News

Peak Season Market Update – The New Abnormal

With the height of peak shipping here, a comprehensive look at current market conditions is in order. We hope you find it useful as you plan the balance of your December and beyond.

As U.S. imports continue to surge, up 21% over last November, the domestic and international supply chain continues to strain under the dramatic rebound in volume. That rebound gives hope for the future. All the while, the new abnormal persists with millions of us working from home as we deal with numerous logistical and personal challenges that are anything but normal. We are seeing extreme port congestion, limited airline capacity, a severe shortage of truckers and overloaded LTL carriers. In short, we all continue to be faced with ongoing supply chain issues, as we await good news from the scientists and doctors on vaccines and COVID control measures.

As the year winds down and we collectively prepare to say good riddance to 2020, our team is doing their best to support you. We work hard to be fully transparent and professional, keeping our customers and partners apprised of rapidly changing market conditions.

Summary

  • Air freight capacity remains very, very tight with rates currently running 300-400% above normal for imports from Asia. Rates are less expensive elsewhere, but still very high by historical standards. Many carriers are completely sold out for the next 2-3 weeks on Asia-USA flights, further driving up rates.  

  • Ocean freight is also struggling with combined capacity issues and extreme port congestion. A severe lack of trucks, container chassis and dock labor in the USA are resulting in 5 to 7 day delays upon arrival in many U.S. ports. This can result in significant unplanned demurrage charges to shippers.

  • Ground freight is seeing unprecedented demand, with FTL loads greatly exceeding capacity and LTL carriers heavily overbooked. UPS/FedEx recently suspended small parcel pickups at Amazon and several other big box distribution warehouses, on a temporary basis, citing lack of capacity due to e-commerce. There are some early signs that demand is finally moderating.

  • COVID related shipments of protective gear, coupled with massive vaccine shipments in Q1/Q2 of 2021 will further strain air freight capacity. These shipments will overlap with the delays normally seen during Chinese New Year in February.

  • Help us help you by booking shipments well in advance and allowing extra lead times at both ends. The new abnormal makes it necessary if you want to plan your shipping properly.

Air Freight

Air freight capacity remains extremely constrained worldwide due to COVID-related cancellations of passenger flights. That lack of capacity during peak season, coupled with surging worldwide demand for re-stocking inventory, has driven rates to 300-400% of normal right now in some markets. Meanwhile, queues for truckers at U.S. airports are long, often resulting in 3-4 hour waits to tender/recover cargo. This waiting time gets passed directly through to shippers, resulting in significant unbudgeted costs.

The pressure of reduced capacity, coupled with record Imports from Asia, is only compounding the logjam of air cargo. Many carriers have resorted to accepting Priority Air bookings only, refusing General Cargo freight, which has little hope of moving.

Looking forward to 2021, it is important to factor in the anticipated massive shipments of vaccine that will take up a great deal of commercial capacity in Q1/Q2. When added to the normal supply disruption associated with the Chinese New Year holiday in February, capacity issues and elevated rates are likely to continue for the foreseeable future.

To help us help you, please plan your shipments as far in advance as possible. Be prepared to pay more than you are used to and allow for extra lead time on both the front and back end of your shipments.

Trucks in line to enter Chicago’s O’Hare airport, November 2020


Ocean Freight

While the air freight carriers are struggling, the ocean freight supply chain is also under tremendous strain, but for different reasons. In the USA and elsewhere, shippers are faced with extreme port congestion. This congestion is, in part, the result of surging demand and labor shortages at many U.S. ports, but that is only part of the story.

The surge in volume is resulting in 3-5 days of delay in docking, due to lack of berths. This delay is wreaking havoc with carrier schedules and driving up their costs, as ships and crews sit idle. To add insult to injury, there is also an extreme shortage of the chassis needed to move containers over the road, and the trucks needed to pull them. In some U.S. ports, it is resulting in a delay of a week or more in receiving the containers after the vessel has been unloaded, putting storage yards at +100% of capacity. Consequently, shippers are incurring significant charges for demurrage/storage, which the carriers are thus far unwilling to waive. There is currently pending legal action in this matter to offer shippers some relief.

Finally, there is a worldwide demand for refrigerated containers to move and transport the anticipated storage and movement of vaccines in 2021 Q1. Carriers have resorted to repositioning them empty, further clogging distribution channels.

One positive note: Ocean rates, while rising, are seeing nowhere near the percentage increases seen in air freight.

Like air freight, plan your ocean shipment well in advance and allow plenty of extra lead time on both ends.

Ground Freight

Ground shipping has been no exception when it comes to challenges. With brokerage boards recently showing available full-truckloads outnumbering available trucks in California by 12-to-1, rates are high everywhere, trucks are scarce, and shipper’s frustrations are boiling over. Through much of November and into December, the nation’s truck capacity was essentially maxed out, as demand far exceeded capacity.

LTL shipping for partial loads was facing similar constraints. Many LTL carriers report that they are heavily overcommitted with significant backlogs at their regional hubs.

To highlight just how crazy it has gotten, UPS/FedEx recently announced that they were temporarily suspending small parcel pickups from Amazon, Nike, GAP Stores, LL Bean and several other large e-tailer warehouses. Meanwhile, the are raising rates by an average of 4.9% in January. It’s a crazy world we live in.

To end on a positive note, there are some signs that the squeeze on ground freight is finally ebbing. With many time-critical shipments already in stores demand is easing. What 2021 will bring, with the COVID wildcard in play, is anyone’s guess.  

Hopefully, you find this information both useful and timely in planning for your business’ shipping needs for the coming months. Working together, we will all get through it together.

For now, best wishes from all of us here at Air & Surface Logistics for a safe, healthy and happy holiday season.

Leave a Reply

Your email address will not be published.

GET A QUOTE