Novel Coronavirus (COVID-19): Operational Update
Last updated: Feb 18, 2020
Capacity Pressure Points
Presently, pressure on capacity affects mainly inbound air freight and China domestic trucking
Office/factories have re-opened and production is resuming
- Work has largely resumed across China but production is only picking up slowly.
- Travel restrictions continue to impact movement of people and cargo transported by road.
- Quarantine measures remain in place for anybody returning from or via Hubei Province.
- Local quarantine restrictions are introduced by local provincial governments for anybody returning from outside provinces, and in some case from within the province.
During the week of Feb 17 to 22, production is expected to increase gradually (updated Feb 17)
- Production is expected to pick up slowly this week.
- Many large exporters, including OEMs, are not immediately resuming full production either due to manpower shortage, in response to or as a precaution to ensure quarantine measures for returning workers.
- Based on preliminary assessments, an estimated 30% of major suppliers remain closed.
- Major OEMs indicate the delay to reach full production could last well into March.
Air & Ocean
Airport and port operations are smooth, but we expect possible challenges at Shanghai Pudong (PVG) Airport as volumes pick up
- Airport and port operations are generally smooth, however low manpower impacts efficiency at certain locations.
- Impact to service level and operating efficiency to be expected at Shanghai (PVG) airport, where stringent rules for workers returning from holidays have been implemented.
- As outbound cargo volume picks up, reduction and shortage in manpower at PVG could become on issue.
- Stringent restrictions for carriage in to and out of Shanghai Province could further impact cargo flow, particularly affecting PVG airport.
Significant number of flight cancellations and blank sailings on rise
- There have been almost 7,500 outbound flight cancellations, however freighter operations are gradually being resumed
- Ocean carriers have begun implementing extra blank sailings, reducing TPEB capacity by an estimated 25% and CN-EU capacity by as much as 60%.
International air and ocean capacity is available, but outbound rates rising in short-term
- Today, both international air and ocean capacity are available, reflecting the slowdown in production over the last few weeks.
- However, as we move forward, pressure on outbound capacity will likely increase and drive market rates up.
- Agility encourages customers to communicate demand forecasts so that we can better support them through this period of volatility.
Capacity varies from area to area
- Outbound air freight capacity is largely available at this time although more than 5,000 tons of daily capacity has been taken out of the market.
- The situation varies from area to area.
- In North China (BJS/TSN mainly), freighter capacity is being resumed as market picks up slightly.
- In Central China (PVG mainly) market rates are slightly reducing, while capacity management appears unstructured. Some freighter operations are being resumed.
- The situations in North and Central China are expected to persist for another week or two after which market rates likely will pick up significantly.
- Capacity in South China (mainly HKG) is being adjusted to meet demand and rates remain relatively stable. Rates out of HKG are expected to increase significantly as production in Guangdong Province ramps.
Movement in the charter market is starting to pick up
- Movement in the charter market is starting to pick up to clear customer backlogs and/or in preparation for the anticipated rush later in the month or early March.
- We strongly encourage customers to contact us if interested as soon as possible, because advance planning will help us serve you better.
Cross-border trucking has largely normalized
- Cross-border operations between China and Vietnam have resumed.
- There is currently a 3-4 days backlog on the border to Vietnam
- Cross-border services between China and Hong Kong are unaffected by the mandatory quarantine imposed by Hong Kong since Saturday Feb 8. Drivers are permitted to cross the border and return without being quarantined.
Domestic trucking remains deeply challenged
- A shortage of drivers and road restrictions continue to impact domestic trucking, including pre- and on-carriage significantly.
- There is an estimated 60-70% shortage of drivers due to travel and quarantine restrictions.
- Domestic trucking is further complicated by provincial highway closures and significant waiting time at toll gateways due to increased health and permit checks.
- New developments in Shanghai (Updated Feb 17)
- The quarantine requirement for Shanghai-registered drivers in Shanghai-registered trucks returning from Hunan, Henan, Guangdong, Anhui, Zheijiang and Jiangxi Provinces has been lifted.
- Truck drivers (non-Shanghainese) originating from specific cities in the mentioned provinces are permitted to enter Shanghai only subject to being quarantined 14 days.
- Pick-up and delivery outside Shanghai Province via Shanghai Airports and Ports will be significantly restricted.
- Hubei Province is essentially covered by the same regulation, but as the province remains largely under lockdown, there is no cargo traffic in or outbound.
- Driver from the Suzhou area are now included under the 14 days quarantine restriction for cargo moving into Pudong operation area.
