Economic shutdown in the UK and US, together with passenger air traffic suspensions by the US, has meant demand for imports has dropped, as retailers and other importers closed.
With cancelled orders diminishing demand the container lines have begun an aggressive blanking programme of more than 50 sailings in the last week alone.
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While ocean rates have softened, reflecting the current drop in demand that has reportedly seen long-term container shipping contracts register their first pricing decline since last October, we believe that the lines fortunes will recover, when demand eventually returns and the effect of their capacity reductions are felt.
Drewry, the container shipping analyst comments: “Ocean carriers’ finely tuned skills in the art of capacity management are going to be sorely tested in the coming months. It is their daunting task to judge how much containership capacity is needed during the demand pullback, and also to be ready to service the market when the recovery begins.”
Shippers should expect service disruptions, more blank sailings and very probably a number of service suspensions for the next two quarters
With around half of the world’s air freight capacity provided in the belly-hold of now grounded passenger aircraft, due to widespread Coronavirus cancellations of flights to and from the US, China and Europe, air freight rates have been spiking.
Demand has surged for time-sensitive shipments, particularly products to fight the virus, including drugs, medical supplies and ventilators, driving astronomic increases from China to the US and Europe, with Frankfurt recording increases of 55%.
Economic drag in the US and UK will dampen demand for non-essential cargo, which may suggest an over-optimistic approach from many selling air capacity, given the drop-off in demand for cargo that would have made up the bulk of spring shipments. The futures market is already discounting further sharp rises, with modest rises in April and May.
The freight forwarding trade association, BIFA, has consulted airline sheds, ports and carriers, who confirm that there is no Force Majeure and they will continue to charge quay rent and demurrage, as they believe importers will simply use the terminals and sheds to provide free storage.
We can flex your supply chain, with extended transits and storage solution at origin or destination
We expect that the situation will deteriorate, as containers arrive from China destined for closed importers, resulting in congestion.
Shippers should contact us immediately so we can help them avoid unnecessary charges and penalties, by flexing their supply chain, storing product at origin, or tactical storage solutions in the UK.