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Increased demand and worsening port congestion in Asia is forcing the east-west alliance carriers to temporarily adjust their liner service networks.

With long waits for berths on the US west coast and at several North European ports, attempts by shipping lines to recover a vessel’s schedule are being thwarted.

The 2M partners advised today they would adjust the sailing programmes of three of their Asia-North Europe loops “to match the actual departure dates from Asia”.

Maersk and MSC advised customers that the advertised sailing dates of their respective AE6/Lion, AE7/Condor and AE10/Silk services would be retrospectively amended to the actual sailing dates of the ships.

“This situation is driven by a combination of rapidly increased demand and measures to fight the pandemic across ports and supply chains in general,” said Maersk.

The carrier said accumulated delays were “causing gaps with the line-up” and had resulted in “several Asia departures being spread apart by more than seven days”.

And according to the 2M partners, the adjustments for the three loops are just the start of their network changes, which will presumably also include the other two loops to North Europe and the AE55/Griffin ‘sweeper’ service.

At the time of going to press, The Loadstar was unable to obtain confirmation from the Ocean Alliance partners of their strategy on network adjustments, but Hapag-Lloyd did confirm this morning that THE Alliance was “currently not making any changes”.

Meanwhile, worsening congestion at Hamburg and Rotterdam are forcing carriers to skip port calls in North Europe.

Last week, Maersk and MSC extended the omission of Hamburg on their AE7/Condor Loop 4 for a further four weeks, discharging cargo instead at Bremerhaven and advising shippers that this constituted “end of carriage” by the terms of their bills of lading.

Maersk said its original decision to cancel the Hamburg call at the Eurogate facility, “a result of high yard density and exceptional waiting time for our vessels”, would continue for a further four weeks as the situation had not improved.

And today, THE Alliance said it was temporarily dropping the eastbound call at Rotterdam of its Asia-North Europe FE4 loop for seven weeks, with immediate effect, “due to the ongoing congestion situation” .

Liner schedule reliability is at record lows, but carriers argue that, given the global issues of the pandemic and the demand surge across many routes, the reliability tables are an “unfair” reflection on their endeavours to improve the integrity of liner services.

“Our ship planners are pulling their hair out; every 24 hours they get a stack of delay advices from the port offices, which all have a knock-on effect down the line. It means that there is a daily adjustment needed to the network,” a carrier contact told The Loadstar.

The ebb and flow of record global liner congestion is neatly encapsulated in two maps provided below from Seaexplorer, a container shipping platform .

As of 3.30 pm Singapore time today (see top map) there were 304 ships idle in front of ports around the world waiting for berth space to open up. Seaexplorer data shows there are 101 ports reporting disruption such as congestion. Officials at the digital offshoot report the number of ships forming queues hit 350 in the middle of this week before falling back to 304, the same level as this time last week (see lower map). Red dots in the enlargeable maps represent clusters of ships while orange ones mark out ports that are congested or suffering from disrupted operations.

The clear change over the past week is how the congestion, so visible in recent weeks in south China, a key export area hit by a Covid-19 outbreak, is now spreading to other important hubs. Singapore, for instance, has seen the number of boxships waiting for berth space increase by 37.5% over the past week, while intra-Asia hubs such as Laem Chabang are now reporting tailbacks and in the US, east coast ports are suffering all manner of disruptions.

While last week, boxships queueing in Chinese waters made up more than 50% of the global total, this has dropped today to less than 40% indicating the growing global congestion contagion.

Maersk, the world’s largest containerline, in a post from earlier this week discussed the stretched nature of global supply chains, something it warned was now the new normal.

“The trend is worrying, and unceasing congestion is becoming a global problem. Due to Covid-19 and a significant volume push since the end of last year, terminals are becoming global bottlenecks, be it at berths, yards or gating out cargo, and it’s continuing throughout the logistics chain – in the warehouses, the distribution centres – with numbers on the rise,” Maersk stated.

Splash reported yesterday how the partial shutdown of Yantian Port following a Covid-19 outbreak late last month is now on track to affect twice as many containers as were impacted during March’s high profile blockage of the Suez Canal.

Blank sailing data tracked at major Shenzhen ports, including Yantian, by box tracking service project44 has shot up.

Over the period of June 1 to June 15, 298 container vessels with a combined total capacity of more than 3m teu skipped Shenzhen, a 300% increase in blank sailings in one month. Though the total capacity was not meant for Yantian, the volume of loaded export containers that were left behind has caused a severe backlog.

