[FBX Weekly] Air cargo rates climbing after outbreaks in Shanghai

Key insights:

1. Operations are resuming at Ningbo, as the industry works to clear the backlog and the additional congestion at alternate ports. The disruption did not push rates up this week, though the transpacific is still at record highs, with Asia - US East Coast above $20K/FEU. 
2. Outbreaks among cargo handlers in Shanghai and other Chinese airports are causing cancellations and a lot of uncertainty for ex-China air cargo. It is also pushing air cargo rates up 15-25% to US destinations and 12-15% to airports in Europe. These prices are double their level a year ago and are at their highest point since May 2020 when the industry was under extreme pressure due to the rush on PPE.

Asia-US rates:

• Asia-US West Coast prices (FBX01 Daily) went unchanged at $18,425/FEU. This rate is 462% higher than the same time last year.
• Asia-US East Coast prices (FBX03 Daily) increased 1% to $20,057/FEU, and are 442% higher than rates for this week last year.

Analysis

The terminal affected by a recent covid outbreak in Ningbo resumed partial operations this week, with a return to full capacity expected late next week, even as outbreaks in Vietnam are shutting down factories just as retailers are clamoring for peak season orders. 

The disruption in Ningbo was not as bad as feared, but has created a backlog in Ningbo and caused unwelcomed additional congestion at alternate ports in the region.  Though the latest ocean freight crisis did not push ocean rates up significantly this week, it is one more factor constraining capacity through delays and keeping rates at record highs, with transpacific rates more than 400% higher than the already elevated rates of a year ago, and Asia-US East Coast prices above $20K/FEU.

Another sign that ocean delays and scarce space with the holiday season rapidly approaching are being felt by big and small importers alike? Walmart and semiconductor-maker TSMC joined Home Depot on the short list of businesses taking the drastic and expensive step of chartering their own container ship in the name of logistics stability. 

And the capacity shortage is not just on the ocean side. In addition to the continuing rail backlogs, logistics providers are also struggling to find enough warehouse workers and truck drivers to handle the peak season surge.

Air cargo is facing challenges as well, as outbreaks among ground handlers in Shanghai and other Chinese airports are resulting in cancelled flights and a lot of uncertainty.