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Supply chains around the world are feeling the impacts of the unprecedented global coronavirus outbreak. Since the first significant disruption six weeks ago, nearly every aspect of international shipping has been affected. With countermeasures ramping up in Europe and the US, disruption is expected to continue.

 

Ocean & air situation

The US-Europe travel restrictions announced this week have caused massive disruption to transatlantic air freight. Passenger flight services are being dramatically reduced, leaving freighter service as the primary air cargo option for the next several weeks. Export and import air rates have already increased significantly due to tight capacity, and we anticipate major rate increases to continue. With passenger service off the table, most air freight will need to be re-routed to freighter service airport hubs, resulting in additional costs and transit time extensions.Factories in China have been increasing production capacity; current estimates show Chinese production levels are around 70-75%. China export volumes are increasing, and we expect a surge in demand will create a spring peak shipping environment in April/May. Ocean and air carriers significantly reduced capacity in February and March, canceling entire air services and imposing over 100 blank sailings on the transpacific eastbound trade alone. Be prepared for a capacity imbalance and higher shipping rates. Air freight rates out of China are already surging and ocean rates are expected to increase again March 15th.

Due to low China import volumes, there is a scarcity of containers in the US and Europe. Carriers are considering options to reposition where needed, an approach that will result in higher rates. We have seen rate increase announcements for March and April on a number of US export trade lanes, as well as outbound Europe lanes.

Domestic trucking & container availability

Domestically, we’re also seeing impacts to the trucking community and ocean terminals. Disruption in volumes has created trucker shortages in some US markets. As a result of reduced sailings, some ocean terminals are experiencing major congestion and advising shippers to keep containers in their possession longer than typically permitted.

How to prepare

The situation in the US and Europe is still evolving as authorities determine the best steps to slow the spread of the virus. Italy imposed a country-wide lockdown this week, reducing cargo flow to a near-halt. Other European countries are considering similar measures, including possible border closures. In the US, all terminals and airports remain operational while commercial activities move increasingly to remote work.

Reliable forecasting has never been more critical than it is in our current situation. Carriers require accurate forecasting in order to adequately plan capacity. With limited cargo space worldwide and new restrictions announced daily, it is essential to plan ahead. The below outline provides a starting point for developing a comprehensive forecast model. Please take the time to review your supply chain needs through the next calendar quarter. We will work with you to develop the most efficient transport plan for this unique environment.

Milestones to consider for each mode of transport

  • Equipment Required (20’/40’/HC/LCL/Air)
  • Production Start/End Date
  • Ready date at origin
  • Required ship date (port/airport)
  • Required destination arrival date (port/airport)
  • Required delivery date (door)

To recap

In summary, be prepared for higher costs and strained resources in the short term. The situation is very uncertain and very fluid, changing daily and even hourly in some cases. CVI is fully operational and in constant contact with our carriers and partners overseas. We have measures in place to respond to the fast-changing global shipping situation and keep your cargo moving as efficiently as possible.

If you have any specific questions, please reach out to your CVI customer service representative. We will continue to update you with any future developments.

CDC.GOV/CORONAVIRUS

Thank you,

Rachel Shames
Director, Pricing and Procurement

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