Dwell times at Yantian also paint a grim picture. Over the last two weeks, the seven-day average of median dwell times on export containers from the Yantian terminal doubled in number, reaching 23.06 days on June 15. The mean dwell times on import containers into Yantian were lower, at 5.96 days for the same period, suggesting that carriers are avoiding the port.

“While the epicentre of this particular breakdown is Yantian, these numbers spell trouble across the maritime shipping world, and particularly for companies that rely on these routes,” said Josh Brazil, vice president of marketing at project44. “Even shipments not directly impacted by the Yantian situation could feel the impact, as carriers adjust their networks to avoid congestion at Yantian.”

Hind Chitty, principal consultant at Drewry’s supply chains advisory practice, told Splash: “Carriers are skipping Yantian port in their rotation, creating massive rollovers and multiple side effects, as an additional shortage of empty equipment in the region and an unprecedented surge in the east-west ocean freight rates, which may spread to the other trades lanes.”

Drewry’s World Container Index (WCI), published yesterday, increased 3.4% or $231 this week, and is 305.7% higher than a year ago.

The average composite index of the WCI, assessed by Drewry for year-to-date, is $5,427 per feu, which is $3,468 higher than the five-year average of $1,960 per feu.

The Shanghai Containerized Freight Index (SCFI) also climbed to new highs today, up another 44 points this week to settle on a record 3,748 points with some speculating the extraordinary market forces at play could see the SCFI cross the 4,000 mark soon.

Shippers are facing a perfect storm as the logistics industry has entered an “an era of unprecedented disruption”, with ports crippled by acute congestion as the malaise faced by China’s Yantian spreads to others.

The delays to Chinese exports, which have escalated to 16 days or more for vessels not cancelling their Yantian call, threatens an impact significantly worse than March’s Suez Canal blockage.

According to Alex Hersham, CEO and co-founder of supply chain technology company Zencargo, the knock-on effect from Yantian, which has been operating at just 20% of normal productivity due to an outbreak of positive Covid-19 cases, will be acutely felt in the coming weeks by retailers and consumers.

“Container shortages and delays will severely impact companies’ ability to deliver to customers,” said Mr Hersham.

And he warned that industries “will face shortages of materials, and countries will struggle to stock up on PPE”, and also claimed “we are in an era of unprecedented supply chain disruption”.

Ocean carriers are scrambling to mitigate the impact, Maersk, for example, confirming the omission of Yantian on 11 of its services and ad-hoc cancellations on eight others.

The carrier said the Yantian port authority had successfully re-opened part of the port, moving productivity back to around 45% of normal, but this was far from sufficient.

It told customers: “While this has a positive impact on gate activity, which is soon expected to reach the same levels as before the incident, schedule reliability will continue to suffer with an average waiting time of 16 days and counting.”

As and when the pent-up export cargo does move, this huge wave of cargo hitting European and US ports will be extremely challenging for them and their already stretched landside operations.

In the US, ports struggle to cope with peaks more than their European counterparts, but the North Europe port of Hamburg has been under intense pressure in the past few weeks and today Hapag-Lloyd advised customers of a tightening of restrictions for export cargo deliveries at Antwerp.

An advisory from the carrier said terminal operator PSA Antwerp had been “forced” to implement a “seven-day cargo opening rule” for export containers to its terminals, meaning shippers would henceforth not be allowed to deliver containers to the quay more than seven days before the confirmed arrival date of the nominated vessel.

Speaking to The Loadstar today Mr Hersham said carriers could decide to omit the UK to mitigate the impact on their schedules.

“Congestion will rise significantly, meaning that ports, and especially those already suffering such as Felixstowe, will be heavily impacted,” he said. “The scale of the issue in South China is already bigger than Suez.

“Two accurate metrics to measure disruption by are days of delay and teu; in both cases, Yantian far surpasses what happened with the Ever Given.”

 

Two Chinese shipping lines will enter the booming trans-Pacific trade in the coming weeks, and a freight forwarder is reportedly seeking to join the fray as soon as it charters ships.

In another development that highlights the explosive demand for US imports now in its 11th month, a spokesman at HMM confirmed Wednesday the South Korean carrier intends to deploy at least four extra-loader vessels to the West Coast in each of the next two months, up from two currently.

The frenzied activity in the largest US trade lane is being driven by 10 consecutive months of record or near-record import volumes from Asia, and record-high freight rates that continue to increase, making any additional capacity a lucrative investment for carriers.

