Stricter quarantine rules in China are causing disruptions in the air cargo supply chain. New restrictions have been imposed due to the recent wave of COVID cases in the country, brought on by the highly contagious Delta variant.

The recent measures, which are expected to stay in place for at least several more weeks, are significantly impacting cargo operations in both airports and seaports, though air cargo is experiencing the most disruption according to supply chain risk analyst, Everstream Analytics.

At least 15 airports have been affected, with some airports like Nanjing Lukou International Airport and Yangzhou Taizhou International Airport being temporarily closed and others operating at reduced capacity. As of early August, Beijing, Shanghai Pudong, Xiamen Airport are operating at around 43%, 33%, and 66% capacity, respectively, with hundreds of flights being canceled at each airport. China Cargo Airlines and China Eastern Airlines have also suspended passenger belly freighters until the end of August due to several crew members testing positive for COVID-19.

In addition, many ground handling staff are quitting as a result of the strict new rules, which require employees to spend 14 days in quarantine for every seven days of working on-site, with seven days of quarantine at a hotel and then seven days at home.

“This has caused a big influx of resignations among operations staff, as well as equipment shortages,” Rickard Ingvarsson, CEO Asia at Scan Global Logistics, told The Loadstar.

With both the mass resignations and limits on how often employees can work, carriers are struggling to meet cargo demand.

Freight forwarder Flexport said of the situation, “This has effectively reduced the workforce at [Shanghai Pudong] by almost 50% which has forced many airlines to cancel flights and also limit the amount of work for the ground handling staff.”

“The situation is likely to cause airport congestion and delays and trigger further rate increases due to lost air cargo capacity,” stated a report from Everstream Analytics. “Major airports in China have restricted operations to undertake virus disinfection work and as a result, shortages in flight capacity and staff have been reported.”

Scan Global Logistics said that flight cancellations and labor shortages have “had an immediate impact on capacity and has been driving up rate levels. Some specific areas in Asia are more impacted than others, however, the overall market situation remains difficult.”

“Volume has reached pre-COVID-19 levels, but the industry is still facing a significantly reduced capacity situation with many passenger flights not having resumed as off yet, driving a further supply and demand imbalance.”

The U.S. is experiencing the effects of the supply chain disruption, with many U.S. airports including Los Angeles, Chicago and New York experiencing heavy congestion as warehouses are overloaded and “cargo is sitting on the tarmac,” according to Ingvarsson.

With the gap between supply and demand continuing to widen, freight rates are being driven up. Rates to Europe and the U.S. increased by $0.7 to $1.5 and $1.5 to $3 per kg, respectively, in early August.

“The uncertainty around schedule availability, workforce on the ground and increased demand may push rates in the open market to extraordinary levels – with the biggest supply-demand gap on the transpacific,” Ingvarsson said.

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