“Important notice for Shanghai Pudong Airport for August 20, 2021” – Scan Global Logistics Airfreight Department posts a notification of disruption to international cargo flight operations following a positive Covid-19 diagnosis among ground handling staff at the airport. It is one of an ongoing series of challenges restricting the movement of cargo into and out of China.
China’s “Zero Tolerance” policy in the face of the latest Covid-19 outbreaks “is good for the pandemic, but bad for the supply chain," Dawn Tiura, CEO of Sourcing Industry Group, is
quoted as saying in a recent Reuters interview. With the latest Delta variant making its way across various airports and ports, the risk of “Zero Movement” in cargo is ever prevalent. The
question is just which part of the supply chain is the next to be affected?
All I want for Christmas…
With 7 of the 10 busiest cargo seaports in the world located in China, along with 4 of the world’s 20 busiest airports in terms of air freight, a single disruption somewhere along the line has a huge knock-on effect. And this is against a backdrop of already severe capacity restrictions coupled with rapidly increasing cargo volumes. Already back in JUN21, industry experts were warning shippers of delays to Christmas 2021/22 orders, given that these were piling in 2-3 months earlier than usual. At the time, they predicted late AUG21 as the likely cut-off date for orders, though some forwarders were already refusing new customers in order to best be in a position to secure capacity for their existing business partners. Space that is additionally impacted by the tens of thousands of empty shipping containers stuck in various ports around the world and not where they need to be. This ongoing sea freight schedule chaos puts an extra strain on the much smaller road, rail, and air alternatives.
Shifting Sands, Winds, and Rates
In addition to the pandemic-related volatilities spilling over from 2020, severe weather has also affected Chinese logistics. In mid-JUL21, devastating and record-breaking floods in central China greatly impacted road and rail movement. This was followed soon after by the onset of Typhoon In-Fa, which led to the closure of railways and ports in the Shanghai region, and 90% of flights being cancelled. Yet, alongside these natural disasters, the WTO states that “COVID-19 continues to pose the greatest threat to the outlook for trade, as new waves of infection could easily undermine the recovery.” World merchandise trade is at the highest it has ever been, but looks to be plateauing, and the capacity restrictions have pushed cargo rates astronomically high which, in turn, drive trade costs up. The WTO says the indications are there “that the pace of recovery is likely to decelerate in the near term.”
“One Belt, One Road…Block”…
As if natural disasters and ongoing capacity shortages are not enough, political restraints pose further challenges. The U.S. recently imposed a capacity cap on four Chinese carriers, limiting their passenger capacity to 40% on four routes to the U.S., in response to China’s 40% cap on United Airlines following claims that five passengers on board a United Airlines San Francisco (SFO) to Shanghai (PVG) flight on 21JUL21 tested positive for COVID-19. The Civil Aviation Administration of China (CAAC) had offered three choices of either cancelling 2 SFO flights, operating 2 without passengers, or run 4 inbound flights with a 40% cap. The latter was chosen and came into force on 11AUG21. While this affected passenger’s traffic in the first instance, these “circuit breaker” regulations lead to restricted cargo capacities, too, in cases where already less frequent flights are cancelled. Regarding rail cargo, the Chinese-Lithuanian rail connection is currently at risk of suspension following Lithuania’s pledge in JUN21 to donate 20,000 vaccines to Taiwan without first involving China. The One Belt rail connection between China and Europe has boomed as a cost- and time-efficient alternative to sea freight of late, though with a train being able to take 50 containers compared to between 10,000 to 20,000 per ship, that alternative has its limitations.
The Human Delta
The largest air cargo threat is the fallout that occurs from Covid-19-related problems happening at various Chinese airports, leading to drops in cargo operating capacity of between 30% and 60%. Delta entered China back in MAY21, and since then, the “Zero Tolerance” policy has led to upheavals. With partial airport closures and resulting drops in airline traffic, to cargo handling backlogs, to reduced handling efficiency because of having to wear protective clothing, to freighter and passenger flight cancellations because of crew operating restrictions in face of Covid-19 regulations, to ground handling staff even resigning from their jobs in view of the untenable, strict quarantine regulations (work for seven days followed by a 7-day hotel quarantine and then 7 days home-quarantine). And all this in a peak cargo situation.
The Scan Global Logistics message is one that could pop up at any of China’s airports over the next weeks and months: “As the largest airport within China for cargo operations, we anticipate this situation to have a significant knock-on effect on available capacity. With the current workforce restrictions in place, cargo operations throughout the region have faced ongoing challenges, with this latest information impacting the market further.
Currently, limited information is available on the impact on operating schedules
as Airlines await official notifications from relevant authorities. However, it is
anticipated cargo will incur delays as flight schedules are adjusted.”
Covid-19 continues to demand flexibility from everyone… and Santa may not be able to fulfil PlayStation wish this year.
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