Forwarders look to other modes to ease China air cargo congestion

EXPEDITORS and DSV Panaplina have both been promoting alternatives to air cargo, such as road, rail and express ocean, as an option out of China in response to ongoing congestion.

In a circular, Expeditors senior vice president global ocean transportation, Karl Fransisco, said express ocean services could move cargo from China to the US west coast in as little as 10 days. To Europe, the company is promoting its rail services.

"As freight congestion continues in Chinese airports, cargo for air export out of China commonly is sitting in warehouses for days as exporters seek lift capacity," said Mr Fransisco. "The scarcity of that capacity makes it imperative to identify and consider possible alternatives to airfreight out of China."

"From [the US west coast] your [full container load] shipment is immediately moved out of the port for delivery to your door location via express rail or transloading at the first port of unlading and final mile delivery via team truck drivers."

Its express less-than-container-load (LCL) platinum service offers 10 days transit from Shanghai to Los Angeles.

"LCL Express Platinum utilises faster vessels, offers a single day of dwell time when entering the US and is cheaper than airfreight."

It also offers LCL Express, which offers 15 day transit times from China to the US west coast.

"We also offer express rail solutions for LCL. The RCX service from China to Europe has a fixed weekly departure and a fast 13-day transit time from the Xian Rail Station container yard to the container yard at the first entry terminal in Poland," Mr Fransisco said.

Meanwhile, DSV Panalpina has been promoting its road services to Europe as an alternative to air, sea and rail.

"Our road transport service from eastern China to western Europe has gained in popularity while the Covid-19 crisis has spread throughout the continents as it is a viable alternative to both air, sea and rail," said Tine Jorgensen, manager Rail & Gateway.

DSV Panalpina said that airfreight transit time for airfreight from Shanghai to an airport in western Europe is now around eight days and last month it was up to 14 days.

"With the still unusually high prices for airfreight due to capacity constraints, road transport from China to western Europe in just two and a half weeks is an attractive alternative," DSV Panalpina said.

The company said its truck service has a transit time of around 15-17 days, travelling a distance of 8,500km from Shanghai to Hamburg, reports London's Air Cargo News.

China's checks on PPE exports push up air cargo rates, capacity shortage worsens

THE Chinese Central Government's crackdown on poor quality medical exports has driven up air cargo costs and worsened congestion in South China.

Following widespread complaints of defective personal protective equipment (PPE), including face masks and coronavirus test kits, Beijing has tightened quality controls and stepped up customs inspections.

New regulations include a decision by China's Ministry of Commerce to boost the export quality supervision of "non-medical" masks, including a blacklist of suppliers which failed to gain export certification, reported UK's The Loadstar.

"In Shanghai, customs brokers have raised rates for export clearance by up to six times, due to extra paperwork and processing time," according to Norman Global Logistics (NGL).

The company said: "So far this is impacting the Hong Kong, Guangzhou and Shenzhen regions, but we expect it to happen in the rest of the country, as at least 90 per cent of all medical cargo will require customs inspection."

NGL confirmed claims that the new export restrictions were preventing PPE manufactured in the mainland from transshipment in Hong Kong, and "more or less forcing" the cargo through mainland airports.

While many governments have enacted "air bridges" to cater for supplies for their healthcare systems, space is still scarce and rates are at a premium due to the absence of bellyhold capacity, said Scan Global Logistics (SGL).

"We now have air freight terminals in Shanghai, Xiamen and Guangzhou on red alert, while Shenzhen changed to yellow, as terminals in these cities are overheated with massive amounts of cargo, particularly PPE," the forwarder added.

Similarly, Flexport describes China's air cargo market as "very hot", due to lack of capacity in the air, but also on the ground in warehousing space and ground handlers.

"This leads to delays and longer transit times," said Flexport's senior director of airfreight EMEA David Wystrach.

"On top of increasing rates, we're seeing another level of complexity in supply chains, with an increase in demand for South China uplift and more volumes flying out of Hong Kong."

The more-stringent PPE export controls are impacting ocean freight, too. According to Global Logistics Solutions India co-founder Naveen Prakash, thousands of containers packed with face masks have been detained in China because the goods failed to meet quality standards.

"About 1,600 manufacturers are blacklisted, due to quality checks and bad paperwork," he explained, adding that buyers need to carefully check whether Chinese manufacturers meet the strict new criteria.

"It's our responsibility to highlight this as many importers are first-time buyers of masks," he said.

Furthermore, shippers could look to less-than-container load (LCL) ocean freight to bypass the air cargo congestion, Mr Prakash suggested. "Our China to India LCL services are 100 per cent operational and will help avoid any cost escalations."

Global air freight drops 19c in March, but passenger jet cargo works well

THE Association of Asia Pacific Airlines (AAPA) has revealed that global demand for air cargo fell 19 per cent in March compared with the same month last year. However, demand is holding up "relatively well, despite economic disruption in many economies following measures aimed at slowing the spread of Covid-19," it said.

A number of Asian airlines have been operating additional air cargo services using passenger aircraft, adapted to carry cargo both in the bellyhold and in the cabin, in the absence of passengers.

Numerous airlines have also increased their number of freighter services to help compensate for the loss of bellyhold capacity caused by drastic cutbacks to passenger services, reported London's Air Cargo News.FAXTEXT = Essential cargo being shipped by air throughout the coronavirus pandemic includes significant volumes of pharmaceuticals, medical protective equipment and foods.

