+++ ALWAYS UP TO DATE WEEK 22 +++

Regular information on current developments

What is currently shaping the market for air freight? What for sea freight? What's happening on the rail link with China? You can read interesting facts here.

GENERAL INFORMATION  

Global supply chains continue to be impacted by a variety of factors. The war in Ukraine is having profound economic consequences. At the same time, we are experiencing the effects of the lockdowns in China - primarily in Shanghai. A factor of uncertainty for the entire industry.

The effects are also being felt at SENATOR. These are making themselves felt in cost surcharges. For detailed and product-related questions, please contact your personal SENATOR contact person directly.

AIR FREIGHT 

In general, the market situation has changed little. Due to the public holidays in a large part of Europe, the situation regarding demand and capacity bottlenecks has eased somewhat. This is also evident on our "SAB" routes. At present, sufficient capacities are available. For June and July additional rotations on the "SAB" SENATOR Atlantic Bridge to Greenville-Spartanburg (GSP) have been organized again. This provides for even more options.

Fuel costs are currently showing a slight downward trend, at least compared to recent weeks. The extent to which this trend will continue remains to be seen.

The announced easing of the Shanghai region could push freight rates up. According to the TAC index, air freight rates from China to Europe have been stagnant since May 16. However, rates for shipments to the U.S. rose 6% last week. Current forecasts point to an overall increase in rates in the near term (source: theloadstar.com).

OCEAN FREIGHT 

China's lockdowns and their consequences continue to affect all routes. Media reports indicate a slow-acting relaxation in Shanghai. For the transport industry, this means an ongoing resumption of regular operations. However, de facto regulations remain strict: workers and managers in the region must apply for permits and a 7-day quarantine requirement still applies. As a result, it is likely to be several weeks before normality returns. The regional government in Shanghai has partially ceded decision-making power to the individual districts. This makes it difficult to plan.

The resumption of production in Shanghai will gradually release piled-up export containers. This is likely to drive up spot rates for Asia. Nevertheless, consumer demand in Europe and the USA has fallen due to the crisis. It remains unclear how long rate increases could last (source: theloadstar.com).

Many sailings are delayed for exports from Europe to Asia. Schedule reliability continues to suffer from delays in China. To avoid congestion at Container Terminal Altenwerder (CTA) in the Port of Hamburg, shipowner alliance THEA has responded by re-routing import cargo to Wilhelmshaven. This means that the cargo of arriving ships is partially unloaded in Wilhelmshaven. Export containers are still loaded at the Hamburg CTA. This measure should help to reduce the backlog. For imports from Asia to Europe, little has changed. Many shipowners still charge a booking cancellation fee (BCF).

For exports from Europe to North America and Mexico, the situation also remains similar to last time. Means: full ships, high rates, partly lack of equipment. Congestion at U.S. West Coast ports continues to drive more and more import cargo to East Coast ports and the Gulf of Mexico. Delays are also being reported from Europe to Mexico. The situation requires forward planning for both FCL and LCL.

RAIL FREIGHT

As a result of the war situation in Ukraine, our SARB (SENATOR Asia Rail Bridge) service has been temporarily suspended. No bookings are being accepted at this time. We ask for your understanding and will keep you informed of further developments regarding rail freight.

Part of this development includes the increase in rail traffic on the Middle Corridor. This route connects China with Europe via Kazakhstan, the Caspian Sea, Azerbaijan and Georgia. It has become a preferred alternative to the actual main route via Russia and Belarus due to the war in Ukraine. Container traffic on the Middle Corridor increased by 28% in the first quarter of 2022 compared to the same period last year. With this growth also comes a challenge. The capacity of the corridor needs to be increased. A first step has been taken with the creation of additional feeder services across the Caspian Sea. These have been increased from two to three. Six feeder services are expected to be available by September (source: railfreight.com).

