Shangai Aims for zero-COVID Target by May 20

Shanghai’s vice-mayor Wu Qing said at a press conference on May 13 that the city was aiming to achieve zero-COVID at the community level by May 20.

Peter Sand, chief analyst at Xeneta, indicated earlier that port operations would take anywhere from four to eight weeks to resume normal functions, while gateway terminals in the US and Europe have repeatedly been warned by container analysts to brace for a whiplash effect from Shanghai’s reopening.

At least 32 cities across China are now under full or partial lockdown, impacting up to 220m people, according to calculations from international news channel CNN. 

Shanghai is also looking to expand the number of businesses allowed to operate. Wu said the entire city would resume normal production and life "as soon as possible".


Asian Shippers Make up for Trans-Pacific Export Gap

A drop of exports from China has Asian shippers stepping in to fill the gap, according to data showing a recent surge of Trans-Pacific containerized imports into the U.S. 

The share of U.S. imports from China compared to all Asia imports contracted approximately 6 percentage points to 58.7% between February and April. Vietnam, the second-largest export market to the U.S., tracked a one percentage point increase to 13.3%, preliminary April data by PIERS showed. The share of U.S. imports from South Korea, Thailand, Taiwan, Japan, Indonesia, and Malaysia also increased within the same period.

U.S. imports from Asia climbed 9.5% between March and April, to 1.75 million TEU while volumes rose 2.9% between February and March. Containerized imports from Vietnam rose 9.8% in April from March to 232,705 TEU. This was in addition to a 16.3% increase recorded the previous month. Container volumes from China to the U.S. rose 8.5% to 1 million TEU in April from March but fell -5.6% from February to March, the PIERS data showed.

Trans-Pacific container volume growth from other countries including Thailand, Malaysia, Indonesia, and South Korea to the U.S. all outpaced growth volumes from China between February and April. The volume slowdown from China aligns with pandemic related lockdowns at Shenzhen and Shanghai, which have disrupted manufacturing, trucking, and logistics operations.

In Vietnam, volumes have risen in April from March at Tan Cang Cat Lai Terminal, which mainly handles intra-Asia and regional cargoes. According to a spokesman from Saigon NewPort, manufacturers switched production to Vietnam from China due to pandemic disruptions. The spokeman added that total volumes at Vung Tau’s deep-sea Cai Mep port have dropped due to blank sailings carriers have imposed because of the lack of cargo and lockdowns in China. 

In South Korea, Busan registered a 7% drop in container volumes since Shanghai’s lock down. Kim Gwang-Min, deputy manager of the Busan Port Authority’s international department, said South Korean exports to China decreased 3.4% in April from a year earlier. 

Source: Journal of Commerce

Airfreight Rates Could Keep Climbing Despite Lowered Demand

In the latest Baltic Exchange market update, Bruce Chan, director and senior analyst at investment bank Stifel said the current easing of airfreight rates may only be temporary and warned rates could climb when lockdown restrictions in China are lifted.

Chan noted that the conflict in Ukraine and consequent removal of air capacity from the market, did not result in a surge. He said, “I posited that upward pressure there was being offset, in large part, by a production vacuum in China as a result of widespread Covid-related lockdowns.” The percentage of population under lockdown in China at present is estimated to be larger than the entire population of the U.S. 

He said airfreight rates could spike again even from currently elevated levels. “Logistics networks remain very congested and there is a real possibility that any temporary pull back in bottlenecks and rates are ‘head fakes’ and volatility will continue to be an issue until the core problems are resolved,” Chan said.

Peter Stallion, head of air and containers, at derivatives broker Freight Investor Services, agreed that many had expected prices to have weakened in April. “While we may have expected a drop off in rates from the first quarter of this year, the removal of Russian-owned airfreight capacity has artificially levered up the constraints for airfreight shippers,” he said.

Stallion added that higher fuel prices are also likely to impact rates. “This will feed through into fuel surcharges and forms a component of general inflation that bleeds through into the cost of running airfreight operations,” Stallion said. 

Source: Air Cargo News

Carriers Announce Blank Sailings out of Asia

According to data provider project44, 33% of scheduled sailings from Asia between weeks 17-23 will be blanked by THE Alliance. The Ocean Alliance will cancel 37% of scheduled sailings and the 2M alliance of Maersk and MSC will cancel 39% of its voyages. The additional blank sailings account for more than a third of scheduled sailings out of Asia through early June.

Container data platform Xeneta said the Far East to U.S. West Coast corridor has tracked the most blanked sailings, both in absolute volume and as a share of offered capacity over the past five weeks. Between 4 April and 8 May, 63 sailings were blanked on this tradelane, removing a total of 517,300 TEU, 25% of the initial capacity offering. 

One digital freight forwarder suggested that carriers were attempting to mitigate falling spot rates through the use of blank sailings. Xeneta said in a blog that the Far East to U.S. West Coast trade had the largest decline in demand in Q1, falling -3.5% y/y and noted the large share of sailings blanked by carriers could the reason spot rates did not decrease.


No Sign of Freight Downturn, U.S. Manufacturing Activity Strong

Five of the six biggest manufacturing industries in the U.S. registered moderate-to-strong growth in April. The Purchasing Managers Index (PMI) recorded an April reading of 55.4%, confirming the economy has expanded for 23-months in succession, but dipped -1.7% compared to the previous month.

“Manufacturing performed well for the 23rd straight month, with demand registering slower month-over-month growth (likely due to extended lead times and decades-high material price increases) and consumption softening (due to labor force constraints),” says Timothy R. Fiore, Chair of the Institute for Supply Management. 

According to IHS Markit PIERS, April import container volumes were up by 11% m/m and 8% y/y. Despite the ongoing port delays in China, higher import volumes are expected in the coming months as the backload on the Trans-Pacific trade lane starts moving again. 

Based on the latest import data from PIERS, April import volumes in Los Angeles and Long Beach increased by 1% and 8% m/m, respectively. New York and Savannah increased by 5% and 32% m/m respectively. The import volume shift away from the congested West Coast continues. April import volumes on the East Coast were up 14% y/y while the West Coast was down 1%. 

West Coast truckload capacity continues to loosen despite increasing import volumes, and on the high-volume lane between Los Angeles and Chicago, spot rates hit a new 12-month low last week, dropping by 51%. Rates East to Phoenix are also down. Los Angeles to Phoenix rates have also declined.

Dry van load post volumes have recorded three weeks of successive gains. Compared to the previous year, load post volumes are down 35%. Carrier equipment posts were flat last week, the dry van load-to-truck ratio has increased for the fourth week in a row from 3.78 to 4.01.

Source: DAT Freight & Analytics 

Spot Rates Stable in Near Term: WCI Index

Drewry’s World Container Index (WCI), a composite of container freight rates on eight major routes to and from the U.S., Europe and Asia, continued its downward slide, decreasing -0.9% week-over-week. The index remains 33.7% higher than a year ago.

The average composite index of the World Container Index (WCI), assessed by Drewry for year-to-date, is US$8,768 per 40ft container, which is US$5,439 higher than the five-year average of US$3,329 per 40ft container. 

According to Drewry’s assessment across eight major East-West trades, week-over-week declines were recorded between Shanghai and Rotterdam in both directions, Shanghai to Genoa dropped by -1%, Shanghai to Los Angeles and Los Angeles to Shanghai gained 1%. Rates between Rotterdam and New York in both directions remained stable at the previous weeks’ level.

Source: Drewry

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