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The global coronavirus pandemic continues to cause unprecedented supply chain disruption. Extraordinary measures taken to stem the tide of the outbreak on several continents have led to an environment of extreme uncertainty and instability in the shipping industry. Much like the financial markets, the shipping and logistics markets are in a state of flux. We expect a very volatile environment in terms of air/ocean space and pricing over the next quarter.

Transpacific

Transpacific eastbound rates increased this week as more volumes begin to move out of China. Current estimates show China production levels are 60 percent to 75 percent. We’ve seen rates to US west coast ports increase by 20 percent. Carriers are implementing additional blank sailings to US east coast ports in an attempt to push that trade lane to higher rate levels. If volumes continue to increase out of China, we expect rates to climb again by April 1st. Air freight rates have also risen sharply over the last two weeks and are holding strong.

Transatlantic

Coronavirus countermeasures in Europe have impacted supply chains significantly over the course of the last week. Italy, Spain, and France are among the countries on total lockdown. The EU decision to close its borders to travelers has resulted in major cargo delays. Commerce in Germany and Austria has slowed tremendously as activity is limited and many are working from home. After an initial spike in rates due to last week’s US-Europe travel ban announcement, air cargo space has suddenly opened up and rates have dipped. The lack of activity and production in Europe has resulted in a significant drop in demand, at least in the short term.

Domestic 

On the US front, we are still seeing the impacts of equipment shortages, terminal congestion, and sporadic terminal closures caused by the reduction in volume and sailings out of China this quarter. Export rates are on the rise on various trades for both ocean and air. Fortunately, the recently announced border closure between the US and Canada allows for continued cargo movement between the countries.

Amid the disruption, fuel prices have been dropping. Carriers are working out the impacts of falling bunker rates, evaluating their current surcharge structures and the shipping market as a whole. Some carriers have announced modest decreases to bunker rates, while others are maintaining their levels for the short term.

Summary

International trade overall is extremely fluid and we expect more changes as countries grapple with the best course of action to slow the pandemic. US guidelines encouraging social distancing and reduced consumption will have a major impact on the economy during the second quarter and beyond.

We encourage our customers and partners to prepare by communicating frequently with the CVI team and providing forecasts when possible. Communication has never been more critical than it is during this period of extreme disruption.

CVI’s global network is fully operational and prepared to expedite cargo as needed. Please reach out to us for assistance navigating the ever-changing landscape of this truly unique environment. We will continue to update you with future developments.

We’re all in this together.

Thank you,
Rachel Shames
Director, Pricing and Procurement

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CAPES UPDATES:

All of our offices are business as usual. We are taking things day by day as we cannot control any possible state or local mandatory closures or restrictions (to date there are none).

In an effort to limit social/physical interaction we have gone to a reduced staffing shift plan. Capes will send all employees home leaving two employees per department in office to answer phones and handle direct clerical duties that requires handling of material in office. All other staff telework from their homes.

After two days the two employees in the office will be sent home to commence telework, and two previously teleworking employees (per department) will be called in to work from the office.

We have suspended all international and domestic travel. Interoffice travel (office to office) is permitted on as needed basis (with approval from a director or higher). Any employee already on travel when the suspension took force is required to telework for no less than 7 days.

We have suspended all visitations from outside principals, vendors, customers, and/or VIPs. All curriers and agents (other than Capes) are held at the front desk, logged, and serviced at the front desk with no hand to hand contact.

All employees are required to report illness or symptoms associated with Cold, Flu, and/or Coronavirus-Covid19. Those employees will be placed on sick leave immediately and will be required to obtain a clean bill of health prior to returning to work.

Regardless of the latest Coronavirus concerns, our boarding agents are at greater risk of picking up germs and illness due to their normal duties of interacting with foreign arriving crew and vessels. Because of this, it is Capes’ general protocol that (regardless of this latest concern), boarding agents should avoid shaking hands with anyone, handling doorknobs, using hand rails (without gloves), eating (ship’s food), and/or using the restrooms while aboard a foreign arriving vessel.

Please reach out with any questions or concerns. Thank you.

Pete Hansen
Director of Operations
Capes Shipping Agencies

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