Gene Seroka, executive director of the Port of Los Angeles, told JOC.com Wednesday that BAL Container Line and China United Container Line have notified the port they will initiate services to the Los Angeles-Long Beach gateway in the coming weeks. Those carriers operate in other China trade lanes, but this would be their first activity in the trans-Pacific, he said.

Noel Hacegaba, deputy executive director and chief operating officer at the Port of Long Beach, confirmed those lines will enter the China to Southern California trade. “This is indicative of the heightened demand in the trans-Pacific, and the preference of carriers for the Southern California gateway,” he said.

The details of the new services are still uncertain and continue to evolve, both port executives said. While it appears the vessels will be in the range of 2,500 to 3,000 TEU capacity, the lines have not released information as to how many vessels they will deploy, or whether they will even have enough ships to offer fixed weekly services.

HMM extra-loaders

Another service that is possible, according to the port executives, would be operated by a non-vessel-operating common carrier (NVO), although that service has yet to be finalized pending the ability of the NVO to secure vessels.

HMM, which has been deploying extra-loader vessels in the trans-Pacific in addition to its schedule of weekly services, will increase its extra-loader deployments at least in July and August. The HMM spokesman said the carrier in July will increase its extra-loader deployments from two to four, and in August to four or five sailings. The plans are subject to change, he said.

The HMM extra-loaders will call at Busan, South Korea, and will also call at a port or ports in China. Vessel sizes range from 5,000 to 6,500 TEU, the HMM spokesman said.

 

China’s latest Covid restrictions have sparked a chain reaction, hampering trucking at container terminals across the Pearl River Delta (PRD).

Amid already severe congestion at Yantian, now “worse than Suez” and spreading to nearby Shekou and Nansha, new testing rules for truck drivers are making life even more difficult for those sourcing from South China.

According to Hong Kong-based Akhil Nair, VP global carrier management and ocean strategy at Seko Logistics, the port of Nansha now requires a negative test within 48 hours of gaining entry.

“At the same time, Yantian won’t allow a driver who has been to Nansha to come into their terminal,” he told The Loadstar. “So the number of available drivers is extremely limited.

“There’s also a lot of traffic out of Shekou and Chiwan, and DaChan Bay has just announced restricted access to Shenzhen-registered vehicles. In addition, they will require a Covid-19 test, which needs up to 72 hours for results, before port access,” he added.

DaChan Bay has been enjoying an uptick in volumes after carriers skipped Yantian, meaning the new driver-restrictions were likely to create a “domino effect”, noted Mr Nair.

“You have so many terminals [in the PRD] and carriers are quick to divert. But as they lock the terminals down, if you’re a driver stuck in one queue, your only choice is to wait. Because of this, the feeders, barges and all the network plans are going out the window.”

Indeed, with much of Hong Kong’s transhipment cargo originating in the PRD, Mr Nair thinks it will lead to “massive congestion in Hong Kong as well, in terms of trucking and yard density”.

He added: “The terminals in Hong Kong are operating fine, but the problem is yard density. If barges in Yantian and Nansha are delayed for three or four days, a lot of them will come to Hong Kong instead.”

Meanwhile, Yantian is beginning to recover, in terms of export operations, albeit very slowly.

“The terminal expects to ramp up operations to 60% over the next two weeks, so I think this is going to last until we see Yantian recover, around the end of June at least,” Mr Nair said.

In the meantime, the number of schedule changes and port omissions continues to escalate rapidly. For example, Maersk’s list of impacted vessels has jumped to 64 from 40 just two days ago.

Lars Jensen, CEO of Vespucci Maritime, said there were now 153 vessels impacted and 132 complete omissions in the region, which compares with only 87 ships directly affected by the six-day Suez Canal blockage.

As China ramps up its Covid measures, in scenes reminiscent of the Wuhan outbreak last year, Mr Jensen also warned of the potential for further shipping disruption.

“It is a realistic risk that [Covid] cases might appear in other places of China, such as Shanghai, Ningbo, Tianjin or other major port areas. Should that happen, the disruption to shipping schedules would take on even larger proportions,” he said.

Quickly deteriorating cargo flows thorough Southern China after congestion spread beyond pandemic-hit Yantian International Container Terminals is creating a scale of disruption greater than the six-day blockage of the Suez Canal in March.

With eastbound trans-Pacific demand outpacing vessel capacity and ocean reliability already below 25 percent on both China-US and China-Europe trades, supply chain executives and analysts warn of fast-widening disruption linked to Yantian.

“Shippers should not underestimate the magnitude of the coming ripple effects,” Lars Jensen, CEO of Vespucci Consulting and a JOC.com analyst, wrote in a LinkedIn post Tuesday.

