Transatlantic Air Freight Rates Soar as US Imposes Europe Travel Ban
March 12, 2020
air freight rates are expected to soar, possibly overnight, following the US
travel ban on mainland Europe, excluding – for now – the UK and Ireland.
Up to 80%
of air freight capacity on the transatlantic could be cut as airlines ground
passenger flights, with bellies normally taking the lion’s share of the
capacity on the route.
Canada, Virgin and Aer Lingus are all going to be very busy,” said one senior
air freight analyst. “There is a tremendous amount of trade between the two
continents, and the vast majority is in bellies. If that capacity plunges, you
can only imagine the reduction in trade on the Atlantic. There is going to be
tremendous pressure on capacity.”
European forwarder told The Loadstar: “This is going to be another case of ‘pay
to play’. Where prices are going to go is anyone’s guess.” Current dynamic load
factors on the transatlantic are 78% westbound, and 60% eastbound, according to
Clive Data Services. Even with a modest assumption of 60% of the capacity
removed, demand is easily going to outstrip supply.
are so few airlines with freighters left,” said the analyst. “The US majors
have none, it’s really only Lufthansa and AF-KLM, and they have cut their
freighter fleets. This is a big gift for IAG.”
said that any BSAs on non-cut capacity would be unlikely to be honored by the
airlines, and in any event, most contracts would only last until the end of the
market tends to work on spot rates anyway.”
throughout Europe are said to be in meetings to determine how to manage their
capacity, with more information expected this afternoon. Some are already
talking about using passenger aircraft just to move freight on the
transatlantic – and are looking to command a high price for it.
is also expected to be key, with mainland European carriers looking to fly
goods into Canada and Mexico on passenger aircraft and trucked over the borders
into the US. In Europe, forwarders are looking to truck freight into the UK for
Virgin and IAG flights into the US.
going to be redirected and trucked,” said one forwarder. “The multinational
forwarders will already be diverting it to the UK.”
However, belly capacity from the UK has already been cut. BA announced on 2 March it was cutting back transatlantic flights as passenger demand fell. Norwegian cancelled 22 long-haul flights between Europe and the US from 28 March to 5 May.
exporters warned of pending shortages of empty containers
Mongelluzzo, Senior Editor | Feb 18, 2020 5:30PM EST, JOC.com, March 2, 2020
are warning US exporters that with Chinese factories crippled for a third consecutive
week and carrier announcements of more than 80 blank sailings in February and
March, the shortage of empty containers beginning to surface in the US interior
will intensify in the coming weeks.
export spot rates to Asia are beginning to increase as space on vessels leaving
US ports tightens. “The imminent thing is the escalating number of blank
sailings. That is going to have an impact on the influx of equipment to the
US,” said Uffe Ostergaard, president of Hapag-Lloyd Americas.
downturn in imports can result in a shortage of containers that are available
to carry US exports. With fewer laden inbound containers unloading in
population centers such as Chicago, Minneapolis, or Columbus, Ohio, there will
be insufficient empty containers in those regions to meet the demand from
exporters for products such as scrap materials or agricultural commodities.
sailings could spawn container shortages
are beginning to notify customers that the growing number of blank sailings in
the trans-Pacific due to factory shutdowns in Asia for the week of Lunar New
Year in late January, followed by extended shutdowns due to the coronavirus
(COVID-19) in China, would disrupt the flow of import containers into the US.
carriers are notifying us about a shortage,” said Hayden Swofford, independent
administrator of the Pacific Northwest Asia Shippers Association, which
represents forest products exporters. The container shortages normally develop
first in the interior, but eventually work their way back to the West Coast, he
of soybeans and specialty agricultural products in the upper Midwest have begun
to experience problems getting all of the empty containers they need, said
Bruce Abbe, transportation strategy adviser to the Specialty Soya and Grains
blank sailings compounding other blank sailings,” Abbe said. Canceled sailings
and staff shortages at shipping lines and warehouses across Asia, especially in
China, are limiting the volume of Asian exports to the United States, he said.
