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Market Insights
February 15, 2024

Ocean, Air, Road market insights – March 2022

Ocean: fuel costs rise as geopolitical tensions escalate

  • The return of war to Europe, and a near-total embargo on one of the world’s busiest lanes for cross-border commerce, are compounding global supply chains, strained since the pandemic’s start in 2020. Disruptions are widespread; schedule reliability dropped in January to 30.9% (-1.1% MoM change), whilst average delays in Europe range from 7-14 days1.
  • Capacity: vessel delays and port congestion continue to impact capacity, keeping it tight across the board. Meanwhile, labour shortages caused by Covid outbreaks at origin have added to berthing delays. We expect carriers to proactively run blank sailings and port omissions as a way of countering equipment shortages throughout Q22.
  • Rates: due to the ongoing invasion of Ukraine, we are likely to see the introduction of bunker surcharges as a result of the rising price of crude oil3. Spot rates are extremely volatile, with some discounts occurring from main Chinese ports.

1. Sea Intelligence, Schedule Reliability
2 Morningstar, When will the supply chain recover in 2022
3. Loadstar, Why war in Ukraine could be catastrophic for container shipping

Air: available capacity plummets as international sanctions are imposed on Russian flights, and airspace    

  • International sanctions imposed on Russia due to the invasion of Ukraine are heavily impacting air freight. Up to 50% of available airspace has been cut, disrupting most Far East to Europe routes. Meanwhile, strict Covid measures remain in place at airports in China and Hong Kong, slowing cargo handling and causing delays1.  
  • Capacity: even before the cuts mentioned above (Russian flights no longer operating on Asia to Europe/US trade lanes) global capacity dropped by 15% in Jan 2022 vs 2019 (with bellyhold capacity still down 25% in Jan vs pre-pandemic levels). We expect the situation to persist, and will continue monitoring the impact of the ongoing crisis2.
  • Rates: after a drop of 16.3% MoM in February (slowing demand post-CNY), Asia-Pacific rates have risen by 15% due to reduced airspace and the increase in fuel costs rising (+25% MoM)3. These factors are driving volatility in the spot-rate market.

1. IATA, Air Cargo Monthly
2. Loadstar, Aid freight turned upside down as capacity slumps
3. Air Cargo News, Surcharges increase as Ukraine conflict rages

Road: crude oil and diesel prices reach fourteen year high  

  • The escalating war in Ukraine is continuing to impact the price of crude oil and diesel, globally. The price of Brent crude – the global oil benchmark – has climbed from 43% from the start of February (reaching $139 a barrel, a fourteen year high)1. We expect this to remain elevated as further sanctions are announced.
  • Meanwhile, delays are mounting at Dover as the logistics sector boosts efforts to aid the crisis in Ukraine. UK and French border controls and sanitary checks have been removed on humanitarian relief to ease mounting backlogs, but a lack of clear requirements coupled with Brexit-border checks has led to “serious delays”, according to The Loadstar.

Source: Xeneta
Note: Average rates, priced for 500+kgs.

Q2 2022> make visibility the priority

  • Plan for resilience. The war in Ukraine and volatile fuel costs may reinforce businesses need to “reduce their reliance on intricate global supply chains,” according to a report by Oxford Economics. Some ways of boosting resilience include prioritising visibility, taking a multi-forwarder approach and geographically diversifying with nearshoring.
  • Monitor suppliers. As uncertainty continues, we advise keeping close track of supplier performance, and cargo ready dates. Booking windows are likely to shorten, so prepare as much as you can in advance and provide forwarders with granular cargo ready details where possible.
  • End to end platform. As the freight market is volatile, rates and transit times are likely to remain erratic in the coming months. With a digitally connected supply chain, you can prioritise the shipment of certain goods, and spot delays as they happen. This will help you act to minimise the impact on your end customer.