Jensen estimated that Yantian has been unable to handle 357,000 TEU over the past 14 days of disruption. By way of context, he said the Suez Canal blockage lasted six days and affected a daily flow of 55,000 TEU, or some 330,000 TEU in total. Also needing to be factored in is the impact the Yantian congestion is having on the other Shenzhen terminals, where productivity is also being limited by COVID-19 measures.

“Every day increases the pile of backlogged cargo,” Jensen noted. “Once the ports re-open normal operations we should expect a surge of cargo – at least to the degree there are even vessels available to handle this. This in turn will cause ripples of potential congestion at the destination with a lag time of some two to five weeks.”

Yantian, one of the busiest deep-sea terminals in Shenzhen, handles 25 percent of China-US trade, according to HSBC Global Research, with 13.3 million TEU in total crossing its busy wharves in 2020. But following a COVID-19 outbreak on May 21, its west terminal was shut and productivity at the east terminal fell to 30 percent. In response, carriers have announced scores of Yantian cuts to their schedules up until the first week of July.

The 2M Alliance of Maersk and Mediterranean Shipping Co. (MSC) announced 40 vessels will omit calls at Yantian until July 5, while THE Alliance will cut 16 calls over the next four weeks, and 11 vessels from CMA CGM will drop Yantian up to June 19.

More than 40 vessels are believed to be currently waiting to enter the terminal. With export containers stacking up, and quarantine measures limiting the availability of truck drivers, the disruption is spreading through South China ports.

Data from visibility solutions provider FourKites shows dwell time increasing over the last two weeks at Yantian from five days in mid-May to eight days for the week of May 30. FourKites also noted a shipment volume drop of 44 percent and 39 percent during the weeks of May 23 and May 30, respectively, compared to the week of May 9.

No easy alternatives

Export containers and returning empties are rapidly stacking up, leaving shippers from the manufacturing hub of Guangdong Province in South China scrambling for alternatives.

“When the COVID-19 cases first broke out we estimated a week delay for our cargo with some rollovers, but now it will be at least three weeks and that is severe for promotional goods or cargo that has any urgency,” an Asia-Europe shipper based in Hong Kong told JOC.com Tuesday.

“It is simply complete chaos,” was the view of a European importer in Germany. “We are looking at Hong Kong as an option, or Nansha or Shekou.”

A spokesman for DB Schenker said the congestion was expected to last “at least for the rest of June,” with export cargo being redirected to alternative ports such as Nansha and Hong Kong. “The situation presents additional challenges to managing the space and equipment for the US market, which is already very tight,” the spokesman told JOC.com.

DHL Global Forwarding said in a statement it was also encouraging customers to divert shipments to the other Shenzhen terminals of Shekou or Chiwan, the Guangzhou terminal of Nansha, or Hong Kong “until the situation eases.”

Getting boxes into those alternative ports has become a challenge, however. Ports in South China are already operating at high levels of productivity because of sustained and heavy demand from US importers. The widening congestion in Shenzhen has seen terminals imposing drop-off and collection restrictions on containers, with Yantian, Shekou, and Chiwan only accepting laden boxes three days prior to the vessel departure. Nansha and Da Chan Bay require drop-off seven days before the vessel departure.

Forwarders said consigning cargo through Hong Kong had its own challenges, requiring clearance by both Hong Kong and China customs. And while barge services were available direct to Hong Kong’s Kwai Chung Container Terminal, cross-border trucking could only be carried out by Hong Kong–based drivers and trucks.

Further complicating a shift from Yantian to alternative South China terminals are tightening quarantine measures as COVID-19 infections spread. According to a SEKO Logistics update Tuesday, all drivers from high-risk areas are being quarantined for 14 days and can only enter Yantian after two negative tests.

Spot freight rates have already begun to react to the disruption. Since May 27 when the Yantian infections were detected, rates have risen by $251 per FEU on the South China-US West Coast to $4,725, and have increased by $350 per TEU to a record $5,435 on South China-Europe, according to rate benchmarking platform Xeneta. On top of the spot rates, carriers are also levying surcharges of up to $2,500 to guarantee space.

Maersk told customers in an advisory this week that Yantian yard density remains elevated with disinfection and quarantine measures being continuously implemented. “We expect continued terminal congestion and vessel delays upwards of 14 days,” the carrier noted.

 

Severe congestion has resurfaced at Hutchison’s Yantian International Container Terminal (YICT) in Shenzhen, prompting the port to stop accepting laden export containers last night.

