Shippers are encouraged to strategize for peak periods as air cargo operations may face capacity challenges
3 weeks ago
Shippers are encouraged to strategize for peak periods as air cargo operations may face capacity challenges
Shippers are being advised to secure cargo space and develop contingency plans due to expected capacity shortages in the air cargo market from key Asian regions during the peak season, according to insights shared in a webinar by Xeneta and Tiaca.
During the webinar, Xeneta's airfreight analyst Wenwen Zhang highlighted that dynamic load factors considering both weight and volume were already high in July, reaching 86% for routes from Asia Pacific to Europe and about 88% for routes to North America, despite this being a typically quieter period of the year.
Capacity constraints are anticipated to worsen during the peak season due to increased general cargo volumes, a continuing surge in e-commerce, and persistent disruptions in ocean shipping.
Niall van de Wouw, Xeneta's chief airfreight officer, noted that the ongoing Red Sea crisis had significantly impacted ocean shipping timeliness. In June, only around 49% of ocean shipping services from Asia to Europe were on time, down from roughly 70% the previous year. This disruption has increased ocean rates and reduced the cost difference between air and ocean freight, making air cargo roughly four times more expensive than ocean freight, compared to ten times more expensive before the pandemic.
Tiaca's Director General, Glynn Hughes, also warned of potential labor strikes on the US east and Gulf coasts when current labor agreements expire in October. Such strikes could lead to port shutdowns, necessitating cargo rerouting through the west coast, which would increase both time and costs or compel shippers to switch to air cargo.
Van de Wouw summarized the outlook, stating that with many flights already at capacity, elevated rates, potential port strikes, unresolved issues in the Middle East, and reduced belly capacity in Q4, shippers face a challenging environment. He emphasized the importance of proactive discussions with forwarders to avoid being caught off guard as happened last year.
To address these challenges, shippers are securing long-term contracts, reserving space, using index-linked contracts, and preparing for various scenarios. Operationally, they are also exploring alternative routes and avoiding hubs that may experience high e-commerce demand.
Hughes noted that, unlike the unexpected e-commerce surge of 2023, this year provides an opportunity to plan ahead. He encouraged shippers and forwarders to negotiate longer-term agreements based on loyalty and prepare for various contingencies, including potential port strikes.
Source: AirCargoNews