Spot shortages of containers are surfacing near hubs such as Chicago and
Minneapolis. “There’s a lot of uncertainty now. Everybody will be looking to do
work-arounds the best we can,” Abbe said.
experiences after the Lunar New Year, exporters around Chicago, Minneapolis,
Detroit, and Cincinnati and Columbus in the Ohio Valley, will probably
encounter shortages of empty containers, which could be more extensive this
year because of the extended factory closures due to the coronavirus, Krause
of empty containers is also emerging in the agricultural-rich Central Valley of
California, said Peter Friedmann, executive director of the Agriculture
export shipments in the trans-Pacific have not been rolled due to a lack of
vessel space. Export shipments this season have been consistent, but Krause
said Seko is alerting its customers that exports could spike in March, which is
normally a peak month in the westbound trans-Pacific.
spot rates in westbound trans-Pacific increasing
are also notifying customers of general rate increases (GRIs) in the westbound
Pacific, which indicates they anticipate bookings will pick up.
carriers told JOC.com this week they not only anticipate that export rates will
go up, but also that they will begin limiting shippers to the volume agreed
upon in their minimum quantity commitment (MQC), with the exporters having to
sign new contracts if they intend to exceed their MQC.
East Coast has yet to feel the drop in imports because of longer transit times
from Asia. “As of this moment in terms of discharging and loading, it’s not a
factor, but it will become a factor as we get into March,” said Sam Ruda, the
seaport director at the Port Authority of New York and New Jersey.
“I am not seeing any structural equipment imbalances,” he added. “That may start looking a little different in the next few weeks as we see what the volumes look like, so we’re keeping a very close eye on it.”
301 Large Civil Aircraft (LCA) Trade Remedy – Modification March 5, 2020 and
March 18, 2020
CBP Modification, Section 301 duties for EU/EU Member States
has been in dispute with the European Union (EU) and certain EU member states
concerning the subsidies provided on large civil aircrafts that are
inconsistent under SCM Agreement and GATT 1994 obligations. CBP has posted the modification to the
additional Section 301 duties for EU and EU member states, on February 21,2020
please see 85 FR 10204. Please see the
below chart from Cargo System Messaging Service (CSMS)
CBP CSMS # 41840662
CSMS #41840662 – Section 301 Large Civil Aircraft (LCA) Trade Remedy – Modification March 5, 2020 and March 18, 2020
purpose of this memorandum is to provide notice of the United States Trade
Representative’s (USTR) modification determination to impose additional duties
on products of the European Union (EU) or certain member states. The effective date is dependent on the
section of Annex 1 and may be either on or after 12:01 a.m. eastern daylight
time March 5, 2020 or on or after 12:01 a.m. eastern daylight time March 18,
2020. The complete list of affected
products, countries of origin, Chapter 99 HTSUS numbers, and the associated
effective dates and tariff rates is attached to the end of this memo.
October 18, 2019, the USTR imposed additional duties on certain products of the
EU and certain EU member States in this Section 301 investigation to enforce
U.S. WTO rights in the Large Civil Aircraft (LCA) dispute published in the
Federal Register 84 FR 54245. On December 12, 2019, the USTR announced a review
of the Section 301 action and requested public comments.
February 21, 2020, based on this review, the USTR published a Modification to
the LCA dispute in 85 FR 10204 to revise the action being taken by increasing
the rate of additional duties on certain LCA, and by modifying the list of
other products of certain current and former EU member States subject to
additional 25 percent duties.
specified in the annexes to FR notice 85 FR 10204 , the USTR has determined to
increase the duties on certain LCA from 10 percent to 15 percent. The countries that are affected by the duty
increase for LCA are France or Germany.
has also changed the composition of the list of products subject to additional
duties of 25 percent. As of this time, the USTR has decided not to increase the
rate of additional duties above the additional 25 percent currently being
applied to non-aircraft products. The countries that are affected by the change
to the list of products are Austria, Belgium, Bulgaria, Croatia, Republic of
Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece,
Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands,
Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden or the United
Kingdom. The LCA Section 301 duties only
apply to products of the countries set forth in the Annex to FR notice 85 FR
has also determined that going forward, the action may be revised as
appropriate immediately upon any EU imposition of additional duties on U.S.
products in connection with the LCA dispute or with the EU’s WTO challenge to
the alleged subsidization of U.S. large civil aircraft.
