March 2022
By NNR USA In Uncategorised On 17th March 2022
UKRAINE - RUSSIA UPDATE
Russia's military attack against Ukraine has had catastrophic effects on Ukraine and its people. Additionally, we see the impact this has on the global economy and the disruption of the world's global supply chain. With ongoing sanctions, Ukraine has largely been cut off from the global economy, restricting cross-border commerce along with impacting the ability of companies to settle international transactions. Key shipping routes are blocked, and due to the unsafe conditions, many carriers have already pulled out or are in the process of discontinuing service on this lane segment.
Adding fuel to the fire is the potential of skyrocketing global prices for oil, gas and natural resources. Consumers will certainly be affected by the high cost of shipping physical goods and should expect to see an increase in fuel prices from the ocean/air carriers to transport goods worldwide.
NNR has restricted cargo moving to Russia, Belarus, and Ukraine until further notice.
We will continue to monitor the situation and keep you updated.
AIR FREIGHT
Tip of the Month
- Understand your lanes and regularly communicate with your buyers/sellers to understand their market condition locally.
- Plan in advance, focus on multiple backup options.
- Understand the market is extremely difficult and volatile, prepare for delays.
Russia and Ukraine war combined with new Covid lockdowns in China is again shaking the supply chain industry!
Disruptions
- Airfreight rates are skyrocketing as the war is causing flight cancellations, and re-routes to avoid Ukrainian and Russian airspace. From China to Europe, rates increased by 80% at the end of February 2022, according to Freightos Air Index.
- Since 02/28/22, the U.S., Europe, and other countries have closed their air space to Russian-owned or controlled planes. Russia, by retaliation, imposed the same ban on 36 countries. As a result, many flights have been canceled and pushed most Asian air carriers to find alternative routes.
- Fuel cost rising is adding another nightmare for airfreight carriers creating more backlogs, delays, and lack of capacity.
Demand & Capacity
- Airfreight market is struggling for available aircraft.
- A drop in capacity on Europe-Asia lanes is creating a significant impact on airfreight rates.
- Volga-Dnepr and AirBridge Cargo stopped their activities in major markets.
- New lockdown and restrictions in China are creating pressure on belly capacity.
- Hundreds of international flights destined for Shanghai Pudong Airport have been diverted to other cities in China by The Civil Aviation Administration of China (CAAC) to ease the pressure.
- Cathay Pacific Cargo, based in Hong Kong, is still facing major disruption on its long-haul operations and is refocusing its activities to regional services. They have resumed cargo freighter service to Atlanta, Houston, and Miami on a lower scale.
OCEAN FREIGHT
Tip of the Month
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Please continue to book early, four weeks in advance if you can, and consider alternative routes and carriers.
Global Logistical Challenges Persist
Congestion, equipment imbalances, sliding vessel schedules, port omissions, and blank sailings all continue to cause pressure on the market with an increase in freight costs.
The Russia/Ukraine conflict has already caused crude oil prices to increase, driving up bunker fuel prices.
Rates in the market remain at a premium as demand for containers surpasses capacity on popular trade routes.
What you Need to Know
- Expect rates to increase due to fuel increase in the market and strong demand.
- Chassis shortage is still causing disruptions for customers moving cargo locally and on Interior-Point Intermodal (IPI).
- U.S. House of Representatives asked vessel owners to comment on rate increases seen in the market during the pandemic. There is an open investigation on this matter. A Fact Sheet on Lowering Prices and Leveling the Playing Field in Ocean Shipping issued by the White House goes deep into the issue.
- Russia-Ukraine conflict is affecting the ports in the region already suffering from congestion, which will cause more delays and rerouting of cargo to alternative ports. Carriers are diverting freight en route to Russia, Ukraine, and Belarus to alternative ports. Many carriers have suspended operations to and from these countries. Read our Ocean Advisory for more detail.
Port Notables
- U.S. West Coast vessel arrivals and available capacity remain fluid for exports. Rail availability is limited as carriers strictly adhere to allocations.
- U.S. East Coast situation sees Savannah operations improving; however, port omissions continue for the south Atlantic ports of Savannah and Charleston. This situation of vessel schedules continues to create void sailings and delays in schedules, creating significant challenges for U.S. exports.
- Shenzhen ports are operating, but the region is on lockdown until the 20th, heavily impacting imports and exports. Cross-border trucks from China to Hong Kong are restricted at the moment.
- Shanghai, confusion for over-the-road drayage carriers as regions have different truck policies. Highway closures have added severe congestion.
DOMESTIC TRANSPORTATION & WAREHOUSE
Fuel Surcharge on the Rise
Customers of the small package carriers used to pay 25-35% of their accessorial cost to fuel surcharges. In early 2022, these percentages climbed close to 50%. In UPS’s Q4 financials, fuel surcharges accounted for over 39% of its year-on-year revenue per package growth.
Currently, UPS ground surcharges are at 12.75%. This number is expected to increase to 13% this week. The ongoing war in Ukraine has added a lot of uncertainty to the global fuel market, and most industry analysts expect fuel surcharges to continue to skyrocket for the near term.
Communication is key between business partners in explaining the fuel surcharges and invoicing them correctly. Most carriers post their new weekly surcharges on Mondays, so it is important to get this information to both the operations and customer teams.
CROSS-BORDER: USA-MEXICO-CANADA
Trade with Mexico & Canada Grows in January 2022
The U.S. Census Bureau has released the trade numbers for January 2022.
China remained the top U.S. trading partner with $59.2 billion in trade for the month. Mexico climbed into number 2. In January, U.S.- Mexico trade accounted for $56.9 billion, a 17% growth in trade over January 2021. Rounding out the top three, U.S.- Canada trade was reported at $56.8 billion.
As world events continue to disrupt traditional supply chains, this may be an excellent time to review your cross-border options for later in the year.
CUSTOMS BROKERAGE & TRADE COMPLIANCE
Tip of the Month
With recent events in Russia, Belarus, Ukraine, and other parts of the world, we need to be very careful and screen all parties. Entities are being added to the denied parties list daily. What might have been good yesterday could be prohibited today.
Russia & Belarus on Track to be Removed from the 'Most Favored Nations' List
On Friday, March 11, President Biden announced the U.S, G7 nations, and EU would revoke Russia’s most favored nation (MFN) status. Today, the U.S. House of Representatives voted 424-8 to revoke normal trade relations for Russia and Belarus. The Senate is expected to quickly pass the bill. Continue Reading
China Tariff Update and Will the Section 301 China Tariffs Start Expiring?
On July 6th, it will be four years since the implementation of Section 301 China tariffs.
The tariffs will automatically expire on their 4th birthday unless the U.S. Trade Representative (USTR) takes specific actions, including a review within 60 days of July 6th. Continue Reading
Li-Ning Sporting Goods Merchandise Subject to Detention
CBP will detain merchandise produced by Li-Ning Sporting Goods at all U.S. ports of entry. Continue Reading
FEATURE ARTICLE
Ocean Carrier Alliances: Then and Now
What's all the fuss?
The alliances currently control 80% of global container ship capacity and ocean freight rates have been on a steep rise up since Jan 2020.
Jenene Bolds, Head of Global Accounts, Commercial Development, discusses the history of alliances and their strength today.