As we head towards the last quarter of 2021, several pressure points and bottlenecks seen through the year show no sign of abating. As a direct consequence, supply chains around the world continue facing a challenging market environment.
Following the extended closures seen in the Yantian ports due to Covid outbreaks during June, a similar issue has been disrupting logistic activities at Ningbo recently, which has seen one of its main terminals closed – utilised mainly by the Ocean Alliance consortium of Cosco and CMA/CGM. This has led to several vessels omitting Ningbo as a port of call and some shipments being diverted to Shanghai, adding to the already existing congestion in that port. It is expected that Ningbo will resume full operations during the first week of September; however, the backlog will take some weeks to clear out.
Additionally, due to increase of Covid cases in China, the authorities imposed strict Covid inspection on all anchored vessels. These new measurements are also expected to result in further vessel delays ranging from 14-21 days.
Port congestion also continues to be a major problem in the US across almost all ports, especially on the West Coast, as does a lack of capacity on rail and full inland terminals, which is prompting many carriers to suspend inland movement of containers and accepting bookings to port of entry only.
The various bottlenecks around the world have continued to worsen the container availability problem, tying up equipment for many more days and weeks than would normally be the case, before it is available and empty for the next voyage. Hapag Lloyd recently estimated that due to this they need 11% more containers to carry the same amount of cargo, and this is certainly reflected across the industry.
These continued pressures have led to freight rate levels on all major trade lanes to remain at all-time highs and showing no sign of reducing in the short to medium term, leading to the carriers reporting remarkable results so far this year. Despite reporting favourable financial figures, performance from shipping lines is at an all-time low, with less than 40% of advertised sailings running as per their scheduled dates. Delays are running as high as 14 days on some services with an average of around 7 days on the main routes. There are frequent blank sailings and port omissions as carriers juggle their schedules around the different and changing problems.
On the other hand, China Eastern Airlines (MU) has announced that PVG-MAD/MXP/CDG PAX/CAO flights will be back to operation within this week. Freighter flights are slowly resuming at Shanghai Pudong Airport (PVG), but 50% capacity is still being cancelled.
The outlook for the remainder of 2021 seems to be pretty much the same, there does not appear to be any slowdown in demand from major economies, as vaccination programmes continue and there are no major new capacity injections from carriers in the coming months. It is likely that the current conditions will continue at least up until Chinese New Year 2022 and it is strongly advised that shippers plan well ahead (at least 3-4 weeks in advance) to compensate for the extended transit times experienced across the ocean supply chain.