If ports in the eastern United States and the Gulf of Mexico are closed from October 1, the strike-induced surge in demand for air freight could be the worst moment for the air cargo industry as the air cargo industry prepares for a strong peak season. Eight consecutive months of double-digit growth, coupled with a strong increase in the volume of e-commerce across the Pacific and Eurasia this year (mainly from China), kept freight rates at higher levels and encouraged airlinesTransferring freight capacity from other industriesTo markets outside Asia where other industries are thriving.
ASF Air President Angel Rodriguez said the U.S. port strike will soon lead to a backlog of manmade or planned outbound cargo shipments, which are usually transported by sea. “Now that this happens during the busiest season for air freight, increased demand for e-commerce, the upcoming holiday season, and the launch of new products such as smartphones, all of which are vying for similar markets. Air freight rates from China to the U.S. and Europe have been rising all year, e-commerce is dominant in cargo volume, and ships are sailing longer around southern Africa to avoid the Red Sea from transferring emergency cargo from sea to air. In August, the Asian-North American routes had a passenger rate of 87%, and the Asia-Europe and Asia-Middle East routes had a passenger rate of 86%, which means that these routes are actually full.
Widespread supply imbalances pushed up air freight rates, with supply up 2% year-on-year in August and demand up 11% year-on-year, data from the Baltic Sea Aviation Index (BAI) showed that shipping rates from China to the United States increased by 30% year-on-year to $5.87 per kilogram as of the week of September 16, according to data from the tariff benchmark platform Xeneta, Shipping prices from China to Europe increased 28% to $4.10 per kilogram.
Airline executives estimate that China's four e-commerce platforms use 150 cargo planes a day to deliver online orders to destination markets, with most of them directly contracting with airlines, leaving cargo agents serving traditional air freight customers to compete in an increasingly tense market Find space in the back.
Hellmann Worldwide Logistics Americas Regional Head Alberto Mathia said that air freight prices, especially those from Asia, have been rising despite the possibility of a strike at US ports. “With the end of the summer flight schedule, passenger flights may be reduced and the momentum will become more tense, creating additional challenges for our already limited air traffic as e-commerce shifts in Asia and the Red Sea.”
Rodrigues said shippers should have discussed contingency plans with service providers to determine a solution that keeps the production line undisturbed. Many of our ASF customers have begun considering full and partial boat charter contracts in order to have a secure inventory when an unfortunate strike does happen, however charter rates are also on the rise, with reports that more than USD 100 million of contracts were recently signed for return cargo flights on Europe-South American trade routes.
Niall van de Wouw, Xeneta's chief air cargo officer, said the air cargo industry was facing an “extremely challenging year-end peak season” with traditionally increased freight volumes in the run-up to Christmas and the New Year.
“China's outbound air cargo market is about to hit a storm, and shippers need to take immediate action and develop a clear plan for when a storm hits, such as working with suppliers to minimize the use of spot market capacity, which could lead to spiraling costs.” He warned.
Glyn Hughes, executive director of the International Air Freight Association (Tiaca), said that while port strikes in the eastern US and Gulf of Mexico would affect China's air cargo exports, the trans-Atlantic air cargo market could be severely hit.
Hughes told Business Journal: “To meet demand (much of which is driven by e-commerce), air cargo carriers have been repositioning cargo planes to serve these high-demand Asian markets.” “This has caused some transatlantic cargo ships to cease operations. If... the port strike goes ahead, some cargo will undoubtedly need air freight, but labor will be in short supply and passenger abdominal mobility is expected to decrease as services on winter flight schedules may also decrease.” He added.
However, labor tensions will push up air freight prices, Hughes said, which could cause airlines to move cargo back across the Atlantic market, and he thinks the manpower challenge will be a form of limited quantity, and I don't want to see U.S. freight facilities overcharged due to air freight.