CURRENT SITUATION WORLDWIDE

BRAZIL

For Air Freight, the situation remains difficult to calculate. In particular, delays are occurring to and from China. Many main airports such as Shanghai (PVG) are far from operating at full capacity again. One option is to shift cargo to nearby airports in China. SENATOR helps to find alternatives. For export, the two airports Guarulhos (GRU) and Viracopos (VCP) in São Paulo are still overloaded. Deliveries must be made within 48 hours before announced departure time (ETD). 

For Ocean Freight, imports from Europe show fluctuating rates. Traffic to and from China remains complicated. The Shanghai backlog has noticeable consequences on routes to and from South America. For exports, ships are full regardless of destination - especially for LATAM. This is driving rates up.

CHINA

China's industrial profits plummeted in April. The country's zero-covid strategy and the Shanghai lockdown were a "big shock to manufacturing," according to reports. The decline was the steepest since the Corona pandemic began in the spring of 2020. Factory activities were disrupted and high raw material prices squeezed margins. The decline was 8.5% from the same month last year. Regions in the east and northeast of the country particularly affected by the corona virus suffered losses of up to 16.7% in the first four months of 2022 (source: scmp.com).

Shanghai authorities have announced a lifting of heavy covid restrictions from June 1. Plans to support the economy have also been released. Industries hit particularly hard by the lockdown are to receive financial aid. The lockdown of the economic hub has now been in effect for about two months (source: bbc.com).

The Hong Kong Airport Authority (AAHK) reports a 2.8% year-on-year decline in cargo throughput for April. The cause is reduced capacity. In particular, total cargo traffic to and from Europe recorded sharp declines. Recently, the quarantine regulations for crew members were relaxed by the Hong Kong government. This should boost airfreight again in the foreseeable future (source: aircargonews.net).

MEXICO

For air cargo, the situation remains complicated for export and import to and from China. Good alternatives to and from Mexico are Hong Kong, Thailand, Singapore and Vietnam. From Europe, there is an excellent option with the "SAB" from Frankfurt (FRA) to Mexico City (MEX).

For ocean freight, the lockdowns in China are also causing delays and equipment shortages in Mexico. Planning ahead remains paramount. 

SOUTH AFRICA

The Corona situation has eased a bit recently. Experts believe the peak of the fifth wave has passed. The number of new infections is declining. However, due to the rather low vaccination rate, South Africa will have to remain cautious for a long time.

Fuel prices continue to trend upward. Observers expect an increase of around 18%. Rising crude oil prices on the world market and the weaker ZAR are causing this price spiral. In general, the country's economy is struggling. The interest rate was raised by 0.5% last week. The pressure on consumers is increasing. South African inflation will exceed 6% in June and is expected to continue rising thereafter.

The country's container ports fear noticeable congestion. The background to this is the prospect of openings at Shanghai and other important Chinese ports. This is likely to lead to congestion and enormous pressure on rail and road traffic as well as on South Africa's available storage space.

USA 

The Covid-related closure of Shanghai has led to the cancellation of one-third of exports from Asia to Europe and toward the U.S. on the trans-Pacific route. This is also having an impact on U.S. imports. In addition, there has been a shift of import cargo from congested U.S. West Coast ports - particularly Los Angeles and Long Beach - to U.S. East Coast ports. New York, for example, reported a 22.4% increase in import volume to more than 439,000 TEUs in April 2022. According to data from service provider Blue Alpha Capital, other East Coast ports are also benefiting from bypassing busy Pacific ports (source: theloadstar.com).

The U.S. Federal Maritime Commission (FMC) has received unprecedented support from the U.S. Congress and the White House. The FMC wants to hold the container shipping industry accountable to its customers. The impetus for this is the ever-increasing price demands of many shipping companies. According to FMC Chairman Daniel Maffei, the Commission has so far been too optimistic with regard to self-regulation by shipping companies. Now is the time for action, he said. As recently as April, Hapag-Lloyd was ordered by the FMC to pay $822,000. The ruling was based on excessive charges that the Hamburg-based shipping line had imposed on a customer in the USA for the allegedly late return of eleven containers. This violated US law (source: freightwaves.com).

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