AIR Freight - Kintetsu World Express

LATEST News
CN announces major spending across North American operations. Canadian National Railway has announced $1.9 billion in investments
across its network. The most significant spending will be in Ontario, Alberta, Quebec and British Columbia, with smaller commitments
planned in Saskatchewan and Illinois, New Brunswick, Nova Scotia, and Tennessee. The company said in a series of announcements that the
spending will go towards technology, capacity, rolling stock units and decarbonization, as well as network improvements. The biggest single
plan is in Ontario, where CN will spend $430 million, largely on maintenance. The company says it will spend $365 million in Alberta, $355
million in Quebec, $390 million in B.C., $185 million in Saskatchewan, $40 million in New Brunswick, and $15 million in Nova Scotia. South of
the border, it plans $30 million worth of upgrades in Tennessee and $150 million in Illinois. Ontario and Quebec business groups welcomed
CN’s plans for decarbonization and infrastructure improvements. “The Ontario Chamber of Commerce applauds our member, CN, for
making such a significant investment in the province. With continued strains on global supply chains, we welcome CN’s work to strengthen
domestic competitiveness and supply chain resilience,” said Rocco Rossi, president and CEO of Ontario Chamber of Commerce.

      AIR Freight
Air charter market remains buoyant as capacity is harder to find. Brokers have suggested that strong air cargo charter demand is set to
continue through 2022 as businesses ramp up production again and the most severe of the pandemic restrictions have now been lifted.
“Over the past two years, the air charter cargo market has seen a rejuvenation,” said Glenn Hogben, CEO at The Air Charter Association
(ACA). However, he noted that Covid had continued to impact the logistics industry, with major outbreaks in China, and its continuing zero
tolerance policy, seeing large areas of the country return to lockdown. He said this had disrupted supply chains and deliveries to ports and
airports and added: “There are also significant backlogs, which are greater than the marine and aviation cargo industries can quickly
dissipate. “These factors combined have created ongoing high demand for capacity likely to last well past the end of 2022.” Compounding
this, there are various limitations on aircraft availability, with the Ukraine/Russia conflict removing a large number from the market, as well
as increasing demand as a result of urgent humanitarian supply deliveries. There is also an impending reduction in market capacity: the
EASA approvals for ‘preighters’ (passenger aircraft with seats removed operating as freighters), granted on a short-term basis during the
height of the pandemic, end next month, which will remove these aircraft from the European market.

Brands to continue higher airfreight spend despite added cost. Multiple brands plan to continue spending on airfreight at elevated
levels to meet demand for the remainder of their fiscal years as supply chain disruptions persist, according to companies’ earnings calls.
Lululemon and Figs expect an increased reliance on airfreight to have a negative impact on their gross margins in fiscal 2022. Outdoor
DISCLAIMER - All information is provided in good faith for guidance and reference purposes only. It is of a general informational nature, and KWE Canada takes no legal responsibility for the accuracy of
the information provided via this document. KWE Canada makes no representation as to the accuracy or completeness of any of the information contained herein and accepts no liability for any loss
arising from the use of the information provided.

lifestyle brand Roots expects its direct-to-consumer margins to be pressured by higher airfreight costs. “Given some closures in China, we
have had to airfreight a bit more products for Q3 of this year than we did last year,” Roots CFO Mona Kennedy said during a June earnings
call. “So, if you are comparing to last year, you will see more pressure in Q3, but you will see equal pressures in Q4 as well.” Shippers call on
airfreight when speed is critical, and brands are pushing to stock up their shelves for the latter half of the year in an environment full of
supply chain roadblocks. This trend has been happening in stretches throughout the COVID-19 pandemic, with companies assuring investors
the cost pressures are temporary. Figs expected to reduce its reliance on airfreight this year versus the end of 2021, CEO Trina Spear said on
a May earnings call. But the healthcare apparel brand has “seen an intense and persistent surge in the volatility of ocean transit times for
receiving our products” since early March as carriers rerouted vessels “unexpectedly” during transit. “Shipping times began to vary, ranging
from as fast as 30 days to upwards of 120 days, and it’s difficult to see this unpredictability ending soon,” Spear said. In response to this
uncertainty, Figs plans to “significantly increase” its use of airfreight while also adjusting its product launch calendar to more reliably deliver
products, Spear added. Much of what the company plans to ship via air for the remainder of the year is connected to product launches that
deliver high levels of customer engagement for a brief period of time, CFO Daniella Turenshine said. “It’s not really about increasing weeks of
supply,” Turenshine said. “It’s more about being really [decisive] in our air choices and making sure that we are doing what we need to do to
have the product here to meet the demand and to sustain our launch calendar and to grow at the rates in our outlook.”

