Mike Short, president of global forwarding at C.H. Robinson, discusses how recent and current air and ocean freight market conditions are affecting cargo owners’ shipping decisions
Global transportation – like many industries – has faced unparalleled disruptions over the past year. As 2021 is now underway, there are new and different challenges added to the mix.
Many of our global shipping customers were up against the clock with Chinese New Year (CNY) in mid-February, while also navigating potential changes from a new US administration. Of course, fast-changing consumer behaviors, port congestion, and continued uncertainty around the impact of COVID-19 continue to bring changes to the market as well.
The global logistics market is forecasted to grow over 17% in 2021. And only a couple of months into the year, that growth seems to be on track, due to heightened demand across major global trade lanes. In January, we saw volumes between China and the US increase by 30% compared to that time last year. And it is likely the demand will continue through Q1.
We historically see a small spike in demand before CNY, but this year looked different. Many companies were stockpiling and replenishing stock rooms in the wake of COVID-19 disruptions. And with a continued need for PPE and the dramatic uptick in ecommerce shopping, it’s no wonder there was – and continues to be – greater amounts of freight being moved.
Air freight challenges
Air passenger travel is still down and predicted to not recover until 2024. With that and continued demand, capacity for air cargo remains tight. Today, COVID-19 vaccine distribution has had minimal impact on capacity, but we’re closely monitoring the situation as it could and likely will change rapidly.
The majority of COVID-19 vaccines will not require intercontinental air lift; however when doses do need to be transported via air, many airlines are already prepared to reposition capacity. When this happens, expect heavy demand from both Europe and India. And if or when this capacity is pulled from today’s already tight air market, your global supply chain may need to pivot in response.
With new COVID-19 strains and outbreaks, many countries are now requiring pilots and airline crews to quarantine or limit overnight deliveries. These changes will likely add to the inconsistencies and put pressure on air freight costs.
Ocean congestion effects
Ocean freight customers are likely to see the most congestion and capacity constraints when shipping via ocean service in early 2021. Significant increase in demand and (container) equipment shortages in Asia have led to longer dwell times for vessels, which inevitably delays export shipments. In the United States, carriers continue to reduce the amount of exports in order to reposition empties back to Asia. Before CNY, ocean carriers announced they would only remove 2-4% of capacity from the market during the holiday due to the continued high demand and equipment shortages likely to continue through March. Historically, carriers remove a larger portion of capacity, average of 15-20%.
Global trade changes
While President Biden has indicated he does not plan to focus on trade and tariff changes immediately, he has already expressed his intention to approach trade differently than the previous administration. Additionally, shippers both in and out of the UK will need to stay up to date on changing regulations as Brexit continues to progress, and any change may directly impact many supply chains.
Despite the challenges, it is possible to mitigate delays due to congestion and equipment shortages. We’ve been able to help multiple customers avoid 10+ day delays by routing shipments through a different port or shifting freight across modes.
A disruption action plan is key to creating an agile, flexible, and well-rounded supply chain.