DB Schenker Air Freight Intermodal Solutions Airplane Inside Loading

Customer Advisory COVID-19 Global Update

December 8, 2020

Please find here the newest edition of our COVID-19 global customer advisory update. Every other week this update will give you up-to-date guidance and orientation over all business areas and all geographies.

Please continue to be engaged with your DB Schenker Account Managers on your latest plans, prices and projections. They will invest the utmost effort to support your business with corresponding solutions.

Executive Summary

Ocean Freight

  • Continued strong market demand on capacity remains the driving factor for exports ex Asia Pacific.
  • This does cause rates to increase dramatically ex Asia, more mildly from other regions. We expect rates to move up further during the 2nd half of December as well as during January 2021. Provision of equipment in Asia remains the biggest operational hurdle in the weeks to come, despite new buildings for a number of carriers and ongoing repositioning activities.
  • Carriers apply strict yield management; this also impacts year-round 2021 contracts significantly.
  • Global schedule reliability down to 52%.
  • Congestions in several place in the world on the rise.

Air Freight

  • Market demand is continuously outperforming capacity supply leading to a very tight capacity situation especially out of APAC, while demand recently also further increased on many trades from North America as well as Europe.
  • Ground Handling situation remains critical across all key economies and countries due to increasing impact of COVID-19 cases and situation in the major countries with increasing regulations.
  • ​​​​​​​Market situation is expected to remain similar for Q1-2021 with initial short-term impacts of a potential COVID-19 vaccine distribution.

Land Transport

  • Restrictions to contain the COVID-19 pandemic are re-established in several European countries, directly or indirectly affecting transportation.
  • In case of disruptions, we follow our pre-defined contingency plans to ensure flows of cargo. We are adapting our transport service offerings daily to the needs of our customers.
  • Some receivers continue to have limited operations. All shippers may check the delivery possibility with the consignee to avoid cost for storage or return shipments.

Contract Logistics

  • Our operations and customer services remain stable.
  • ​​​​​​​We continue prioritizing protection of our staff and keeping our customers’ businesses running.
  • BCP‘s are in place and monitored around the world.
  • We are supporting with storage and handling of PPE and offer short-term warehousing where idle space is available.

Global Market Updates

  • Global

(Dec 8, 2020) - Market demand in the global airfreight market is increasing and remains on a very high level. In particular, Asia Pacific Outbound demand has already led to a strong peak season with limited supply due to COVID-19 capacity implications. Freighter capacity is limited and aircraft utilization has reached similar peak levels in the first half of 2020. The strong demand has therefore led to additional charter flights to supply additional capacity on major trades. In the short-term passenger freighter flights can become a more viable option on several trades to supply additional capacity to overcome the expected supply shortage until year-end.

(Nov 24, 2020) - Airfreight volumes remain strong as the market continues to recover closer to 2019 volumes even though capacity supply remains strongly limited due to passenger flight cancellations throughout 2020. In addition to a strong peak season, the market is now experiencing additional volumes due to the current ocean to air conversion based on the recent developments in the global ocean freight market. The situation is therefore also expected to be impacted throughout the initial months in 2021 as a short-term improvement is not expected and demand globally has recovered month-on-month in 2020.

Freighter aircrafts are reaching maximum utilization levels as volumes continue to spike with an increase in passenger freighter flights to provide additional supply in the market. Load factors are increasing week-on-week as e-commerce demand in the major economies increases with some countries being in lock-down due to increase in COVID-19 cases. The additional COVID-19 cases have also led to further restrictions and strict quarantine measures across some key countries impacting the ground handling process in key airports leading to extended transit times or delays of airfreight imports in North America and Europe.

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Spotlight: COVID-19 Vaccine Logistics

Recently the market dynamics related to a COVID-19 vaccine distribution have strongly accelerated as pharmaceutical companies have requested an emergency approval for their vaccine product. On some key trade lanes from Central Europe this has already led to a challenge to access commercial capacity as airlines are supporting the prioritized uplift for the vaccine. However, the major impact yet is expected in the final mile distribution due to the temperature requirements of a COVID-19 vaccine. The airfreight market has been used to transport vaccines between +2 to +8° C, but has not yet been exposed to a situation where a demand for a global distribution of a vaccine requires the product to be kept deep frozen. Some of the distribution is expected to be resolved through a domestic or road freight distribution network as key pharmaceutical companies are using multiple production sites in the USA as well as in Europe. However, as capacity remains critical and demand is increasing month-on-month, even a slight further increase in airfreight capacity can lead to extended transit times or a tight capacity situation, but not closely as congested as many companies experienced the airfreight market during the PPE demand from China throughout the first half year of the pandemic in 2020.

