Bolloré Logistics said the current "tensed situation" in the logistics industry is expected to last throughout 2021.
In a statement, it said this includes the shipping rates that are soaring at "record-high" levels with demand for consumer durables from Asia continuing to boom — which is expected to be under more pressure ahead of the Christmas restocking. Meanwhile, supply-side bottlenecks persist.
"Demand-supply imbalance, unreliable service, congested ports and through-the-roof rates have been the highlight since the beginning of the year and will clearly persist throughout the rest of 2021," the French logistics company said.
It cited the various disruptions in the market, including the major setback on ocean freight caused last quarter by the six-day blockage of the Suez Canal in March.
As the impact of the disruption on the transatlantic and Asia – Europe routes was starting to wear off, another bad news came as Covid-19 broke out in the Guangdong province in southern China in late May, causing a three-week closure in Yantian, one of the biggest ports in China.
Bolloré noted that this triggered a backlog that saw its route shipments through Hong Kong and other ports around Yantian.
"Although full operations have now resumed at the port, the impact is expected to last many weeks, coupled with unreliable transit time and several blank sailings," said Anne-Sophie Fribourg, Bolloré Logistics’ Ocean business development director.
More transatlantic blank sailings
"We have not seen the end of port congestion and carriers are now blank sailing to try to recover disrupted schedules. The transatlantic and Europe – USA routes remain heavily congested. Shipping lines are skipping at least one European port every week especially Le Havre, Southampton, Antwerp and Rotterdam," she added.
Fribourg further warned that many blank sailings will be implemented on the transatlantic this summer, putting further pressure on space.
Similarly, on Latin America route, CMA CGM, HAMBURG Sud and Maersk announced they were going to skip the stopover in Le Havre for 8 weeks, between Northern Europe and the East Coast Latin America.
Elevated freight rates through 2022
"With carrier capacity at its limit, shippers are expected to face elevated freight rates through 2022," she added, noting that freight rates have already soared to reach an average level of US$ 12,700 (40 foot) on the Asia-North Europe trade lane (SCFI). Peak Season Surcharge (PSS) surcharges are also already being implemented.
Fribourg said a lot of GRI/PSS is expected on major axes in July, lasting until the golden week.
In its statement, Bolloré noted that service levels will also remain poor despite the numerous blank sailings carriers are implementing to try to get back to a better quality of service.
It said based on data from Sea Intelligence, schedule reliability declined by a massive 36.0% year-on-year in May 2021, with the average delay for late vessel arrivals being 5.86 days — although the news is not any better or different on the airfreight side where air cargo traffic maintained its upward momentum, outstripping available capacity.
As a result, the freighter noted that rates remained elevated.
Latest data from Seabury show that air cargo capacity was down 11% during the two weeks from 15 to 28 June, compared to the same weeks in 2019.
Widebody belly air cargo capacity also decreased by 53% during the two weeks, while freighter cargo capacity remained relatively stable; airlines increased freighter capacity by 32% while integrators increased theirs by 33%.
Meanwhile, according to IATA, there is a robust uptick in July-August travel bookings in some of the key domestic markets that managed to get the pandemic largely under control while international travel demand remains muted.
But Claude Picciotto, the company’s Airfreight Procurement Director, noted that if international travel demand does not pick up this summer, there is no hope for significant additional capacity for the rest of the year.
"Peak season will be tense this year and shippers may have to pay premium rates during peak season," he added, noting that the Civil Aviation Administration of China (CAAC) have also put a restriction on increasing freighter capacity, which will create additional backlog.
Volumes to be diverted to air freight
Picciotto said due to this, a lot of volume will be diverted to airfreight from ocean freight by US importers that have started early massive restocking in time for Christmas, causing even more pressure on space.
This is certainly not looking good for the peak season. As of May, US imports have increased by 50% compared to same month in 2020, he added.
For one, Bolloré Logistics is already responding by adding westbound capacity on the ASPAC – EUROPE route; more than 10 charters from Shanghai and more than 8 from Hong Kong, to cater to peak season rush until the end of November.
It said this is an addition to its three weekly round charter flights from Luxembourg to PVG.
"Even as the Covid-19 pandemic has seemingly started to wane, things have not started looking up for the shipping industry. Demand has continued to outperform capacity, service levels have deteriorated immensely, alternative solutions such as rail and trucking services are under pressure, lack of equipment persists, and ports remain heavily congested," the statement added.
"Unfortunately, no improvement is expected any time soon. Shippers will have to pay unprecedented rates even when shipping delays, blank sailings and lack of space abound," it added.
Fribourg and Picciotto said shippers should consider alternative solutions such as using obtaining space on charters or using other means of transportation when possible.