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Topic of the week:
As we approach air cargo’s peak season, shippers are facing growing challenges. Limited capacity is driving up sell rates on major trade routes, while concerns are mounting about the potential impact of looming port strikes on the US East and Gulf coasts. The situation is further complicated by the surge in eCommerce, which is already consuming much of the available airfreight capacity as peak season draws near.
Recent insights from market analytics platform Xeneta highlight the intensifying pressure on air cargo. As the trade lane from northeast Asia to Europe heats up, freight forwarders are seeing their air cargo sell rates reach the highest levels in nearly 18 months. Xeneta reports that newly contracted long-term general cargo sell rates have surged to $4.42 per kilogram, marking a 30% increase compared to the same period last year. This spike has left cargo owners and their logistics partners scrambling to build contingencies, particularly as they grow increasingly concerned about the viability of airfreight as a solution amidst the potential port strikes.
Allen Liu, President of eater China at Chapman Freeborn, attributes the rising rates to several factors, including the rapid development of eCommerce in Europe and the ongoing Red Sea crisis, which is constraining sea freight. Additionally, the conflicts in Ukraine and Israel are further limiting available airspace. Liu cautions that these high rates are likely to persist through 2024 and possibly into the first quarter of 2025.
The potential port strikes are also having a ripple effect on US airfreight. Brandon Fried, Executive Director of the US Airforwarders Association, notes that the mere threat of strikes has already prompted shippers to divert volumes to West Coast gateways. He warns that a strike could be "extremely disruptive" for the airfreight sector, particularly as importers and beneficial cargo owners become increasingly concerned about the upcoming holiday season.
Fried points out that if ocean-going cargo is forced to move by air due to the strikes, it will exacerbate an already pressing issue: the explosive growth of eCommerce. According to DHL’s eCCommerce Trends Report, logistics providers should brace for a 12-fold increase in online orders by 2030, translating to an additional $8.5 trillion in global trade.
In summary, the air cargo market is bracing for a perfect storm of limited capacity, rising rates, and potential disruptions from port strikes, all against the backdrop of a booming eCommerce sector. As these challenges converge, shippers and logistics providers must navigate a complex landscape, balancing the need for timely deliveries with the realities of a strained global supply chain.
Sea:
- Over the last two weeks China/East Asia to North America West Coast spot rates have decreased by 15% from $7,628/FEU to $6,459/FEU according to Freightos data.
- China/East Asia to North America East Coast spot rates have fallen over the last two weeks, decreasing by 19% to $9,480/FEU.
- Global container spot prices have fallen over the last two weeks, and are now sitting at $5,049/FEU, a 0.45% decrease over the last two weeks and a 229% increase from spot rates this time in 2023 according to the Freightos Baltic Index (FBX)
Air:
- Global Air Freight spot rates currently sit at $2.64, as rates continue to fluctuate according to the Freightos Air Freight Index (FAX)
- Europe to Northern America spot rates currently sit at $1.65 (100-3000kg), says FAX, increasing by 1.2 %
- Europe to Asia, Greater China spot rates currently sit at $1.23(100-3000kg), says FAX, decreasing by 2.3
That’s all for this week’s update…
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