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February 13, 2020
Service Impact of COVID-19 Containment Measures in China February 13

Due to the coronavirus (COVID-19) outbreak, the associated extension of the Chinese New Year holiday (also known as the Spring Festival) and measures imposed by governments around the world, there are currently unavoidable service impacts on air and ocean freight shipments shipping into and out of China.

This information is provided for general guidance only. Due to the dynamic nature of the situation, the information is subject to change without notice. We are closely monitoring the situation and will continue to provide updates as they become available.

The safety and well-being of our team members and customers is our top priority. We are closely monitoring guidance by the U.S. Centers for Disease Control and the World Health Organization and taking all recommended safety precautions.

FedEx is currently supporting relief efforts through our long-standing relationships with humanitarian aid organizations including Direct Relief and International Medical Corps. These relief organizations are providing critical needs like masks, disposable medical protective clothing and disposable medical gloves. FedEx is maintaining frequent communication with them and other nonprofits to ensure that our resources are deployed effectively.

Countries outside of China have released and continue to develop rules and regulations in an effort to help control the impact and further transmission of the virus. Those rules and regulations are impacting our service in certain markets.

 

Service Impact of Coronavirus Containment Measures in China (as of Feb. 13, 2020)

Over the last three weeks, the COVID-19 outbreak that began in Wuhan, Hubei province, China, has impacted the region and the shipping industry. With a reduction in the active Chinese labor force and business closures imposed by an extension of the holiday, there are indications there could be additional potential impacts on global supply chains. FedEx Logistics is committed to keeping our customers updated and is monitoring the situation.

We've made the following service adjustments at FedEx Logistics offices in support of the holiday extension by Chinese officials:

City Holiday Extended Until: Email Communication Local Pickup Cross-City Pickup
Beijing open Yes Limited Case-By-Case
Chengdu February 14, 2020 Yes Yes Case-By-Case
Chongqing February 14, 2020 (confirmation pending) Yes Yes Case-By-Case
Dalian open Yes Limited Case-By-Case
Fuzhou February 14, 2020 (confirmation pending) Pending Pending Pending
Guangzhou open Yes Yes Advance Notice
Nanjing February 14, 2020 (confirmation pending) Pending Pending Pending
Ningbo February 14, 2020 (confirmation pending) Yes No No
Qingdao open Yes Limited Case-By-Case
Shanghai open Yes Yes No
Shenzhen February 14, 2020 (confirmation pending) Yes Yes Advance Notice
Suzhou February 14, 2020 (confirmation pending) Pending Pending Pending
Tianjin Announcement pending Yes Limited Case-By-Case
Xiamen open Yes Yes Advance Notice
Zhengzhou February 17, 2020 (confirmation pending) Yes Yes Case-By-Case

 

Air Freight Industry Environment (as of Feb. 13, 2020)

As the COVID-19 situation continues to develop and affect global production, the air freight industry is experiencing broad-based volatility. Local regions in China are experiencing continued impacts to manufacturing and ongoing Chinese New Year holiday extensions. Many passenger airlines have cancelled their flights to mainland China through March and beyond, constricting widebody belly capacity, and more airlines may follow. These continued flight cancellations can affect air cargo capacity, which may lead to rate increases and delays. There have also been significant demands for humanitarian and medical supply shipments into China over the past week.

With the anticipated return of normal production in China, there may be increased air cargo and freighter capacity demand. Additional flights could be added by carriers to support this demand, and that might help to stabilize the air freight pricing environment. The length and intensity of the COVID-19 situation will ultimately define the overall air freight market conditions.

China air cargo volumes may be lighter through the end of February. The anticipated resumption of manufacturing at Chinese factories could produce capacity constraints, as some shippers might opt for air freight over ocean shipping for an earlier delivery date. The resumption of production and potential outstripping of capacity by demand for air cargo space could cause an increase in short-term spot rates.

U.S. importers should consider preparing for possible air rate increases in early March as consignees vie for constrained air cargo space.

FedEx Logistics is working closely with air carriers to assess and adjust capacity requirements. All FedEx Logistics gateways continue to work with our customers on their specific needs and shipments as carriers communicate the latest information.

 

Ocean Freight Industry Environment (as of Feb. 13, 2020)

The COVID-19 situation in China and its impact on the global ocean freight industry continues to evolve. There are ongoing impacts to manufacturing in the local regions in China, as well as ongoing extensions of the Chinese New Year holiday.

Some Chinese technology companies have extended their work-from-home policies for at least another week. Many factories are limited in their production capability due to a shortage of manpower. This manpower shortage may also impact local trucking.

Ocean carriers continue to announce blank (void) sailing cancellations out of China. Sea-Intelligence, a provider of maritime data and analysis, reports that ocean carriers have blanked 32 sailings outbound from China (21 trans-Pacific and 10 Asia-Europe). This is in addition to 61 sailings voided in the trans-Pacific eastbound for the Chinese New Year.

Ocean volumes out of China may be very light for the balance of February. If Chinese factories are authorized to begin production this week, demand for capacity would be a challenge after the two-week production period. During that two-week period when capacity demand is lower, ocean carriers could continue the trend of void sailings so that they are not shipping empty to North America and Europe.

Market dynamics could reverse in early March. Demand may outpace supply as the first production after the extended holiday translates into ocean shipments out of China. The timing coincides with the unofficial start of annual ocean contract negotiations between steamship lines and Beneficial Cargo Owners (BCOs) and Non-Vessel Operating Common Carriers (NVOCCs). If demand far outpaces capacity supply in March, short-term spot rates could increase to levels several hundred dollars higher than the current long-term fixed rates.

U.S. importers should consider preparing for possible ocean rate increases in early March as consignees vie for constrained container slots. For importers with long-term fixed rates, when demand far exceeds capacity, carriers often review their past four to six months' volume support and honor those weekly average volumes. Spikes in volume being booked beyond an importer's historic weekly average may require them to pay spot rates for space. If the COVID-19 outbreak lingers into March, ocean carriers could declare Force Majeure in order to justify higher rates across the board, although there is no indication of this yet.

The FedEx Logistics Ocean teams are communicating with our ocean carrier partners about any possible alternative contingency routings that may be available in order to accommodate the likely spike in demand in March.

FOR ADDITIONAL INFORMATION


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