YICT said: “Due to increasingly serious delays in vessel schedules, the container yard is now in high utilisation rate, which seriously affects the efficiency of terminal operations. This also causes traffic congestion around the port area.”

Imports and empty container movements will carry on as normal, YICT added, with laden exports expected to resume on Friday.

However, YICT said only laden containers within four days of a vessel’s estimated time of arrival would be accepted, until 3 June.

Several Covid-19 cases were reported at Yantian this week, resulting in suspension of operations at three of the port’s 20 berths for disinfection. One Chinese agent said this had resulted in “insufficient manpower on duty”.

The agent added: “Serious congestion has occurred at Yantian Wharf, and vehicles entering the port to drop off containers have lined up in the channel entering the wharf. The operation time of container return is severely delayed and ship berthing, loading and unloading are all affected to a certain extent.”

A major export gateway in South China, YICT handled 13.35m teu last year, up 2.1% and the port is no stranger to heavy congestion, having suffered major truck queues just prior to Chinese New Year.

Australian forwarder Neolink warned customers the export suspension would “cause massive space and equipment challenges, not just for the port of Yantian but also for Shekou port, as, inevitably, shippers try to pivot and rebook/redirect cargo.”

Neolink recommended shippers with critical orders planned for sea freight in South China over the next two weeks should start considering air freight options.

“We anticipate this will start to put more pressure on already forecasted increases to shipping rates, not just for sea freight, but also for air freight, as supply chains try to move goods that cannot afford to be caught in the congestion,” the forwarder said.

Indeed, Stefan Holmqvist, MD of Norman Global Logistics Hong Kong, said many shipments were now facing extra transport costs ranging from $500-$1,000 to handle and reroute.

“It’s complicated to manage the transport and traffic control,” he told The Loadstar. “Also, the LCL terminals are affected too as the congestion has impacted the ability to get the containers to load, to and from the yard.”

According to Worldwide Logistics Group, the slow turnaround of vessels at destination ports is the main culprit playing havoc with shipping schedules.

“Space continues to be in short supply,” said WLG president and CEO Joe Monaghan. “The slow turnaround of vessels due to port delays caused by congestion results in unscheduled blank sailings at a time when we need more sailings, not fewer.”

Willy Fong, the forwarder’s MD in Asia, said WLG expected “at least one blank sailing a week” in June, from Yantian and Hong Kong to the US west coast.

He added: “Space will be cut by half, with some carriers only releasing premium service containers and very little FAK [freight all kinds] cost container space availability.

“Carriers have not announced blank sailings from Shanghai and Ningbo, but if the vessels are not able to return from the US, that will force them. The same situation holds true in South China.”

 

Cargo congestion has gone from bad to worse at Chicago O’Hare International Airport, forcing importers to wait several days to retrieve shipments and prompting two large logistics companies to migrate airfreight operations an hour west to an uncrowded facility in Rockford, Illinois.

There is so much cargo piling up at O’Hare that airline-handling agents for the first time in memory are actually renting warehouses in surrounding townships to hold the overflow until it can be sorted for customer pickup, local trucking and logistics professionals say.

The problem stems from the rush of ad hoc all-cargo aircraft being substituted for grounded passenger jets amid the travel downturn combined with the surge in e-commerce orders, inventory replenishment and ocean shipping backlogs that have companies turning to air to move their goods. Major gateways like O’Hare are used to a mix of traffic, including scheduled freighters and frequent international passenger flights that bring freight in smaller chunks.

The onslaught of shipments is colliding with staffing shortages at airport warehouses, which are unable to quickly break down or consolidate shipments for transfer to other supply chain parties.

“The wave of freight that’s come through in the last couple of months has just been enormous. Most of the airlines don’t have enough room. So many times we go to deliver export freight and they’re turning us away because there’s just no room on the floor for them to accept freight,” Joe Valdez, the airport department manager for R&M Trucking, said last week during a virtual meeting of the International Air Cargo Association of Chicago.

“At times, when we go to certain airlines, there are pallets sitting out in the yard where drivers have to go around them because they just don’t have room in the building,” he added.

Cargo volume by weight at O’Hare grew 14.8% in 2020 to more than 2 million metric tons and freighter flights increased 25% to 30,399, according to the Chicago Department of Aviation. Critically, international imports carried on widebody jets jumped 22%, more than any other major gateway in the U.S., including Memphis, Tennessee, and Louisville, Kentucky, home to the respective global air hubs of parcel giants FedEx and UPS, an analysis by consultant Logistics Capital & Strategy shows.

