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Thread: Freight rates soar as cargo capacity shrinks amid Covid-19 crisis

  1. #1
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    Default Freight rates soar as cargo capacity shrinks amid Covid-19 crisis

    https://www.businesstimes.com.sg/tra...ovid-19-crisis

    Freight rates soar as cargo capacity shrinks amid Covid-19 crisis

    Grounded aircraft and rise in blank sailings putting pressure on supply chains, but some airlines are using passenger planes for cargo charters

    MON, APR 13, 2020

    MINDY TAN


    SKYROCKETING air freights and a jump in blank sailings, where a carrier cancels a particular sailing, are piling the pressure on global supply chains, leaving businesses on tenterhooks.

    With most airlines grounding more than 90 per cent of their passenger aircraft fleets, the belly capacity for cargo has significantly shrunk.

    "Supply for freight space is very limited because globally, most of the airlines have grounded their aircraft due to the global pandemic. That has obviously created a big vacuum in terms of providing freight space to customers who wish to ship their freight," said Benjamin Ong, CEO at freight forwarder Alliance 21.


    "Now, you have to pay for premium express rates to be able to put your freight onboard."

    The situation is not improving and is in fact "getting worse" daily, according to Steven JK Lee, chairman of [email protected]

    "Pricing fluctuates every day because demand is higher than supply," said Mr Lee, adding: "Now, airlines work on a day-to-day basis, or even hour-to-hour. And they charge express rates - there are no more standard cargo rates."

    SingPost CEO of Postal Services and Singapore Vincent Phang said the national postal service provider was not spared as well. On an almost-daily basis, SingPost is contending with service suspensions and freight delays to and from various countries, as well as higher air freight rates owing to the limited number of available flights.

    "Covid-19 has dealt a huge blow to the global freight forwarding industry. Factory volumes evaporated overnight with immediate shutdowns of production; air shipment volumes worldwide were adversely affected by the grounding of flights by airlines in response to lockdowns and travel advisories issued by numerous countries to stem domestic Covid-19 outbreaks," said Mr Phang.

    BT understands that the spread can be relatively large. If, for instance you have always been a VIP airfreight user, this jump can be two to three times. If not, the rates can be six to 10 times higher. Rates from Shanghai to Singapore for instance used to be US$2 per kg and are now US$4 per kg.

    The situation is no better on the sea freight front, with blank sailings cropping up again.

    While previous blank sailings were largely a result of factories in China being shut down, this current batch of ship cancellations is due more to the drop in consumer spending, and resultant cancelled orders from retailers.

    For instance, MSC Mediterranean Shipping Company announced on March 27 that it was implementing a "seasonal blanking" programme, starting with the cancellation of two sailings that were serving routes between China and Europe or the Mediterranean.

    Even worse is that carriers are increasing the number of blank sailings without giving the market much notice.

    "It is not just the number of blank sailings but also how fast they are being implemented. Carriers previously would give three to four weeks' notice but now implement this immediately, catching many shippers (manufacturers) off guard," said Raymon Krishnan, president of The Logistics & Supply Chain Management Society.

    On the Asia-Europe route, the number of blank sailings has increased to 75, of which 29 are due to Covid-19, said Bollore Logistics in a "Covid-19 impact update" on April 6.

    Meanwhile, Hong Kong-based logistics startup Buyandship has called on governments to require air freight carriers to maintain pre-pandemic costs or prioritise essential supplies to be shipped.

    While sourcing is not typically part of their business, Buyandship CEO Wilson Chan decided to leverage their network and logistical capacity to help address the global mask shortage.

    According to Mr Chan, rates for air freight are at unprecedented heights, currently at three to five times pre-pandemic rates.

    As services such as Amazon FBA (Fulfilment by Amazon) come back online in China, competition for cargo space will increase and drive up prices even further, he told BT. The worry is that even if the cost hurdle can be overcome, there might simply be insufficient carriers.

    Mr Chan said: "We tried as much as we can to ensure the majority of shipments would still be forwarded to Hong Kong by air, especially for parcels delivered to our US and Europe warehouses even though air freight costs from US to Hong Kong have risen five to six times."

    Pre-pandemic, air freight cost around US$4-5 per kg. Now, it has gone up to US$23-24 per kg, said Mr Chan.

    Meanwhile, the company has had less luck with its warehouse in Japan, where it has opted instead for sea freight. "It was not about the cost. It was purely because couriers/airlines had significantly reduced flights. We have considered a couple of options and the truth was, shipping via sea freight might be even faster than air freight," he said.

    Some passenger airlines, including Singapore Airlines Group's Scoot and Cathay Pacific Airways, have taken the initiative to fly passenger-configured planes on cargo charters, said [email protected]'s Mr Lee. US airlines including American, Delta, United, and Southwest have also offered their aircraft for cargo use.

    On corridors where these measures are already taking effect, there is a slight recovery with declining rates, according to international consulting firm Tim Consult in a recent report on Global Air Cargo.

    Mr Lee said: "We hope other airlines will follow suit to ease the capacity situation".

  2. #2
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    Default Re: Freight rates soar as cargo capacity shrinks amid Covid-19 crisis

    I'm sure prices will go down soon. It's not sustainable to have these rates in the current circumstances.
    But in the meantime check out https://www.cargolution.com/en/transport/air-freight/ . They have decent prices.

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