From the Wall Street Journal. July 1:
The e-commerce shipments out of Asia are squeezing airfreight space, with the sector’s peak shipping season still months away
Bargain shopping apps Temu and Shein are reshaping the air cargo market out of China, eating up aircraft space at a pace that is driving up freight rates and sparking fears of a capacity squeeze during the busy peak shipping season later this year.
Shipping volumes from China’s manufacturing hubs in the south in particular are surging, triggering growing competition for aircraft space. Prices out of the airfreight-heavy region in June were up about 40% from a year ago during what is normally a slack season before business accelerates for the end-of-year holiday shopping period.
“If you as a shipper have not arranged or dealt with your freight forwarder on how to navigate that time, I think you might be in for quite a ride,” said Niall van de Wouw, chief airfreight officer for transportation data and procurement firm Xeneta.
Industry experts say the surge is largely the result of the turbocharged growth of Temu and Shein, the China-founded e-commerce upstarts that have become a force in online retail trade.
“The e-commerce boom out of China has transformed the airfreight market in an incredibly short period of time,” van de Wouw said.
Tim Scharwath, chief executive of DHL Global Forwarding, said Chinese e-commerce companies have expanded so rapidly in less than two years that they consume more than 30% of cargo space on some routes out of Asia.
Airfreight is typically dominated by small, high-value items such as smartphones and laptops as well as perishables such as fish and flowers. Temu and Shein are swamping air routes with low-cost clothing and household goods that they are shipping to consumers in Europe and North America.
Exports out of Hong Kong International Airport recorded double-digit increases in each of the first five months of 2024 and were up 30% year-over-year in May, according to the agency that runs the airport.
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The demand is driving a surge in prices. The average spot rate in late June to ship cargo by air out of South China to the U.S. was $5.27 per kilogram, more than double 2019 levels, according to Xeneta.
Freight forwarders, the middlemen who manage a large share of the cargo shipments moving on trans-Pacific routes, are warning competition for space later this year will be intense as retailers rush in goods for the holidays.
DHL Global Forwarding is pressing retailers and manufacturers to sign contracts now despite the higher-than-usual rates to guarantee space later. “If you come to us in October and ask for extra capacity, our answer to you will probably be no,” Scharwath said.
The growth of the international e-commerce volumes is among broad forces that are driving a lift in air cargo business this year.
Global airfreight demand rose 12.7% in the first four months of this year, according to the International Air Transport Association, well ahead of the 10.3% increase in capacity the industry trade group measured in the period. Demand in the Asia-Pacific region has been particularly strong, expanding 14% in April, nearly double the 7.8% gain in capacity.
WorldACD, a Netherlands-based airfreight industry data group, said in a June 13 report that attacks by Yemen’s Houthi rebels on commercial ships in the Red Sea that have triggered diversions and delays in ocean shipping have pushed exporters to air transport. The disruptions “have been exacerbated further in recent weeks due to port congestion and vessel capacity shortages in certain key markets, driving more cargo owners” to air carriers, the firm said.
Temu and Shein shot to popularity in the U.S. last year, drawing in customers with rock-bottom prices for items that ship directly from factories in China. The business model allows the companies to avoid paying duties under a U.S. statute that permits shipments with a value of $800 or less to enter the country without facing certain tariffs.
Amazon is planning a similar service out of China this fall, which could make the competition for airfreight even stiffer....
....MUCH MORE
In 2021 we saw:
Supply Chain Crisis: Beanie Babies Airlifted From Chinese Factories to Chicago Amid Holiday CrunchThe heart wants what the heart wants