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Our console charter flight schedule now includes the following flight operations:

→ Europe – China – Europe: 4 flights per week (B747-400F)
→ Hongkong – Europe: 2 flights per week (B747-400F)
→ China – USA: 3 flights per week (B747-400F)
→ Europe – USA – Europe: 3 flights per week (B747-400F)
→ Europe – India – Europe: 1 flight per week (B747-400F)

  • Europe 

(Dec 8, 2020) - All offices remain in full operation with access to terminal handling and ground transportation. All our European hubs deliver import and receive export freight with no backlogs recorded towards the weekend. Operationally, our linehauls to and from the hubs are running as scheduled. In some areas, our cross-border trucks might experience some minor delays.

  • Asia Pacific 

(Dec 8, 2020) - There are no updates on significantly impacted operations due to COVID-19, with status largely remaining unchanged.

Recent incidents at airports underscore the continued risk on operations and the vigilance necessary to cope with the ever-present COVID-19 situation.

Though resurging COVID-19 infections are evident and tight controls remain in some countries across APAC, our air freight operations remain available to support customer needs. Delays will be expected in customs clearance and transportation. Alternatives to move / transport cargo via other gateways / routes are being established. Customers may contact the respective DB Schenker representatives for support or solutions if required.

Capacity is expected to remain volatile. We remain vigilant in monitoring the situation, to mitigate events with potential impact to operations.

  • Middle East/Africa 

(Dec 8, 2020) - Overall, the air freight operations in the countries remain uninterrupted and we continue to serve our customers. Our regional and global preferred carriers are seen to gradually increase the frequency of passenger cargo flights.

Situation

Country

No operational restrictions for air cargo business

Qatar, Kenya, Oman, South Africa, Bahrain, Saudi Arabia, UAE, Egypt

Restrictions for operational air cargo business

  • Americas 

(Dec 8, 2020) - The 4th quarter and a busy peak-season have placed a strain on capacity to varying degrees by trade-lane. In addition, airport terminals are at times running behind in transitioning cargo creating further challenges. Especially the ground handling situation at key major airport such as Chicago O’Hare, New York and Los Angeles has led to heavy delays (2 - 4 days recovery) in the import ground handling process and workforce constraints due to COVID-19 impacts.

The situation has improved, but DB Schenker continues to closely monitor the situation to mitigate any impacts for our customers and inform you immediately in case of any change. DB Schenker Flight operations and part charters both transatlantic and transpacific are providing secure capacity for our customers, and our airport-based offices are providing the necessary coordination to provide the fastest release of cargo possible. Situation by trade-lane is as follows:

USA – Europe

→ Market demand is moderate to strong. Further charter flights have been launched with the Global Flight operations Program to provide additional air cargo capacity to Europe. These flights are connecting Atlanta and Chicago with Frankfurt, Germany and other surrounding Central European markets. They offer DB Schenker customers a stable access to capacity in what continues to be a volatile market situation.

USA – Asia (excluding China)

→ Capacity has tightened on most trade-lanes as a 4th quarter peak has materialized with the strongest capacity challenges remaining with movements to Australia, Singapore and India. DB Schenker’s strong ‘Part Charter’ capacity in place from ORD to destinations in Australia, and flight operations via the DB Schenker Euro Hub from FRA – BOM are supporting DB Schenker customer demands to these destinations.

USA (exports to) – China

→ No capacity constraints to key destinations in China. Market demand is moderate with the market supported by the large amount of inbound flight operations and charters that support capacity on the return leg to China.

USA – Latin Am / Latin Am to Europe and APAC

→ Intra-Americas: Market demand has grown significantly into the 4th quarter, with access to capacity becoming very tight with pricing moving up on all lane segments. Market demand USA to Brazil and Chile having become much stronger, and critical situations remaining for movement to Peru and Bolivia from the USA, and between Brazil and Mexico.

→ Perishable peak season as well straining available capacity and increasing rates ex Latin America to USA, Europe and Asiatic destinations.

USA – Middle East / Africa

→ South Africa with continued strong market demand and shortage of capacity.

  • Global

(Dec 8, 2020) - Market demand ex Asia exceeds massively the supply, this affects all trades incl. smaller Intra Far East lanes. Subsequently, equipment remains very tight. Carriers push for utmost empty positioning activities ex Europe and North America back to Asia. Several global carriers are expecting new equipment to be released in Asia over the next weeks to ease the current bottleneck. Carriers continue to execute strict yield management and prioritize equipment release, space and uplift accordingly.

Career Capacity Development 1-12/2020

Capacity ex Asia runs at fullest utilization, in addition we note larger roll over pools with several carriers. Market is expected to produce full ships until Chinese New Year in February 2021 – and beyond. Given this positive momentum, industry analysts have revised their earlier more negative anticipation of the ocean freight to a more moderate negative 4% volume growth for 2020, with an outlook of a growth in 2021 of about 4 to 6%.

