German delivery firm DHL expects global supply-chain bottlenecks to ease next year as the return of air travel adds cargo capacity and higher vaccination rates keep a lid on Covid-19 infections.
A loosening of U.S. borders slated for Nov. 8 will be key, as the added flights provide more space for freight in the holds of passenger jetliners, DHL Chief Commercial Officer Katja Busch said in an interview.
“We will go back to normality next year,” Busch said Wednesday in Dubai. “The belly capacity over the Atlantic is coming back. That will take all the tension out of this destination, definitely.”
A supply-chain crunch stretching from Asian manufacturers to consumers in the U.S. and Europe is proving difficult to tackle, with port closures in China and worker shortages in America. Long waits outside U.S. ports and shipping containers piled up on docks are causing concern among retailers preparing for the holiday shopping season.
Traditionally, air freight has been a safety valve, giving shippers a way to get urgently needed parts to their destinations. But the coronavirus pandemic has limited the number of passenger flights, causing a squeeze on the amount of available cargo space.
The transatlantic reopening will increase air traffic, so barring a new wave of infections, “we should see the air freight market soften in the middle of next year to the fall,” Busch said. Ocean shipping may take a little bit longer, she said.
Harbor congestion is “bad in Europe and somehow worse in the U.S.,” Busch said. But she remains optimistic about the outlook because governments and logistics companies are working to resolve the issues. Busch pointed to the decision to allow the ports in Los Angeles and Long Beach to remain open 24 hours a day, seven days a week. The twin ports are responsible for 40% of U.S. container traffic.
Ruining Christmas?
Retailer concerns about product shortages and delays threatening the American holiday shopping season aren’t justified, Busch said.
“This scenario that our poor kids will be sitting around the Christmas tree without any presents, honestly I don’t see that,” Busch said. “I don’t think it will get worse before it gets better. I think we will see an improvement.”
The logistics industry will manage during the upcoming “peak season” for shopping over the next eight weeks as it managed during the worst of this pandemic, she added.
Still, supply woes are casting a shadow over U.S. economic growth, which slowed more than expected in the third quarter to the slowest pace of the pandemic recovery.
Shipping rates
Busch expects shipping rates to decline as bottlenecks ease, but not to fall back to 2019 levels after surging since the pandemic started. It now costs about $20,000 to import a 40-foot container from Asia, up from less than $2,000 two years ago.
“We will not see the levels we saw before the crisis,” Busch said. “The rates before the crisis had been very profitable for the ocean carriers, but the pandemic came and there was a lot of cost. They ordered new ships, so they’re heavily invested, and these are investments they need to earn back.”