Cargo bottlenecks are nothing new at O’Hare. Many terminals are outdated, lack modern technology, have limited truck access and dock doors, and haven’t adopted appointment systems, according to industry officials.

The situation deteriorated last year when a constant stream of freighters began arriving with personal protective equipment and other medical supplies from Asia to help combat the COVID-19 virus. At the same time, third-party ground handlers released many workers when airlines scaled back passenger flights and lost others to illness. Social distancing also makes warehouse operations less efficient and cargo-only passenger flights require larger crews to hand more boxes in the cabin.

Ground handlers say they’ve had difficulty rehiring workers because of generous federal unemployment benefits and stimulus checks during the pandemic.

There has been no letup since then. Swamped ground handlers are taking nearly a week to sort freight from arriving flights and trucking is scarce for airport pickups and local deliveries, freight forwarders say.

Many shared warehouses have shortened their hours and stopped giving out import freight between 10 p.m. and 3 a.m., a period that serves as a valuable release valve so everyone doesn’t congregate in the middle of the day, R&M President Jerry May said at the meeting.

R&M has 135 drivers dedicated to airport shuttles and their idle time per day went from three to five hours to almost 12 or more, according to company officials.

“They’re just sitting in a line. They went from doing up to four turns per day to one or one and a half,” Valdez said. “That’s how bad it’s gotten in the last 90 days.”

Sometimes the carrier has to bring in substitute drivers to replace those who use up their on-duty hours, which are capped by highway safety regulations.

A manager for a leading forwarder that does business at the airport, who asked not to be named so as not to jeopardize business relationships, said truckers can wait several hours for a load only to reach the counter and discover the freight isn’t ready because the ground handler hasn’t communicated with the forwarder.

The source described reports of how attempts to secure faster service have even been digitized. Yesterday’s discreet passing of paper currency to a warehouse employee has been replaced with a few discreet taps on a smartphone and a funds transfer via electronic means.

A common practice for years is for warehouses to allow high-volume trucking companies to pre-stage trucks. The forwarder described one location that recently had seven dock doors with trucks waiting for import freight but no drivers. “There’s arrangements being made by recovering truckers to stake out doors in return for service. That reduces the available capacity” for others, he said.

The cargo volume is so overwhelming that some ground handlers, including those for China Eastern and China Cargo Airlines, are renting warehouse space in neighboring jurisdictions outside the airport because they can’t handle it all in their existing facilities, the forwarder said. In some cases, warehouse operators are subcontracting to competitors.

“Then it becomes a guessing game to a certain extent over which warehouse is my freight going to be in. So if one gets full, it goes to the other, and you have people spending two to three hours at the wrong warehouse,” he explained.

In January, the Chicago City Council approved a lease agreement with a development firm to expand O’Hare’s Northeast Cargo Facility, which will boost the airport’s cargo capacity

Rockford refuge

The overcrowded conditions and service delays at O’Hare have pushed German logistics providers DB Schenker and Senator International to relocate some airfreight operations to nearby Chicago Rockford International Airport (RFD).

The freight forwarders have signed long-term leases to occupy more than half the space in two airside warehouses currently under construction by the Greater Rockford Airport Authority.

Regional hubs for UPS and Amazon have driven rapid growth in recent years at the cargo-centric airport, which is also attracting more independent freighter operators that often run regular flights for logistics customers.

Both DB Schenker and Senator contract with all-cargo carriers to operate dedicated flights under long-term charters in which they control the schedule and the freight that goes on the aircraft. They continue to manage shipments through O’Hare, either on passenger aircraft, pure freighters or charters, but Rockford will handle flights for their private-label airlines. DB Schenker’s contract carriers include AirBridgeCargo Airlines, Atlas Air, Cargolux, Magma Aviation and National Airlines.

The challenges at O’Hare warehouses last fall finally convinced DB Schenker to look for an alternative gateway for its own-controlled aircraft. The last straw was when leased freighters had to wait in Anchorage, Alaska, on a couple of occasions because all the parking spots at O’Hare were taken, Benno Forster, senior vice president and head of operations and procurement for the Americas, said in an interview.

“The lines for picking up freight are very long. We see the same issues on the export side. In order to make the cutoff, we have to go very early. So we had to be innovative to find ways to help our customers” and avoid penalties for not fulfilling door-to-door transit commitments, he said.

The service experience is completely different in Rockford, where the forwarders say they get personalized attention as the main customers.

“You touch down and five minutes later your plane is parked. That’s really difficult to beat,” Forster said. “The handling agent is able to unload the plane, load it directly on our trucks and within no time we arrive in our warehouse in Chicago.”