The current circumstances make it very important for our customers to plan volume forecast (we advise 4 to 8 weeks in advance) and be flexible to re-route cargo (for congested destinations).  Career Capacity Development 1-12/2020

The situation for exports ex Europe is calmer, however volumes on the exports are improving and vessel utilizations increase. Rates remain stable with a trend upwards.

Please expect the situation on all trades subject to continuous changes.

With an uncertain outlook on vessel utilizations and partly huge impacts on port terminals, we need to prepare for changing schedules and transit times (due to slow steaming, port omissions or additional port inclusions as a result of service mergers), sudden / unexpected delays in uplift, increased bottlenecks of equipment availability, inconsistent departures and sudden surcharges possibly resulting in higher costs for the supply chain.

Our experts in Ocean will support and guide for

→ DB SchenkerOcean priority product on all main trades which guarantees loading within a fixed window.
→ DB SchenkerOcean offers for alternate routing possibilities to ensure cargo is lifted from port of loading.
→ Volume forecast and allocation planning: We have access to volumes on all alliances and support volumes planning through consultation services (allocation match based on customer forecast). Under progress: volume prediction per vertical.

Contact your DB Schenker Account Manager regarding Personal Protective Equipment services ex China Europe.

  • Europe 

(Dec 8, 2020) - On trades to the West, the utilization to North America has improved to over 90%, however LATAM destinations are in decline. It is expected that carriers will take additional actions on curtailing the capacity.

On exports ex Europe to the East, carriers still report strong booking situations with only limited shortfalls. Especially commodity volumes are still going strong (logs, chemicals). Equipment availability becomes a larger concern due to an upcoming 25 - 40% reduction of inbound flows plus expected longer usage of the equipment.

All European Ocean Freight Branches are fully functioning operationally.

  • Asia Pacific 

(Dec 8, 2020) - Notwithstanding the severe market situation on rates and capacity as highlighted by Global Ocean, there are no significant COVID-19 impacted operations, as status remains unchanged.

Though resurging COVID-19 infections are evident in some countries across APAC, our Ocean operations remain available to support customer needs. Delays could be expected in customs clearance and transportation.

→ Alternatives to move / transport cargo via other gateways / routes are being established. Customers may contact the respective DB Schenker representatives for support or solutions should it be required.

  • Middle East/Africa 

(Dec 8, 2020) - DB Schenker is able to manage the current demand from customers even though an equipment shortage has been seen in the region.

→ Please get in touch with your DB Schenker Account Manager for the latest rates.

  • Americas 

(Dec 8, 2020) - On the exports ex NORAM it is worthwhile to mention that especially to Asia, the vessel utilization remains strong with no inflation of market rates expected. Void sailings and service suspensions causing severe shortage of space on all North American gateways resulting in high vessel utilization factors across the board. Roll-overs and yield management are being applied by carriers. Extra loaders deployed and services being reinstated on ad-hoc basis. Asia to North America is peaking further and bookings Asia to South America have come up massively during the past two weeks. We continue to monitor the situation.

  • Global

(Dec 8, 2020) - Europe Land is fully operational and available for business, managing existing constraints re-established during wave 2. Asia gives a heterogeneous picture with most countries fully operational and available for business while a few countries (such as India) are facing challenges, however operating. Asia Landbridge (China – South East Asia) as well as Eurasia Landbridge (China – Europe Train) are fully operating, although facing congestions. Land operations in the Americas are also showing constraints, but still working close to normal.

  • Europe 

(Dec 8, 2020) - Restrictions to contain the COVID-19 pandemic are re-established in several European countries and in parts directly or indirectly affect the transportation of goods. For any potential cases of disruptive conditions, we follow our pre-defined contingency plans to ensure flows of cargo as much as possible. In addition, we are adapting our transport service offerings daily to the needs of our customers.

Some receivers continue to have limited operations and we ask all shippers to check the delivery possibility with the consignee to avoid cost for storage or return shipments.

Are you up- or down-scaling your business activity in response to the changing market environment? DB Schenker Landtransport is your partner with one of the strongest and most resilient networks across 40 countries in Europe. Moreover, with our digital channels like connect4Land we offer a 24/7 entry point to our transport services, easy to use from everywhere, every time – Click. Ship. Done.

  • Asia Pacific 

(Dec 8, 2020) - Our Domestic Land product continues unabated to provide our regular high level of service.

Our Asia Landbridge FTL/LTL road service still encounters intermittent reactionary border closures.

Border congestion due to high demand can add between 1 and 3 days to Asia Landbridge. DB Schenker staff at Asia Landbridge border offices ensure lead-times are minimized through “triage” prioritization. Additional labor and associated domicile costs are still required to strategically avoid lengthy quarantine periods for our international drivers.

