We are in constant contact with our customers who import from China, Malaysia and Vietnam in particular and thought it worthwhile sharing with you the latest news and trends regarding importing by container and importing by air from China
Chinese Public Holidays
It is important to know that China has two major extended public holidays. Chinese New Year, which is well known and occurs in the spring time. Then there is Golden Week, which incorporates China’s national day commemorating the founding of modern China. This is held in the first week of October each year.
It is also worth knowing that due to the migrant nature of much of China’s workforce, these public holidays are often extended to two or even three weeks for total factory shut downs.
These holidays matter to companies who import from China as they cause a spike in demand immediately prior to both these holidays for space on ships and planes. In addition, there is very little commercial work done, if any, over the holiday period.
This year is no exception and we are currently finding that there are serious space shortages for container bookings from China with many of our customers booking up to three weeks in advance or more to secure space.
Due to the restricted nature of the available freight, rates have increased as space has become tighter. Shipping lines who offer monthly contract rates are restricting or eliminating space on these monthly deals, in favour of auctioning off their container booking slots to the highest bidders.
You may wonder why there is such a problem in a year where Covid has seriously dampened consumer demand. Shipping lines have already anticipated this by not operating up to 30 percent of all sailings through 2020 to restrict supply.
It has now become clear this strategy has been staggeringly successful, as shipping lines have gone from a position of struggling to make a profit in previous years, to almost all making significant profits in 2020. Not many industries are in this position and it does help that all Far East shipping lines are in in three Consortia so, in effect, operationally, there are only three choices for importers.
Curiously air freight does not seems to have been affected by pre-holiday spikes even though capacity has been seriously restricted due to lack of passenger flights. Most cargo flies on passenger flights, not on cargo aircraft. This is something of an enigma and probably describes the true state of the freight market and maybe the container market would have looked similar if shipping lines had not cut 30 percent of capacity.
Another factor to bear in mind is in the UK there is a shortage of container haulage drivers. The average age of container drivers in the UK is 58. Many of these people are leaving the industry due to the compulsory medicals and classroom based re-evaluations that need to be taken. These drivers are not being replaced as fast as they are leaving as it is seen as a hard way to earn a living. Long, irregular hours and nights away from home are off putting for the next generation of potential drivers.
To complete the double whammy up until earlier this year about 30 percent of UK container drivers were non UK EU nationals, many of whom have started to leave the UK as we head to the end of 2020.
The result is that whilst many trucks are parked up un-used, some shipping lines are advising there is up to a three week wait for containers being unloaded from ships. Most shipping lines will only allow seven days ‘free time’ at the port for loaded containers, after which, penalty rent and demurrage charges are applied. The ‘merchant haul’ container market is similarly busy with lead times from booking through to delivery of up to two weeks being common and sometimes expensive.
Clearly we are in challenging market conditions – we at K&L Freight are here to assist and make sense of this all. Please mail us or give us a call on 01606 272880