Coronavirus update, 5th March

As the Coronavirus repercussions extend further outside of mainland China, business are braced for continued disruption across their global supply chains.

Metro assures you of our continued vigilance and commitment to meeting these unprecedented challenges.

Whilst recognising the effects of the Coronavirus on global commercial activity, business continuity planning forms part of every responsible organisation’s governance. 

Metro and our partners are focusing on how these contingencies can be invoked to maintain the flow of goods to and from your key markets.  We are using our extensive network of international partners and the latest freight forwarding market intelligence to support you through these unsettled times.

Worldwide confirmed cases – 96,609; China total cases 80,430 – 83.3%
Worldwide deaths – 3,308; China deaths – 3,013 – 91.1%
Total number of countries affected – 87

Ocean cargo

• The coronavirus outbreak is estimated to have cost shipping carriers $2bn due to lost capacity, following the extended closure of Chinese manufacturing
• Sailings to and from China remain at historically low levels; further cancellations and blank sailings can be expected, albeit at lower levels than previously seen
• The general rate increases and peak surcharges being applied by some carriers have exceeded expectations; Metro is rigorously challenging these increased costs where possible and actively seeking viable market alternatives on behalf of our customers
• Proactive capacity management can partially mitigate rate increases, and where practical we are asking customers to provide 8-week forecasts to help us manage their cargo requirements
• Eastbound blankings and the consequent capacity constraints now mean that European exporters to China, the Indian subcontinent, the Far East and the Middle East are facing emergency capacity surcharges
• It is expected that existing rate agreements will be reinstated once the market has adjusted to the current challenges of  the Coronavirus epidemic

Container shortages

• An urgent consideration for ocean freight is the predicted equipment imbalance; blank sailings are causing container backlogs in China, leaving European and American shippers without containers and reefers
• Some Chinese ports are reporting container levels are 40-50% higher compared to the previous year, while container stocks at European ports are up to 35% lower
• Carriers are faced with the challenges of ‘repositioning’ – moving container stocks to where they are most needed, whilst reducing the costs they will incur in the process
• Many carriers have already announced equipment recovery surcharges and congestion charges on key routes

Air cargo

• Key routes into China are attracting additional surcharges and unprecedented rate increases; charter flights are also experiencing similar increases as some shippers are able to prioritise goods movement over cost considerations
• Cancellations of passenger and cargo flights, to and from Asia, are set to continue into April and May; this situation is expected to continue as major Asian centres and European hubs, such as Italy and Korea, are now affected by significant Covid-19 outbreaks
• With Chinese manufacturing approaching up to 60% of normal capacity in some areas the need for inventory and moving higher value goods, in and out of Asia, is already driving air freight rate increases
• We would reiterate the need to forecast and proactively secure early bookings wherever possible; this will help us to secure rates and capacity under the most favourable terms currently available
• Metro remains focused on supporting our customers through this price volatility

Force Majeur

• A number of carriers have now declared force majeur, citing circumstances beyond their reasonable control for the non-fulfilment of contracted services as a direct result of the Coronavirus
• This declaration effectively relieves carriers of their contractual obligations, and no liability will be accepted for any additional costs, i.e. demurrage, detention, storage, rate increases, re-routing, off-loading at alternative ports and transport to original destinations
• This will have implications for importers and exporters across the board, as a force majeur situation affects insurance cover and other indemnifications in place

Multimodal solutions

• We are assessing options for bringing cargo from China to Western Europe via rail, however this route is experiencing some congestion due to the limited ocean cargo options
• Metro is able to offer a combined sea/air solution, with containers shipped from China mainland to Singapore and then air freighted to the UK
• The advised transit time, from Chinese origin ports to arrival at a UK airport, is approximately 18-20 days
• The current option is available for general/non-restricted cargo on a full container basis, but we are happy to discuss any specific requirements

Further information on the two options can be provided by Grant Liddell, our Business Development Director
grant.liddell@metroshipping.co.uk

Examples of further coverage in trade and international publications can be found in the links below:

Air freight rates soar: ‘it’s all about deep pockets and whether shippers can pay’

Historic capacity crunch looms as more Europe-Asia sailings are blanked

Coronavirus hits India’s shipping, while empty containers get scarcer

We will continue to provide updates on key areas of impact for our customers, and our teams are here to support you with any Covid-19 questions you may wish to raise.