Our Domestic and International road services continue to meet the high demand and are strategically positioned to meet the forecast demand spike associated with ongoing reduced Ocean freight and Airfreight capacity.

Congestion levels continue to fluctuate on our Eurasia service for Rail and Road. There are delays of 3 - 7 days at CN / KZ, CN  / MN and CN / RU borders plus < 3 days at BY / PL (Mala).

Westbound container stocks are running out and may lead to delays in the near future. The westbound wagon shortage is causing delays up to 10 days due to reduced services.

Christmas vacation will impact rail freight forwarding from December 18, 2020 to January 7, 2021.

We therefore recommend checking estimated lead-times with your Account Manager.

  • Middle East/Africa 

(Dec 8, 2020) - International GCC land border connecting Saudi Arabia to other countries has been opened for land transportation / land freight movement with limited operations.

  • Americas

(Dec 8, 2020) -

→  USA: USA still experiencing tight capacity in certain areas due to COVID 19 impacts on carrier staff. Anticipate capacity to be tight throughout the remainder of the year, as we continue into the peak season.
→  Brazil: Market is running in normal conditions.
→  Mexico: 100% fully operational. Although finding capacity at Ciudad Juarez for North Bound shipments can be a challenge.
→  Canada: Toronto and Peel regions are on lockdown effective for 28 days. Other close by regions have moved to ‘red status’ which allows everything to be open, but with very strict limitations. Restaurants and retail are shut (except for curbside service). Department, hardware, grocery stores remain open as essential.

  • Global

(Dec 8, 2020) - Our operations and customer services remain stable. No change in prioritizing protection of our staff and keeping our customers’ businesses running. With dedicated guidelines and preventive measures, we keep up our constant and short-term customer support. While supporting companies and institutions around the globe with handling of PPE, we keep up our offering:

→ In case you need temporary space, reach out to your DB Schenker Account-Manager or local contact person!

  • Europe 

(Nov 24, 2020) - All sites in our operations in Europe currently remain fully operational with precautionary measures in place for the health of workers.

  • Asia Pacific 

(Dec 8, 2020) - There is no significant change in status for APAC countries generally from previous updates. Tight controls remain in several APAC countries due to resurgent outbreaks. We remain vigilant in monitoring the situation, to mitigate events with potential impact to operations.

Due to extension of movement restrictions, some delays may be expected, albeit with no significant impact to our operational status.

→  For India, there have been no significant operational updates. Please refer to our India website for detailed information via download.

→  For Greater China, no change in operational status, despite local outbreaks reported and being contained in some cities.

While governmental imposed restrictions in APAC countries continue at varying levels, our service levels so far are maintained with our CL operations available to support customer needs.

Delays may be expected due to availability of workforce and enhanced strictly enforced hygiene and monitoring SOPs. Customers may contact the respective DB Schenker representatives for further support if necessary.

  • Middle East/Africa 

(Dec 8, 2020) - All DB Schenker contract logistics facilities in MEA continue to operate with appropriate health and safety standards, even as Kenya and South Africa slip into partial curfew.

  • Americas 

(Nov 24, 2020) - While observing increasing cases of COVID-19 infections across the region, our warehouses continue to operate, with precautionary measures in place for the health of our people and hence keeping up our customer services.

→  USA: All operations in the USA remain operational with precautionary measures in place for the health of our people and delivery of services to our clients. We are seeing increasing cases of COVID-19 in the USA and remain very robust in our safety measures and protocols.
→  Mexico: COVID-19 numbers are increasing in Mexico. Some states do require partial shut downs of private life and economy in particular on weekends. We are doing everything possible to minimize the impact to our personnel and facilities.
→  Canada: New restrictions affect non-essential retail in the regions of Toronto, Peel and the Province of Alberta. All sites in Canada remain operational with health and safety measures in place for the safety of our associates and continued service.

DB Schenker Organizational Update

DB Schenker is closely monitoring the COVID-19 situation. With precautionary measures in place, we are aiming to maintain full operability across all DB Schenker operations. In our offices across all continents, we have taken action to enable as many employees as possible to work from home to support the social distancing guidelines put in place by public authorities.

The next customer advisory will be the December 22 release or earlier should there be significant developments. Visit our website in advance to be among the first informed.

The 24/7 newsfeed on our website www.dbschenker.com offers additional links and downloads supporting the topics of this document. Please visit: 24/7 News Update


Thank you for your patience and support.
DB Schenker COVID-19 Customer Advisory Team

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We have used our utmost care in providing the information above. While the information above has been provided to the best of our knowledge and ability, the DB Schenker Group does not assume any liabilities arising from this information of the use thereof.