- New developments in Guangdong Province (Updated Feb 17)
- Road restrictions are also imposed by Guangdong Provincial government. Shipment normally moving from outside provinces via Guangdong Province ports and airports will be impacted and subject to alternative routing arrangements.
Civil service workers will work from home until further notice
- The Hong Kong government has asked civil servants to work from home, while sports facilities and museums are closed indefinitely
Quarantine in place for cross-border passenger traffic between Hong Kong and China, but no impact on cargo.
- Effective Saturday Feb 8, cross-border movement between China and Hong Kong will be subject to quarantine.
- Residents and visitors entering Hong Kong from Mainland China will be subject to 14 days compulsory quarantine.
- At this time, it is understood that quarantine is not affecting cargo operations as truck drivers (except Hubei drivers) will continue to be permitted to enter China / Hong Kong and return without being quarantined.
No operational impact, but government has widened travel restrictions to visitors who recently visited Mainland China.
- The situation in Singapore has been escalated to Disease Outbreak Response Condition (DORSCON) Orange.
- All visitors who have visited China in the past 14 days will be denied entry into Singapore even in transit.
- The government is mandating that all returning citizens, permanent residents, work permit holders etc. from China are to be placed on Leave of Absence for 14 days from the date of return, and asked to work from home if possible.
- Anyone returning from Hubei Province will be placed in government designated quarantine facilities.
- Any returning staff needs to obtain approval from the Singapore government prior to returning to Singapore.
- The Singapore government has requested that companies consider splitting work teams.
Agility Singapore making contingency arrangements.
- Employees have been asked to postpone non-essential travel. Regional meetings across Asia have been postponed until the situation stabilizes.
- Agility offices in Singapore have already instituted twice-daily temperature screenings for all employees.
- Agility has issued surgical face masks, hand sanitizers and alcohol (for disinfecting truck cabins) to front line staff who come into contact with visitors or public areas.
- Agility will stagger meal times to avoid crowds.
- Back-up locations for freight operations have been identified, should the situation require that we split our teams.
Passenger airlines have extended suspensions through April, and capacity planning is currently unstructured. (Updated Feb 17)
- Passenger airlines have started to extend the suspension of service to and from China and Hong Kong until the end of April due to lack of passenger demand.
- As the airlines are still adjusting their flight schedules to accommodate the reduced demand, capacity planning is currently unstructured.
Eastbound capacity for air exports from China is ramping up only slowly. (Updated Feb 17)
- A preliminary assessment indicates that an estimated 30% of major suppliers to the airfreight market remain closed.
- Cargo output is ramping up only slowly for air exports from China, reflecting lower production levels.
- Freighter frequencies are being adjusted to market demand by the carriers.
For the time being, eastbound capacity to the US is still available.
- However, it is expected that once production does return in full force, – possibly not until mid-March – the increased demand and reduced capacity will push freight rates upward at a steep trajectory.
Westbound capacity from the US to Asia is still congested and rates remain high, despite some ad-hoc freighter rotations entering the market. (Updated Feb 17)
- Some additional ad-hoc freighter rotations are entering the West-bound market, but only at limited scale. The freighter rotations are not yet sufficient to clear the backlog and improve rates.
- US outbound rates still consistently average 4 to 6 times the normal values.
- The situation from the US should stabilize once production from China normalizes and additional freighter capacity reenters into the market. This is currently estimated to be around mid-March.
- Agility’s branches and gateways have been able to procure capacity Westbound to accommodate pending shipments, although at significantly increased cost and longer transit times. Please speak to your Agility representative for more details.
A return to normal at factories and ocean terminals in China will likely be delayed. (Updated Feb 17)
- While production has returned to many locations, many other provinces have extended a shutdown until as late as March 1.
- Highway closures and limits on transportation, together with a 14-day quarantine for persons returning from highly affected areas, mean that a return to normal at factories and ocean terminals will likely be delayed.
Demand for cargo space has weakened, but East-bound rates from China to US have remained relatively static in anticipation of pent-up demand. (Updated Feb 17)
- With the extended CNY lapse in operations, demand for cargo space has dipped below expectations for early February.
- However, rates from China to the US have remained fairly static, with only a slight depreciation, in anticipation of pending post-CNY demand.
Blank sailings are on the rise. (Updated Feb 17)
- Carriers have instituted numerous blanks sailings as a response to weakened demand and in an effort to maintain balanced rate levels.
There will likely be capacity constraints when production returns in full force, likely to be in the mid-March timeframe.
- Our general advice for ocean freight customers is to keep updated about extended shutdowns and plan for an initial backlog of production and capacity constraints when production returns in full force.