InfoMail March 2020 | SENATOR INTERNATIONAL

China: Coronavirus effects, Sea freight: Imbalance, Sea freight, Air freight: Price evolution

Dear Sir or Madam,

China: effects of coronavirus

This is how today’s Handelsblatt Morning Briefing begins: “… the global economy has Donald trump. His tariff aggression and Chinese responses. Fighters in Syria, Vladimir Poutine and Recep Tayyip Erdoğan have also been unable to hurt global stock markets. The interest rate was so low and the investment crisis so great that there seemed to be no way to avoid stocks. But the coronavirus crippling entire markets and Saudi Arabia oil sheikhs quarrels with the Kremlin over production quantities and prices was too much for the cathedrals of capitalism. Something must be done urgently. “

Airlines and shipping companies hit twice as hard. Sharing prices in the doldrums, too few reservations on the main roads and an increased imbalance in transport operations. Things will remain difficult for the next few weeks. Solutions exist. Especially more expensive, slower and worse than what we are used to for global supply chains. the train continues to be a good option for China. It operates west of China with slightly longer advanced booking times. The capacity increases again. The eastbound train from Europe is operating normally.

Sea freight: imbalance

Empty containers are still piling up in China. The missing imports from the Middle Empire can be felt drastically in the rest of the world. Equipment is lacking for export. Improvement is on the horizon. The port of Yangshan in Shanghai reports that it has again reached 95% TEU (20 units) of use of the pre-COVID-19 level. Just on 04.03.20, 19 container ships left the port for North America and Europe. Including 6 vessels> 18,000 TEU. Similar developments can be seen in the other main ports of China.

Sea freight, air freight: price evolution

What happens to ocean freight rates? They are stable for imports from Asia. For the moment. The announced rate hike in mid-March should not represent much. This may change soon as demand increases, but could be more than offset by lower fuel costs. Export rate from Europe have increased dramatically. Each shipowner approaches the situation differently: equipment imbalance costs, general price increase, high season overload, emergency space overhead … huge losses must be absorbed in recent weeks. Otherwise, some will not be able to survive.

Two ships may originate in China with empty containers as so-called additional loaders. This has not yet been confirmed; it would be an approach to compensation. But the blank departures from Europe in March reduced capacity. 46% of the fleet is missing in trade with Asia. Ships to the Far East are almost full for March.

What happens to air freight rates? If anything, the opposite scenario. Export rates remain high. There are signs of improvement. Passenger flights remain unchanged. But more cargo ships are flying. Additional note: The ban on the export of medical protective equipment may result in more customs inspections, for example, if a respirator or a pair of work gloves are packed with a machine.

Saudi Arabia interrupts all passenger flights to and from the United Arab Emirates, Kuwait, Bahrain, Lebanon, Egypt, Syria, Italy and Korea. Lufthansa reduces passenger flights by 50%. Korean Air no longer flies from Germany to Korea on passenger aircraft. News about the airlines breaks every day. It is therefore difficult to plan long-term capacities for the next summer flight schedule.

And for imports? The demand for air cargo drives prices up on the spot market. Production in China resumes. And everything that has long been urgent steals. Now, ground handling the officers released a lot of staff, mainly temporary workers. This translates into delays in the timely processing of increasing cargo arrivals from China.

We will be happy to keep you informed.
Your SENATOR INTERNATIONAL team