       SEA Freight
Shock for carriers as spot rates fall below long-term contract prices. Spot container freight rates on the main east-west deepsea
headhaul trades continued to edge downwards this week, amid a softening of demand as western consumers grapple with the rising cost of
living crisis. A survey of SME shippers by Freightos shows that more than half the respondents have placed peak season orders early in the
hope of building inventory, while two-thirds said they were already experiencing a decrease in demand, which most of them attributed to
inflation. This early booking seems to have an extraordinary effect: long-term contract rates on the transpacific eastbound leg now being
higher than spot rates, according to data from Xeneta. Today’s reading of Xeneta’s XSI spot index shows a spot rate of $7,695 per feu, a week-
on-week decline of 2.8%, alongside a long-term contract rate of $7,981 per feu. And this is beginning to have an effect on shipper behaviour,
according to one forwarding source involved in the trade. He said: “What is interesting is that, previously it was the BCO looking for space,
now we are getting BCO requests for spot quotes, as it looks like the long-term contract rates are higher, depending on the size of the BCO.
“To me, this is problematic for the carriers, as they lost a degree of credibility with the way they handled the contracts last year, saying the
market would be strong for the BCO for all of 2022 and into 2023. Now, they are faced with falling rates and open space,” he added. The
erosion of elevated spot rates also continued on the Asia-US east coast trade this week – Drewry’s World Container Index (WCI) showed a
3% decline week on week, to finish at $10,403 per feu, while Freightos FBX posted a 1% decline, to $11,784 per feu. Very similar rate
declines were seen on the Asia-North Europe trade. The WCI recorded a 2% decline, to $9,598, the FMX was down 1%, to $10,643, while the
XSI showed a slight 0.8% gain, to $10,353. And the week was summed up simply by the Ningbo Containerised Freight Index: “The loading
rate of the Europe route was not good, and the market freight rate continued to show a downward trend.” And it is increasingly odds-on that
this pessimistic market outlook is likely to persist, according to the monthly market monitor from MSI, published yesterday. It says: “The
outlook for H2 22 will be challenged by a weakening demand-side environment, as inflationary pressure forces consumers to cut back on
discretionary spending.

DISCLAIMER - All information is provided in good faith for guidance and reference purposes only. It is of a general informational nature, and KWE Canada takes no legal responsibility for the accuracy of
the information provided via this document. KWE Canada makes no representation as to the accuracy or completeness of any of the information contained herein and accepts no liability for any loss
arising from the use of the information provided.

SURFACE Transportation
Cross-border truck traffic surged in April. Talk of a potential recession continues, and inflation has hit levels not seen since 1983, but the
surge in cross-border freight continues. Trucks moved US$35.6 billion of freight in both directions across the Canada-U.S. border this April,
according to the U.S. Bureau of Transportation Statistics. Another $44 billion was hauled by trucks across the U.S.-Mexico border. (All figures
in US dollars.) The vehicles were responsible for 58.9% of all trans-border freight by value. Ontario border crossings with Detroit and Port
Huron, Mich., accounted for a respective $10 billion and $6.2 billion of the total. Mexico’s crossing at Laredo, Texas, remained the busiest
land port overall, accounting for $19.6 billion in truck freight. The top three commodities moved by trucks across the Canada, U.S. and
Mexico borders included computers and parts ($14.9 billion), electrical machinery ($11.6 billion), and vehicles and parts ($10.8 billion).
Overall, $69.1 billion in freight traveled between Canada and the U.S. – up 31.2% over April 2021 – when including trucks, railways, aircraft,
ships and pipelines. Oil and gas accounted for 99% of the goods moved by pipelines, and the value of that oil was up 64.9% over the same
month last year. Customs officials at the Canada-U.S. border processed 461,150 truck drivers in April 2022, up from 453,789 in April 2021,
according to data from the Public Health Agency of Canada. Canada and the U.S. have since January required truck drivers to be fully
vaccinated against Covid-19.

Canada’s spot market continues to cool. Canadian spot market load volumes fell 15% in May, according to Loadlink Technologies,
reflecting a cooling from pandemic-induced highs. For the second consecutive month, truck capacity increased with 1.68 trucks available for
each load. But despite the softening market, loads were still up 40% year over year. Loads from Canada to the U.S. dropped 30% from April,
but were still up 82% year over year. Inbound loads dropped 12% but were up 27% year over year. And domestic loads were down 5% from
April but were up 45% year over year. Loadlink says the rise in the truck-to-load ratio reflects the transitory nature of the spot market in
Canada, as it recovers from record-setting low capacity seen in the pandemic. The 1.68 trucks per load was up 47.4% from April, but
remained 32% lower than last May when there were 2.47 trucks per load.

        MARKET Sources
https://www.insidelogistics.ca/transportation/rail/cn-announces-major-spending-across-north-american-operations-181690/
https://theloadstar.com/shock-for-carriers-as-spot-rates-fall-below-long-term-contract-prices/
https://theloadstar.com/air-charter-market-remains-buoyant-as-capacity-is-harder-to-find/
https://www.supplychaindive.com/news/brands-ramp-up-airfreight-spending-ocean-shipping-china-lululemon-figs-roots/625744/
https://www.trucknews.com/transportation/cross-border-truck-traffic-surged-in-april/1003166849/
https://www.trucknews.com/transportation/canadas-spot-market-continues-to-cool/1003166845/

DISCLAIMER - All information is provided in good faith for guidance and reference purposes only. It is of a general informational nature, and KWE Canada takes no legal responsibility for the accuracy of
the information provided via this document. KWE Canada makes no representation as to the accuracy or completeness of any of the information contained herein and accepts no liability for any loss
arising from the use of the information provided.

This announcement applies to all Kintetsu World Express Transportation Services, including our Air Freight, Sea Freight, Ground Freight and Logistics.
Kintetsu World Express is continuously monitoring the situation and will provide further updates as the information becomes available.
If you have any questions, please contact your local KWE representative.
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DISCLAIMER - All information is provided in good faith for guidance and reference purposes only. It is of a general informational nature, and KWE Canada takes no legal responsibility for the accuracy of
the information provided via this document. KWE Canada makes no representation as to the accuracy or completeness of any of the information contained herein and accepts no liability for any loss
arising from the use of the information provided.