FREIGHT MARKET CHALLENGES

FREIGHT MARKET CHALLENGES

Non-stop demand for ocean freight from Asia to the U.S. continues to overwhelm major U.S. ports, keeping ships waiting outside several major West Coast ports and driving air cargo rates up as importers seek alternatives. This has led to delays, backlogs and shutdowns at all levels throughout global trade. Global trade is experiencing impacts in both capacity and pricing. It will likely take the remainder of the year to recover completely.

Asia to both US East and West coasts are still experiencing very high volumes and port congestion, pushing factory-to-door delivery times to an average nine weeks, compared to four to five.  With respect to rates, see the below line graph illustrating pandemic-related impacts to costs of shipping from Asia.

Source: FBX

Expensive and unreliable ocean freight is pushing shippers to air cargo. Healthy demand has pushed global air cargo volumes back to pre-COVID levels with data showing Asia-US rates to most destinations have climbed about 25% so far this month. These conditions are likely to keep rates elevated for some time.

Carriers were hesitant to restore capacity too quickly as demand started climbing. The crisis proved that carriers can now prevent rate collapses through capacity management. The ensuing backlogs and rollovers, and the decision to restore capacity relatively slowly, were a function of poor data visibility and the repositioning of vessels. This directly contributed to the speed and possibly the size of the rate spike.

Air exports from Asia continue to surge with demand up over 40% year over year given the delays in ocean freight. Capacity is extremely tight with the situation worsening this week as Taiwan CDC grounded a large percentage of China Airlines pilots following a Covid outbreak at the quarantine hotel in Taiwan Taoyuan International Airport.  China Airlines has announced that 20% of their entire schedule will be cancelled as a result.

Fastbolt is doing all it can with its supply chain partners to facilitate resolutions to our customers.