Freight gridlock at Shanghai Pudong International Airport is so bad that some cargo planes are being forced to leave nearly empty and logistics companies are recommending ocean transportation as a faster option.
Airfreight professionals describe an operational meltdown, with trucks stuck in queues for two to three days to drop off shipments and boxes piling up in warehouses unable to get put on aircraft because Chinese customs officials and ground handlers are overwhelmed by the surge in export demand for face masks and other medical supplies.
The volume of hospital gear, resumption of e-commerce and other trade following China’s coronavirus quarantine and new export restrictions are blamed for the massive backlog, which was compounded by factories rushing out extra shipments before closing for the May Day holiday.
“In my 20 years, I have never experienced this level of congestion at any airport. And there are no signs of this alleviating in the next week to 10 days,” especially with factories reopening again, Neel Jones Shah, the global head of airfreight at San Francisco-based Flexport, said in an interview.
An avalanche of personal protective equipment, test kits and disinfectant is descending on Chinese airports because the rest of the world desperately needs it to minimize exposure to the COVID-19 virus and air is the fastest delivery method. China is the world’s largest source for respirator masks, surgical masks, medical goggles and protective garments, accounting for 50% of global exports in 2018, according to Chad Bown of the Peterson Institute for International Economics.
The Shanghai airport handled about 350 cargo flights during the last 10 days of April alone, Glyn Hughes, who heads the cargo division at the International Air Transport Association, told FreightWaves.
But the onslaught of goods is running into a bureaucratic wall and piling up. Last month, Chinese authorities placed export controls on 11 types of medical supplies, including infrared thermometers, after complaints in Europe and the U.S. about low-quality purchases. Chinese-made N95 respirators failed in several tests to meet filtering standards for small particles, while non-medical masks are also being sold as medical-grade ones. In addition to special certification, all the shipments must be individually inspected and verified by customs authorities to make sure they are not defective or fraudulent.
The risk-control office that certifies the medical equipment was closed for Chinese Labor Day and customs worked reduced hours during the holiday, adding to the bottleneck.
The process of opening boxes and going through the contents with a fine-tooth comb is very manual and adds at least three days to transit times, said Brian Bourke, chief growth officer at Chicago-based SEKO Logistics.
China’s new policy has forced freight forwarders to cancel many bookings because export shipments are regularly failing customs inspections. Most of them are demanding customers have cargo ready at least four days before a flight. It now takes five to six days for shipments to get from the manufacturer’s dock onto a plane, according to logistics companies in the area.
Meanwhile, forwarders and consolidators are requiring all freight charges for protective garments be paid up front, 72 hours before departure, because the cost of chartering a dedicated plane at the eye-popping one-way rate of $1.5 million or more, is prohibitively expensive. Pre-payment is also desired because shipments may miss the flight’s cutoff time and result in the forwarder otherwise having to eat the loss.
Delayed or rejected loads have a knock-on effect, too, because they need to be rebooked on later flights.
The most-affected transfer station is PACTL, a joint venture between Shanghai Airport Group and Lufthansa Cargo that controls three of the seven cargo terminals at Pudong Airport, according to a SEKO client advisory. Since May 3, Eastern Air Logistics’ western cargo terminal is temporarily not accepting any new charter flights in an attempt to clear the backlog.
Chinese social media sites show massive traffic jams of trucks, with no space to unload, on the entrance road to Pudong Airport. The wait is so long, Bourke said, that trucking companies have to rotate fatigued drivers via motorcycle.
Even after shipments are cleared, they can sit in a warehouse because ground handling companies often don’t have enough labor to consolidate shipments for aircraft loading, he added.
Jones Shah, a former head of cargo at Delta Air Lines, and others who do business at Pudong airport say the increased tender times have forced multiple carriers on several occasions to depart only 10% or 20% loaded because of schedule commitments, or fears that pilots will violate duty-hour limits by waiting.