modifications set out in the Annex 1, subparagraphs A and B are applicable with
respect to products that are entered for consumption, or withdrawn from
warehouse for consumption, on or after 12:01 a.m. eastern standard time on
March 5, 2020. The modifications in
additional import duties for products set out in Annex 1, subparagraph C, apply
to merchandise entered for consumption, or withdrawn from warehouse for
consumption, on or after 12:01 a.m. eastern daylight time March 18, 2020. A complete list of products subject to the
remedy and assessed duties are set out in FR notice 85 FR 10204.
product listed in the Annex 1, except any product that is eligible for
admission under ‘domestic status’ as defined in 19 CFR 146.43, which is subject
to the additional duty imposed by this determination, and is admitted into a
U.S. foreign trade zone on or after 12:01 a.m. eastern daylight time on March
5, 2020 or March 18, 2020 (only) may be admitted as ‘privileged foreign status’
as defined in 19 CFR 146.41. Such products will be subject upon entry for
consumption to any ad valorem rates of duty or quantitative limitations related
to the classification under the applicable HTSUS subheading.
When importers, brokers, and/or filers are submitting an entry summary in which
a heading or subheading in Chapter 99 is claimed on imported merchandise, refer
them to CSMS 39587858 (Entry Summary Order of Reporting for Multiple HTS when
98 or 99 HTS are Required).
ensure the FR notice 85 FR 10204 is passed to all Center Directors, Assistant
Center Directors, Port Directors, Assistant Port Directors (Trade), Import
Specialists, CBP Officers, and Entry Specialists. If field personnel have any questions
regarding the Section 301 remedy described in the United States Trade Representative
(USTR) Notices of Action, please contact email@example.com.
past week or so, the China government has reportedly lowered COVID-19 emergency
response levels in some provinces, allowing workforce back into production.
Return-to-work restrictions/requirements from the Chinese local authorities and
some office building management teams remain in place.
portion of our colleagues in China have returned to the offices, and the team
is strictly following precautionary measures. While some teammates are working
from home, we are operationally ready to manage business as normal:
Ningbo, Taiwan and Hong Kong: 100% of the teams are working in the office.
90% of the team is working in the office, with 10% working from home.
60% of the team is working in the office, with 40% working from home.
Fuzhou and Tianjin: 50% of the team is working in the office, with 50% working
40% of the team is working in the office, with 60% working from home.
continue to work with the relevant authorities to bring the full team safely
back into our offices.
in China: Cross-border trucking
between China and Hong Kong continues to run, but it is highly recommended that
bookings are made at least 2 days in advance to ensure driver
of inland trucking in mainland China remains limited, advanced bookings of at
least 2-3 days are required to secure trucking services.
Air and Ocean Freight:
Production and export volumes from China have increased as the workforce
returns, and demand for airfreight space, particularly to the rest of Asia, is
picking up. There are also indications that ocean freight shippers are looking
to switch modes in a bid to ‘catch up’ on schedules, further accelerating the
demand for airfreight.
not expecting a quick reinstatement of cancelled airfreight capacity on both
freighter and passenger flights outbound China, which we estimate to be well
above 30% of last year’s global capacity (50% to the US, 50% to Asia, 35% to
Europe), particularly passenger flights, as many countries maintain advisories
against travel to China. At this point, we anticipate that airlines will
initiate a resumption of capacity no earlier than the third week of March.
rates soared on the China-Asia routes as capacity pulled out of this market is
most significant, and demand for space has become ‘red-hot’. Air charters are
in high demand, but supply is soft as the availability of aircraft and crew
fallout from COVID-19 is strongly felt in the container shipping market.
According to Alphaliner, Q1 2020 volumes at ports in China and Hong Kong are
estimated to have reduced by more than 6 million TEUs due to the extended Lunar
New Year holiday and COVID-19 containment measures.
container equipment is sufficient in China, but the availability of
Non-Operating Reefers (NOR) is diminishing.
We will continue to update you as we receive more information. If you have questions, please contact your BOC Representative.
Work Arrangements – Our teams are working as much as possible,
guided by advice from local authorities to protect the well-being of our staff
while maintaining maximum coverage and minimal operational disruption as
In China, our team is operating either from our offices or their
homes, and we have implemented tiered working hours.
