China-US air rates spike as virus hits and cargo capacity tightens!
AIR and sea cargo rates have surged due to the coronavirus pandemic, with air freight prices from Shanghai to US and Europe quadrupling since the virus outbreak started, reports Nikkei Asian Review
AIR and sea cargo rates have surged due to the coronavirus pandemic, with air freight prices from Shanghai to US and Europe quadrupling since the virus outbreak started, reports Nikkei Asian Review.
Aviation companies have massively cut back on air cargo operations, as passenger demand for flights have plunged in the wake of travel bans and quarantines. Cargo compartments of passenger flights typically carry 55 per cent of all goods sent by air.
Since the outbreak, aviation companies have been prioritizing the transportation of medical supplies, cutting availability for ordinary goods and causing prices to spike.
A sender now has to pay CNY70 (US$9.87) to send one kilogramme of goods from Shanghai to the US or Europe, more than four times the pre-coronavirus rate.
Japanese carrier All Nippon Airways said its freight services, which have been reduced by 30 per cent due to the suspension of many passenger flights, are running at full capacity. It stores face masks and other medical supplies on seats and in overhead baggage compartments in passenger planes leaving from Narita Airport near Tokyo.
Air cargo leaving Japan totalled 69,320 tons in March, down 25 per cent from a year earlier, according to the Japan Aircargo Forwarders Association. A fall in demand plus an even bigger decrease in capacity are the reasons for the decline.
Shipping capacity is also estimated to fall by 30 per cent because of landing restrictions and a shortage of seamen.
'There are delays of several days in transporting wheat and other grains on North America to Japan routes,' an official at a major shipping company said. The official said it was difficult to draw up a rota of seamen as they were often banned from disembarking when they arrived at their home ports, including Vietnam and India.
Of some 120 countries, only 37 nations and regions, including Japan and the US, permit crew switches at their ports, according to a survey by Wilhelmsen, a global maritime industry group based in Norway. Seafarers are usually rotated off ships after three months or so, and a ship cannot set sail without a full crew, under global labour rules.
Maersk of Demark, the world's largest container vessel operator, suspended two of its 10 Asia-Europe routes over the April to June period. It will also stop some sailings on the remaining routes to cut overall operations by 30 per cent.
Jefferies, a US financial services company, forecast that the combined capacity of maritime shipping companies will fall by up to 30 per cent in the April to June quarter, up substantially from a drop of five per cent to 10 per cent in the previous three months.
Slower distribution is already hitting corporate strategies. For example, auto parts maker Yachiyo Industry has begun airlifting sunroof parts from China to Japan to cut shipping delivery time. But as the company has failed to secure enough airfreight capacity, it is facing delays in production.
Nintendo is also facing problems in the production of its hugely popular gaming console, the Nintendo Switch, in China due to delays in the delivery of electronic components.