they can with time, and the longer the disruptions in China last without any signs of improvement, the more supply chains will be transferred to other countries outside of China.

Metro are constantly reviewing the situation and we have both local colleagues ‘on the ground’ and international teams. We have it covered with our approach and up-to-date market intel and will continue to encourage international travel and the movement of stakeholders involved in our clients business requirements, globally.

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