In Hong Kong, a portion of our staff is working from home while
the rest is working from the office.
Factories in China are gradually resuming operations at a
varying pace, a slow ramp-up in production and exports are still to be
Drayage in China: Various provinces and cities have imposed
restrictions on the entry of non-residents and vehicles registered outside
their localities. This has given rise to a shortage and/or rate increase of
inland trucking in the mainland China as truck drivers have not been able to
return from their hometowns to their work regions post-holiday. Advanced
bookings of at least 2 days is required to secure trucking services.
Air Freight: A large number of passenger and freighter flights
to and from China have been cancelled, severely impacting capacity. Though
freighter flights have gradually been reinstated from last week, with demand
far outstripping supply, airfreight rates will likely be much higher than
Ocean Freight: All Chinese ports except Wuhan are currently
operational. However, many container yards have yet to re-open, potentially
causing equipment shortages.
Global Port Developments
We will continue to monitor the situation closely and provide updates as we have them. Please contact your BOC Representative, if you have any questions.
Coronavirus delaying normal post-CNY trans-Pac flow to March
Bill Mongelluzzo, Senior Editor | Feb 10, 2020 2:57PM EST
experts predicted Monday that delays in resuming China’s factory production and
inland transportation supply chains due to the deadly coronavirus will push the
return of normal post-Lunar New Year Trans-Pacific cargo flows to late February
or early March.
carriers over the weekend announced an additional 21 blanked sailings, which
means that beneficial cargo owners (BCOs) now face at least 82 blankings
through February and into March, with additional canceled sailings possible.
China’s government initially extended the Lunar New Year factory shutdowns
until Feb. 3 for much of China and Feb. 10 for the Wuhan-Hubei province region
in a bid to stem the spread of the virus, sources indicated those deadlines
what I’ve been told, most of the factories may only resume normal working
around Feb. 17,” Paul Tsui Hon-yan, managing director of Hong Kong-based
logistics company Janel Group, told JOC.com.
before factories resume production, they must submit a plan to authorities
detailing precautions they have implemented to prevent the virus from
spreading. “That means the actual date of resumption of operation could be
delayed by a further two or three days,” he said.
closely intertwined warehouse, trucking, and factory logistics chain is
struggling with a shortage of workers, which is delaying the resumption of
operations, let alone full production, said Jon Monroe, who represents
non-vessel-operating common carriers (NVOs) in the United States and China.
can’t get enough truck drivers,” he said. “There are skeleton crews at the
factories. Warehouses are closed.”
years, many workers in the coastal areas who went to their homes throughout
China for the Lunar New Year factory shutdowns returned a few days late. This
year, the situation is compounded by a hesitancy among workers to travel on
crowded trains amid unceasing reports about the virus and its spread, Monroe
Carriers announce 82 blank sailings
merchandise begins rolling off the production lines, BCOs will face an
unprecedented number of blank sailings from Asia to North America. In this
week’s Sunday Spotlight, Alan Murphy, CEO of Sea-Intelligence Maritime
Consulting, said carriers have announced 82 canceled sailings into March thus
increasing announcements in the past 24 hours of factories extending closure
periods further, it seems likely that the number of blank sailings might also
escalate in the coming week,” Murphy wrote.
services from Asia to the West Coast will be the hardest hit by the blankings.
“There will be a staggering 62 blank sailings on the Asia-North America West
Coast trade lane, 19 of which have been in relation to the coronavirus
outbreak,” he said. Carriers have announced 20 blank sailings to the East
Coast, 18 of which are due to the Lunar New Year factory shutdowns, and two to
the virus, he said.
Port Tracker, which is published monthly by the National Retail Federation and
Hackett Associates, estimated that containerized imports at US ports in January
declined 3.8 percent from January 2019, and will fall 12.9 percent in February
and 9.5 percent in March year over year. Global Port Tracker projected that
year-over-year increases in imports will resume in April, but the first half of
2020 will still be down 0.4 percent from the first six months of 2019.
attempting to deliver transportation solutions and work-arounds due to vessel
delays, blank sailings, and port issues within Asia, Swire Shipping said in an
advisory that 14-day quarantine periods for vessels that call China must be
taken into consideration when projecting vessel arrivals in receiving
countries. “These restrictions may lead to delays caused by changed rotations
or longer transit times,” Swire said.
experts emphasized that conditions in China, the rest of Asia, and in the
trans-Pacific shipping arena remain fluid, especially for any services touching
China, so BCOs should maintain close contact with their transportation
consultants for regular updates.
