Airlines are canceling cargo flights from Shanghai Pudong (PVG) following the city’s Covid lockdown, with diverted cargo likely to push up airfreight rates at alternative gateways.
Yesterday, Cargolux announced it would suspend PVG flights until at least April 2 and, according to Crane Worldwide Logistics, other airlines are watching and will likely “adjust their schedule at the last minute, without prior notice”.
“Many freighters are also expected to be canceled from/to PVG due to lack of handling manpower caused by the urgent lockdown, added to the reduction of international passenger flights to PVG since 21 March. That will result in more severe shortage of capacity to and from PVG.
“Our airfreight agents also have very limited staff reporting for duty today, which will impact the customs declaration and cargo tendering to terminals and airlines.”
Indeed, Crane said today there had been a raft of further cancellations from Chinese carriers to/from Los Angeles, Chicago and Amsterdam, Qatar Airways has canceled PVG flights from 31 March until 5 April, as has Turkish Airlines until Saturday, while Singapore Airlines has also canceled the majority of flights until Saturday.
While some cargo movement is permitted in Pudong, the lack of staff is having an impact. Crane said: “Due to limited staff on duty, the customs clearance was extremely slow yesterday.
“Some companies have tried to apply permits for staff and trucks, but the permit only allows them to move inside the logistics park. They cannot go out of the logistics park and send the cargo to terminals, even after customs release. Thus, some warehouses have decided to suspend operations until April 1, the end of the Pudong lockdown.”
As with sea freight, cargo is expected to be diverted from PVG, but not without further challenges. Grant Liddell, MD of Metro Shipping, said: “Diverting cargo to other airports is typically more expensive for trucking and airfreight and adds time to the overall transit.”
According to data from the TAC Index, airfreight rates from China flattened in the past week, having rallied from a three-month low at the start of March. The index shows China-US rates at $8.54 per kg, up 0.2% week on week, but up 22% compared with $6.97 on 7 March. For China-Europe, rates are $7.27, down 1.5% this week, but up from the $6 three weeks ago.
Peyton Burnett, TAC’s MD, told The Loadstar there were two pricing dynamics at play.
He explained: “Fuel is increasing a lot, which is pushing up pricing. Shippers are now being pushed to accept fuel surcharges again, and so they have been dusting off their old contracts of eight-plus years ago to review various fuel surcharge clauses.”
On the other hand, Mr Burnett said, China’s zero-Covid policy was putting downward pressure on rates, due to the impact on production and domestic transport.