Sometimes freight gets to the DB Schenker warehouse in Chicago faster when it lands in Rockford instead of O’Hare, he added.

DB Schenker’s uses several carriers for its private air network, including this Icelandair passenger aircraft with the seats removed. (Photo: DB Schenker)

When the warehouse near Chicago began running out of space, DB Schenker asked the handling agent at RFD to deconsolidate large container shipments so they could be trucked directly to individual customers. That quickly led to discussions about co-locating within a new cargo center under development. 

The first building is nearly complete and scheduled for occupancy in July. Schenker will share it with Senator for a few months until the second building is finished and then move over to its permanent 50,000-square-foot home.

Forster said DB Schenker doesn’t view RFD as a temporary solution. Even if passenger services return to previous levels, the company needs a buffer warehouse because the Chicago facility is already too small. 

Beyond speed and efficiency for processing cargo, secondary airports like RFD also have a cost advantage.

Tim Kirschbaum, the CEO of Senator International, said O’Hare is very expensive to use because of high landing fees and fuel consumption that cargo airlines bill to the customer.

“You burn a lot of money by burning a lot of fuel just to get to the runway,” he said. “From your parking spot to the runway, in the worst case, can take you 1.5 hours when there is rush hour. Your engines are running and burning fuel.” Even with sharply reduced passenger traffic today, it can still take an aircraft up to 30 minutes taxiing to the runway, he added.

The COVID-related delays in Chicago accelerated Senator’s pre-pandemic plan to start operating at Rockford in 2021 or 2022, Kirschbaum said. Instead, the Hamburg-based forwarder began regularly scheduled charter flights last summer with partner Magma Aviation. The airport’s ground handler, Emery, quickly set up a tent and freed up some hangar space for temporary freight processing because there weren’t any available warehouses for general cargo at the time.

Kirschbaum said Senator initially wasn’t looking at the move strictly for congestion avoidance but as a way to differentiate itself to customers with faster, price-competitive service. The forwarder currently brings in two flights per week and expects to add another frequency in September. Long-term plans call for more flights to RFD.

Senator is paying for several unique features to mirror those at its airside warehouse at the Greenville-Spartanburg airport in South Carolina. They include a drive-in pit that makes it easier to load and offload flatbed trucks because they are at the same height as the warehouse floor; a 40,000-pound overhead crane for lifting equipment and extra-large loads; and a cryogenic freezer shipped from Germany by Siemens to store MRI medical machines, which prevents expensive helium from seeping out and stretches out the delivery window.

Back at O’Hare, the outlook is for more of the same with air cargo demand expected to remain at peak levels all year and labor challenges until extended unemployment payments expire this summer.

“It’s just been brutal — the lack of accountability, the lack of visibility, not being able to recover the freight in a timely manner and to always have to explain to the customer what is going on,” said the logistics source. 

Zim Integrated Shipping Services later this month will launch its third expedited trans-Pacific service in a year in response to still-growing e-commerce demand, and give Oakland its second first-in-country US call on an Asian service. 

The service, set to launch April 29 and deploying ships with roughly 4,250 TEU of capacity, will connect Kaohsiung, Shanghai, and Ningbo with Oakland and Los Angeles. CMA CGM in January launched an Asian that gave Oakland a long-sought-after first US inbound port of call, propelling its ability to tap growing e-commerce imports. 

Maritime analyst Alphaliner noted the new service its weekly newsletter Tuesday; JOC confirmed the new service details with Zim. 

In a November interview with JOC.com, Zim CEO and President Eli Glickman said the carrier would launch new services to attract cargoes that normally moved via air transport before air freight rates rocketed as passenger jets were parked amid the COVID-19 pandemic. Glickman said Zim prides itself on its ability to roll out new services in weeks, rather that the months it takes larger carriers.

Zim last June reentered the Asia-US West Coast trade with expedited service to Los Angeles, and then in February launched a Southeast Asian express service to Los Angeles and Tacoma that in seven weeks will also begin calling Yantian, China.

In March, the Israel-based carrier said it expects an even stronger 2021 performance on forecasts of continued volume and rate strength, after achieving net income of $542.2 million for 2020, the highest in its 75-year history.

Shippers on the Asia-Europe and Asia-US East Coast trades should expect months of supply chain disruption and capacity cuts even once the Suez Canal is reopened, carriers have warned. 

The cascading effects of re-routing of ships around Africa to Europe, and even through Panama to the US East Coast, to avoid the blocked Suez Canal will limit available shipping capacity and equipment at a time when demand for container shipping is high. 