JOC correspondent Keith Wallis contributed to this report.
For a word
to define the current situation, I would use fluid. Typically after CNY, there
are some planned canceled sailings due to a lack of volume since the factories
close for the normal holiday period. Now with the extended closures due to the
Coronavirus, the carriers, both ocean and air, suddenly are canceling
additional services that were not originally scheduled to be aborted. Below you
can see the JOC article which details some new unplanned blank ocean sailings
announced. In regards to air capacity and services, 1/3 of all air freight
cargo moves in passenger planes. With almost all passenger services to and from
China for the next several weeks suspended, we believe there will be a lack of
air capacity and rising air prices until at least the end of March. As some of
the factories begin to open on Monday, we have also identified that inland pick
up at the Chinese factory is going to be a major issue. Many of the truck
drivers who come from outside of the port areas, will not have returned to work
due to Coronavirus human mobility restrictions. The human mobility restrictions
are overseen by the central China government but the local Chinese
municipalities have been granted additional authority to restrict human travel
within their own region. We will keep you informed as we get the details but I
would plan for potential delays due to sudden changes in service for weeks to
come. Transparency and updated information will be the key role we will play
and help you pass all the information on to your customers. We will get through
this terrible affliction together.
have any questions or would like to discuss this further please feel free to
contact your local BOC Representative.
| Feb 05, 2020 5:40PM EST | JOC – MARITIME NEWS – CONTAINER LINES
Wednesday said it was cancelling six Asian service sailings to North and South
America due to the extended Lunar New Year holiday triggered by the coronavirus
outbreak, and warned that although Chinese port container operations continue,
refrigerated plug scarcity is slowing reefer shipments. More carriers operating
on the trans-Pacific are expected to follow Maersk’s lead.
message to customers from Maersk comes after Alphaliner warned that China’s
response to the coronavirus and carrier reaction to the extended Chinese New
Year holidays will cut the country’s first quarter container volume by more
than 6 million TEU. Such a drop will shave 0.7 percent off global volume for
the full year.
customer notice, Maersk said the backlog of barge operations from Wuhan, the
origin of the coronavirus, was easing, and it was working with reefer shippers
to mitigate port plug-in power capabilities. Maersk announced the cancellation
of the following sailings:
Feb. 2 from Kaohsiung on the TP9
to the US West Coast
Feb. 9 from Yantian on the TP2
connecting to US West Coast
Feb. 17 from Ningbo on the TP18
toward the US East Coast
Feb. 7, Feb. 14, and Feb. 21
sailings from Ningbo on the AC3 to the South American West Coast
noted 2M, of which Maersk is a member with Mediterranean Shipping Co., will
cancel an additional two China-North Europe sailings in February, and the Ocean
Alliance is believed to be blanking three sailings in February on the China-US
West Coast trade.
impact of the Chinese coronavirus outbreak on container volumes will not be
fully measurable until ports announce their throughput numbers for the first
quarter,” Alphaliner noted in its weekly newsletter.
has extended the Chinese New Year holidays by a week. Factories are supposed to
reopen on Feb. 10, but as the number of deaths and infections rises, that date
might be extended further. There are also severe travel restrictions in force
across most of the country and limited cross-provincial movement, so even if
the holiday ends this weekend, the factories’ migrant workforce will find it
difficult to get to work.
Beijing has extended the Chinese New Year holidays by a week. Factories are supposed to reopen on Feb. 10, but as the number of deaths and infections rises, that date might be extended further. There are also severe travel restrictions in force across most of the country and limited cross-provincial movement, so even if the holiday ends this weekend, the factories’ migrant workforce will find it difficult to get to work.
Canceled Flights, Asia, Update During the Coronavirus Outbreak
Since the coronavirus outbreak in China, many airlines have canceled flights. As we receive more information, we will continue to update you. If you have questions, please contact your BOC Representative.