As a potential East Coast dockworkers' strike looms in October, shippers turning to air freight to stock holiday inventory face surging prices and capacity shortages.
Air cargo markets are expected to overheat during the upcoming fourth-quarter peak season, with rising prices and limited capacity now almost inevitable.
Even before the holiday shipping rush begins, air freight rates on major lanes are already spiking. Speaking on the latest episode of The Freight Buyers' Club podcast, Peyton Burnett, Managing Director of TAC Index, the air cargo pricing agent for the Baltic Airfreight Index, noted significant increases. Spot pricing from China to the U.S. and Europe in the second week of September was "up around 25-30%" year-on-year, he said.
Burnett also highlighted a dramatic surge in freight prices from India, stating, "India outbound to the United States is up 150% year-on-year, and India outbound to Europe is up about 125% year-on-year." Additionally, rates from Vietnam, another key supplier of retail goods, have increased by over 100% compared to the previous year.
With demand intensifying and capacity tightening, Glyn Hughes, Director General of The International Air Cargo Association (TIACA), confirmed that airlines were redeploying available capacity to the most lucrative routes. "We're seeing some withdrawn capacity from markets like Europe-Latin America, where rates are not as high. More capacity is moving to the Asia-Europe and Transpacific trade lanes," he explained.
Two key factors are driving this spike in demand: extended transit times and rising shipping costs due to the Red Sea crisis, and strong e-commerce growth.
An additional complication for U.S. markets is the unresolved labour dispute between the United States Maritime Alliance (USMX) and the International Longshoremen's Association (ILA), which represents over 14,000 dockworkers at Gulf and East Coast ports. The ILA has reiterated its intent to strike in early October if no agreement is reached, creating further uncertainty for shippers.
Despite the intensifying situation, Hughes told the latest episode of The Freight Buyers' Club podcast, produced with the support of Dimerco Express Group, that air cargo prices won't reach the extreme levels seen during the COVID-19 pandemic. However, he warned that with little surplus capacity available, the market is likely to remain squeezed in the coming weeks. "We just hope shippers secure the capacity they need early enough," he added.
Kathy Liu, Vice President of Global Sales & Marketing at Dimerco Express Group, said that many shippers have already turned to air freight due to unreliable shipping options and high ocean freight rates. "Demand is still very strong," she stated, adding that it will continue to pick up from late September through December (see video here available for publication).
Liu also cautioned that aggressive capacity bookings by major Chinese e-tailers like Temu and Shein are exacerbating the crunch. Temu, for instance, has reportedly secured around 90 scheduled freighters through December, including a substantial amount of FedEx capacity. As a result, Liu said, "Very few freighters are now available on the open market," further tightening the availability of air cargo options for other shippers.
Source: The Freight Buyers' Club