Uncertainty surrounding the unfolding of the coronavirus outbreak means forwarders have little visibility on how long the current disruption to air, ocean and rail freight flows to and from China is likely to last. But they appear braced for a hike in freight rates when the situation does improve and an expected capacity squeeze kicks in.

The pneumonia-like virus has to date killed close to 500 people, the majority in the central province of Hubei and its capital Wuhan, and the Chinese authorities have reported well over 20,000 confirmed cases.

Flemming Ole Nielsen, EVP for investor relations, corporate marketing and communication at freight forwarder DSV Panalpina – which has 3,000 employees in China, including around 250 staff in Wuhan – told Lloyd's Loading List that the extent of the drop off in Chinese import and export volumes since the outbreak began was too early to estimate, noting: “Last week was closed down anyway due to Chinese New Year (CNY) and this week would normally be a slow start after CNY.”

As for capacity constraints, Nielsen noted: “Over the past few days, several carriers continued to announce that they will either reduce or completely cancel flights to and from China. These cancellations primarily affect passenger airplanes and therefore belly cargo capacities. However, we have also received notifications that dedicated freighter companies are currently re-evaluating their flight schedules for the coming weeks.

“Several ocean carriers have announced blank sailings, but these were already announced before CNY. Rail is still the best alternative to air. However, the available capacity is currently affected by several train cancellations and might become an issue once China resumes work. Port terminals, airports and custom authorities are working normally.”

Asked whether he anticipated a concerted switch from ocean to air freight when Chinese factories resume production, in order to meet contract obligations as well as customer demand, Nielsen replied: “Yes, we do expect a significant rush on all transport modes, and air in particular. This will also be reflected in rates and surcharges.”

In a Wuhan coronavirus impact update issued earlier today, Bolloré Logistics China informed its customers that work was scheduled to resume at most of the company’s offices on 10 February, and on 14 February for the Wuhan office. Currently none of its employees and their close relatives in China have been suspected of carrying the virus, and it is sending protective and monitoring equipment to all its offices.

On the air freight side, Bolloré Logistics China underlined that with the exception of Wuhan, which is closed to commercial flights, all other airports in mainland China and Hong Kong are still operating. “Capacity is, however, reduced due to the extension of Spring festival holidays and a growing number of flights cancellations.”

In the event of a lockdown at other major airports in China, the company said it would be possible to use sea-air options via neighbouring regions such as Korea and Taiwan, or by truck via Hong Kong.

It said access to cargo air capacity from Europe to China “is gradually tightening to all Chinese airports, but remains under control. One notable exception is Shanghai, where it becomes extremely difficult to find capacity unless you accept Express rates from airlines that continue to operate.”

Ocean freight loading and unloading operations are taking place at Chinese ports, but barge services are subject to delays, Bolloré said, noting: “Some container depots in Shanghai (WGQ and Yangshan) remain closed till 10 February, which will impact export sailings from 3-9 February. Some carriers have been open for space booking from 3 February, but delays are expected as there will be only limited duty staff at shipping lines. We will have Bolloré Logistics staff mobilised for urgent booking requests.”

In an update, issued earlier this week, Kuehne + Nagel said that in keeping with local government directives, the vast majority of its branches in mainland China would reopen on 10 February, but Wuhan is scheduled to resume its operations on 17 February.

A spokesperson for the company told Lloyd's Loading List: “Given that we are currently in a (longer than expected) holiday period, the general level of business is low. Outside of Hubei province, which is locked down by the government, all other major ports and airports are currently operating under the reduced Chinese New Year schedule.

“However, the likelihood of delays is rather high given the current fluid situation. Our local teams will keep in close contact with customers to manage the situation accordingly.”

In a coronavirus customer advisory, forwarder Agility highlighted that “disruptions to inbound and outbound air and ocean cargo shipments, trucking and rail cargo services are likely to persist as the coronavirus crisis unfolds”, adding: “Agility is continuously monitoring developments and working with customers to expedite their shipments in the face of port/airport access delays, driver shortages, additional documentation requirements, by-appointment-only customs clearance, and other issues.

For Davies Turner (DT), which offers air and ocean freight services to and from China, it was currently a case of “wait and see”, a spokesperson for the UK-based forwarder said, adding: “We’ll be in a better position to comment on how the situation is likely to play out after factories return to work on 9 February and there is a better idea of  availability of the resources that are required to run international supply chains.

“While air cargo capacity has been reduced, major shipping lines have said operations are continuing as usual; so at present there is no justification to worry about a complete shutdown in international freight flows to and from China.

“DT’s partners in China are currently planning a resumption of work in compliance with government guidelines, while activating online contact and remote operations management, adapting procedures and contingency plans.”

DT also operates a weekly consolidated intermodal service from Wuhan to the UK, via rail to Duisburg in Germany and then trucked under bond to Rotterdam and by ferry to Purfleet. “This service would not have run during the Chinese New Year anyway and the shutdown has been extended,” the firm said. “The next Express China Rail service is due to run on 22 February and will operate from Xian rather than Wuhan.”

Returning to air freight, most international airlines have reduced or suspended their passenger services to and from China, due to the effects of coronavirus, with many freighter operators also cutting services and operating more-limited schedules.

Lufthansa Cargo yesterday said it plans to maintain freighter connections to and from mainland China “as long as possible”, adding: “The special flight schedule is to be continually updated in line with current developments and will comprise five connections a week. This corresponds to one third of the normal winter flight schedule.

In detail, Shanghai (PVG) shall be served three times a week, Beijing (PEK) and Chengdu (CTU) once a week each. Freighter flights to Hong Kong will continue to operate according to schedule.”

Source: lloydsloadinglist

The opinions expressed herein are the author's and not necessarily those of The OLO News.