Under normal circumstances, cargo airlines typically change crews in China. Instead, flights are originating in Tokyo or Seoul. Upon arrival, crews stay on the planes to avoid being tested or quarantined by Chinese authorities keen on preventing outsiders from reinfecting the local population. If freighters stay too long in Shanghai, crews will time out their duty clock and violate anti-fatigue rules before reaching a refueling stop in Anchorage, Alaska, or U.S. destinations.
“It’s a disaster right now. . . . There is personal protective equipment that could have been coming to the U.S. just wasn’t able to because of this backlog,” Bourke said.
Contacted by FreightWaves, North American passenger airlines that now operate so-called “ghost” charters — planes without passengers flying dedicated cargo routes — downplayed the congestion’s impact on load factors.
“PVG [airport code for Shanghai] has some challenges as a result of a huge increase in volume and flights, but American Airlines has been able to fill nearly all flights to-date. Demand remains very strong and our handling partners have been able to process freight in time to meet our outbound flights,” Sandy Scott, managing director of cargo operations – Europe & Asia Pacific, said in a statement. “Limiting export deliveries to 48 hours prior to flight departure helps with smoothing the flows through the cargo terminal. American is in constant contact with all global account customers, local customers, and handling partners to ensure flights leave on time and with full loads.”
A Delta spokesperson said, “Delta Cargo is working with our ground handlers and contracted warehouse providers in Shanghai to improve the situation in light of congestion affecting all airlines. Delta is committed to continuing our cargo-only flights between Shanghai and the U.S.”
Air Canada has not had aircraft leave empty because of good planning that enables it to swap out shipments that are not ready for ones that are, said Tim Wong, director of cargo sales and services for Asia-Pacific.
Freight forwarders are employing a number of tactics to bypass the bottlenecks and say customers need to be open to quick course corrections.
Flexport works with airline partners to delay flights upline, “before they leave for Shanghai because then the crews can continue to rest and not start their duty day. And that gives us a little more time to have freight tendered and built,” Jones Shah said. “But it can get tricky. Flights have to get to their destination because they have another flight after that. So, you’re operating within the confines of a very intricate schedule. This is a 24/7 job right now managing the complexity.”
Other Chinese airports face similar problems, to a lesser degree. SEKO is trying to avoid Shanghai at all costs for now, instead sending most airfreight to Zhengzhou airport, a 10-hour drive west of Shanghai. Time:matters, the logistics arm of Lufthansa Cargo, and its Chinese agent, Shanghai International Freight Forwarding, are also arranging cargo-only passenger charters from airports in Xiamen, Malaysia, and Nanjing, China, spokeswoman Katja Sondey said.
Making matters worse is that Chinese regulations don’t allow personal protective equipment to be exported or transshipped through Hong Kong.
“That has created lots of backlogs and capacity issues in Guangzhou and Shenzhen as many airlines do not have landing rights in mainland China and is one of the reasons why rates are sky high,” said Christos Spyrou, the CEO and founder of logistics cooperative Neutral Air Partner, via email from Hong Kong.
Fast-boat services, like those offered by Matson Inc. and APL, offer another relief valve for shippers. Matson, for example, sails direct from Shanghai to Long Beach, California, in 10 days.
“We’re telling people that sometimes it’s more of a sure thing to move via expedited ocean services. And that’s an education,” Bourke said. “When your airfreight guys are selling ocean, that’s when you know that the market is working in a crazy way.”
Jones Shah said shippers — especially those who are moving a lot of volume — need a diversified strategy when it comes to moving medical supplies.
“If you’re just moving one shipment of 500,000 masks, airfreight is the way to go. If you’re moving multiple shipments of 40 million to 50 million masks over the duration of a project, there is absolutely a hybrid, modal strategy that is going to get you there.
“It’s not just air or ocean that’s going to let you be successful. You need a combination of the two,” he said.
Europe doesn’t have an express-ocean option, so some logistics companies are increasing use of transcontinental rail from China to move urgently needed protective suits and related supplies. Imperial Logistics International said it took 20 days for the first batch of 45 containers with medical gear for health care workers to arrive in Germany by train.