"We recognise and applaud the efforts being made by many governments to offer financial assistance and support to the aviation industry as well as the wider travel and tourism sector," said AAPA director general Subhas Menon.

"The Asia Pacific aviation community is strongly committed to continuing to work closely with governments, public health authorities, and other international bodies to both respond to current challenges, and at the same time begin to make plans for recovery," he said.

"Aviation has always been a key driver of economic and social development, nowhere more so than in the Asia Pacific region, and will play an important role in the overall recovery effort," Mr Menon said.

Hong Kong air cargo sector plead for state aid to avert disaster

HONG KONG's cargo sector has warned of looming bankruptcies, particularly in air freight, unless financial assistance comes from the government.

In a letter to the transport ministry, nine logistics groups call for financial relief to survive the havoc in cargo markets due to the coronavirus pandemic.

"Up to 95 per cent of shipments are cancelled, put on hold or disrupted,?said Alice Lui, director general of the Hong Kong Association of Freight Forwarding and Logistics (HAFFA).

"Logistics operators are facing unprecedented threats, tremendous risks from default payment and liquidity difficulties.

"Without timely relief measures of government on rental, employees' salary and fuel, or rental relief from the landlords, it is estimated that a substantial number of SMEs and micro companies in the industry will close down or go bankrupt, forcing hundreds of thousands of workers out of a job.?

The logistics industry represents 20 per cent of Hong Kong's GDP and employs over 700,000 people, aviation alone represents 10 per cent of GDP and 330,000 jobs.

Over the first two months of this year, Hong Kong International Airport suffered a 9.8 per cent year-on-year drop in cargo throughput, to 611,000 tonnes.

Hong Kong Air Cargo Terminal Ltd (HACTL) chief executive Wilson Kwong said it was vital to safeguard the airport's skilled labour pool in the event of a recovery, which would otherwise make it difficult to get back to previous volumes.

Airport Authority Hong Kong (AA) has provided a relief package, worth up to HK$2 billion (US$258 million), to airlines and aviation support services, but although discussions are underway, no specific support has been earmarked for logistics yet, according to HAFFA chairman Brian Wu.

"We anticipate a very tough year ahead,?he told London's Loadstar. "Retailers are closing in the US and Europe, and most urgent air shipments are medical products and equipment. Many shippers have had their purchase orders cut or delayed dramatically.?

With airlines forced to cancel the vast majority of passenger flights, Cathay Pacific Cargo and others began using passenger jets for freight-only flights. But Mr Wu said cargo capacity was still down significantly, leading to spikes in freight rates.

Intra-Asia routes have been particular impacted, due to the reliance on previous belly capacity, and there are reports of rates between Hong Kong and Singapore increasing six-fold, to HK$25 per kilogramme.

Meanwhile, forwarders and shippers were given some respite by Hong Kong Airlines' decision to shelve a planned security charge hike last month, said Mr Wu.

"Security charges have been a long-standing issue for our members and have a very negative impact on Hong Kong's competitiveness. The increase would have had a detrimental impact on both our members and overall trade.?

The new ICAO cargo security screening rule started in January, with 25 per cent screening of export cargo, however, and the regulation will continue to be phased-in before full implementation by July 2021.

"It will definitely affect the competitiveness of Hong Kong Airport, in terms of costs and efficiency,?said Mr Wu.

Intra-Asia airfreight rates surge; China to Europe/US prices are rising

THE TAC Index shows that airfreight rates on trade routes between China and Singapore, and from China to Korea have jumped over the past few weeks, with prices from Singapore to China hitting SGD4.50 (US$3.27) per kilogramme last week, while in the opposite direction they stood at CNY16 per kg ($2.36).

From China to South Korea rates are above CNY10.5 per kg, up from CNY8 per kg last year.

South Korea to China peaked in week five at above KRW2,600 ($2.34) per kg, before easing off in the following weeks.

Prices on these routes began to surge in week six and week seven of the year.

Meanwhile, prices from China to Europe and China to the US have only recently started to show signs of improvement.

This has led to speculation that the intra-Asian spike in prices was down to semi-conductor companies boosting production ahead of the re-opening of factories in China following the prolonged Lunar New Year holiday due to the coronavirus, reported London's Air Cargo News.

Meanwhile, Peter Stallion from derivatives broker Freight Investor Services said that prices on services from China to Europe and the US were beginning to rise in line with expectations.

"Finally, and what the entire market at this point was expecting, prices rise as freight volumes hit air transport," he said. "Capacity still remains low, passenger traffic has yet to resume, however full freighter schedules have restarted with a number of notable airlines (Lufthansa, Qatar, Emirates, Cargolux to name a few).

"Although supply disruption is providing healthy load factor ex Asia for freighter operators, the core business airlines still remains under significant pressure. Cathay has parked half of its entire fleet, and slashes three quarters of its scheduled flights, Air Cargo Global goes into restructuring, and CargoLogicAir tragically [suspends] operations."

Forwarders also backed these findings. Agility said: "Intra-Asia trade lanes are now tremendously impacted and congested while intra-Asian wide-body belly capacity has reduced heavily and drives rapid surge for AF [air freight] rates on daily base.

"China outbound freight capacity is getting congested while production is gradually resuming to the market. Volumes are ramping up since mid of February and expecting a heavy quarter-end in Q1 2020."