Posted on 17th December 2020 in the categories: Market Update

Market Update

COVID-19 Impact

The fallout of the Covid-19 pandemic continues to have major impacts on the global cargo industry. We have summarised some of the main impacts below:

Sea freight

Efforts to help reduce the spread of Covid-19 across the world have disrupted the normal trade patterns. In turn, this has caused freight delays, and leading to a shortage of containers in the major export ports. This has subsequently led to some vessels sailing from China under-utilised in recent weeks. A recent container availability index report from Container xChange indicates availability across China is at a ‘record low’. This has been further exacerbated by UK importers rushing to load stock ahead of the UK’s exit from the European Union on the 1st Jan 2021.

To ease the imbalance, ocean carriers have started to suspend bookings for European and US exports and are reviewing what they can accept on vessels. They are refusing all but the most valuable cargo through to mid-January 2021, preferring to send as many empty containers as possible which has resulted in goods stacking up in ports causing overcrowded terminals. Container freight rates from Asia to Europe have reached a 10-year high. Rates on 20-ft containers more than doubling since August 2020. It’s expected that freight rates will remain high during the 1st quarter of 2021, as it will take some time before the shortages are resolved and normality resumes.

Air Freight

The majority of the worlds air cargo is transported on passenger aircrafts. A major reduction in air travel has been experienced since the Covid-19 pandemic began. As a result the air cargo normally transported on passenger flights has been moved on scheduled freighter services instead. This has put extreme pressures on capacity, coupled with the increase in requirement of PPE & medical supplies to be transported by air and a new product launch from Apple consuming large portions of what little availability there was, has pushed prices sky high. Some routes in November experienced prices more than 60% higher than in the same period last year.

In the coming months, we should see the removal of the travel & quarantine requirements, currently in place to help prevent the spread of Covid-19, which should result in an increase in passenger travel. This should subsequently provide an influx of capacity and help to bring the prices back down to pre-Covid-19 levels.

Currency Prices

GBP has dropped against most major currencies, as traders priced in the rather unsettling yet unsurprising prospect of a ‘no deal’ Brexit scenario. This comes as EU-UK trade negotiations seemingly breakdown and come to halt with Prime Minister Boris Johnson ready to quit talks.

Newspapers have suggested that the Prime Minister labelled the EU’s demands as ‘outrageous.’ Further reports suggest that if there’s no movement by Monday the 8th, there will be a question as to whether it is worth carrying on. The major stumbling block is reportedly that the UK remain adamant they will not give into EU demands. Therefore, preventing the UK taking back control of the rules Britons live under.

Volatility is likely to carry on this week for the Pound. Additionally, it will likely be elevated and reactive to any rumours or headlines on the status of negotiations.

GBPEUR now trading around 1.0950

GBPUSD now trading around 1.3260

Commodity Prices

During the first quarter, when the Coronavirus pandemic hit the world’s economies hard, prices for some REEs were affected. This included cerium, lanthanum, neodymium (Nd) and praseodymium (Pr), which saw 5 to 8 percent declines in Q2 compared to Q1.

However, overall prices for most elements showed signs of recovery in June and July. The upward trend has continued into Q4 2020. However, it depends if the virus is kept under control, the global economy stays open and a recession is avoided. These increases are in line with what would be expected during a period of tightening supply for heavy rare earths; there was then a correction as increasing supply returned to the market.

Goudsmit UK

At Goudsmit UK, we draw on our experience, resources and industry connections to manufacture and transport your products globally. We’re in constant contact with our customers throughout the process to ensure that we can continue to meet your requirements. We can facilitate holding UK stock for our customers and would encourage that 6-8mths of buffer stock is considered when re-ordering new production. This reduces the likely requirement for airfreight and any potential impact of vessel delays by sea freight.

Should you wish to discuss any current orders or future requirements, contact us on 02890271001 or email us at info@goudsmit.co.uk.

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