“Companies should expect the Suez blockage to lead to a constriction in shipping capacity and equipment, and consequently, some deterioration in supply chain reliability issues over the coming months,” Caroline Becquart, senior vice president and head of Asia and the 2M Alliance service network at Mediterranean Shipping Co. (MSC), said in an update Saturday. 

“Unfortunately, even when the canal re-opens for the huge backlog of ships waiting at anchorage this will lead to a surge in arrivals at certain ports, and we may experience fresh congestion problems. We envisage the second quarter of 2021 being more disrupted than the first three months, and perhaps even more challenging than it was at the end of last year.” 

Evergreen Marine Corp. said in a statement Saturday that efforts to clear sand and mud around the ship’s bow would take “at least two to three days” before the required depth was reached to refloat the ship. 

MSC’s 2M Alliance partner Maersk also warned the impact on the container supply chain would continue well beyond the physical removal of the vessel. “For every day the canal remains blocked, the ripple effects on global capacity and equipment continues to increase,” Maersk said in a Saturday update. “We have already started to proactively manage our capacity and will not be accepting cargo where we cannot ensure space.” 

Maersk said once the canal was reopened, shipping convoys would aim to run continuously, but with the backlog of vessels Saturday, the carrier expects it will take three to six days for all waiting ships to pass through the canal. 

The 2M carriers have 22 vessels waiting to enter the canal, with five expected to reach the Suez Saturday. 

Sea-Intelligence Maritime Analysis noted in its latest weekly newsletter that carriers re-routing ships around Africa or through Panama would absorb an amount of carrying capacity equal to 6 percent of the globally available container vessel capacity. The analyst said 6 percent of the global fleet was equal to 1.48 million TEU of capacity, or the equivalent of 74 ultra-large 20,000 TEU container vessels. 

“It is evident that such an amount of capacity absorption will have a global impact and lead to severe capacity shortages. It will impact all trade lanes, as carriers will seek to cascade vessels to locations where they have the greatest need,” Sea-Intelligence wrote.

Global supply chain stretched 

The Suez disruption is hitting a container shipping system where all the buffer capacity and resilience has already been deployed in full to deal with the ripple effects from the pandemic. 

“The market is under severe stress already, with all seaworthy container vessels already in deployment,” Sea-Intelligence said, outlining a litany of already severe problems constraining the ocean trades and affecting schedule reliability. 

“Charter rates are hitting new highs every week and fixture lengths are increasing, as carriers are extremely eager to secure tonnage. The empty container shortage problem has not yet been solved. Port congestion remains a problem, not only in major US ports, but also across the world, hitting ports such as Singapore, Auckland in New Zealand, and Chittagong in Bangladesh.” 

Becquart shared a grim assessment of her own. “There’s no doubt that the current Suez Canal blockage is going to result in one of the biggest disruptions to global trade in recent years, and we are working around the clock to manage our fleet and services so we can keep cargo moving and keep trade flowing as best we can under the circumstances,” she said in the weekend MSC update. 

To keep container flows moving, carriers are diverting greater numbers of ships around Africa or via the Panama Canal. The 2M Alliance has so far diverted 14 of their vessels, but Maersk said this number was expected to increase as salvors struggle to free the Ever Given. 

“While efforts to dislodge the Evergreen vessel from the Suez Canal continue, hundreds of ships are caught up in the traffic snarl in both directions,” Maersk said. 

CMA CGM said Saturday two of its vessels have been diverted around Africa, and for cargo not yet loaded, alternative maritime routes, rail services, or air freight solutions with CMA CGM Air Cargo were being considered. 

Hapag-Lloyd said Friday its partners in THE Alliance — Yang Ming, Ocean Network Express (ONE), and HMM — are rerouting three Asia–Europe vessels and three Asia–US East Coast ships around Africa’s Cape of Good Hope, a move that can add about 10 to 14 days to the trip for Europe-bound ships. 

As ocean carriers reroute more vessels away from the canal, shippers will face further delays and higher costs, according to a report from Commodities at Sea, a sister product of JOC.com within IHS Markit. 

“Even a two days delay would further add to the supply chain disruption slowing the delivery of cargo to businesses across the UK and Europe,” the report noted.

Given that a routing around the Cape of Good Hope at the southern tip of Africa would add more than 3,000 nautical miles, ships would have to burn approximately 1,000 tons of additional fuel, equating to approximately $500,000, to increase speeds by two knots to maintain their weekly schedule, according to IHS Markit research.