Air Freight Demand Soars Amid E-Commerce Boom
As the peak season approaches, the global air cargo market is on the brink of a historic surge. Since the Lunar New Year, the market has shown no signs of the usual seasonal slowdown. Instead, export e-commerce platforms have continued to thrive, driving air freight rates to consistently high levels since March.
Key Drivers of Increased Demand
The rapid growth of e-commerce platforms like SHEIN and TEMU has significantly boosted air freight demand. This surge is not limited to routes from China to the United States but has also impacted neighboring regions. For instance, the increased demand has filled air freight capacities from Vietnam to Europe and North America by early July.
Additionally, airlines are requiring freight forwarders to book flights to Europe and North America 10-15 days in advance, causing delays. Singapore flights have seen delays double in recent weeks, potentially leading to higher freight rates in future shipping cycles.
Supply Chain Challenges
Strong demand for Chinese exports, including e-commerce goods and electronic cigarettes, has tightened air freight space from South Korea to the U.S. The space shortage and Asiana Airlines’ temporary refusal to transport goods to the U.S. West Coast have driven up export freight rates from Tianjin, China, to the U.S.
While congestion at Incheon International Airport has somewhat eased, freight rates remain high. In June, the U.S. Customs and Border Protection temporarily suspended multiple customs brokers’ participation in the T86 program (which allows duty-free entry of goods under $800) and increased scrutiny of incoming e-commerce cargo. Although this posed challenges for cross-border e-commerce parcels, platforms like TEMU, SHEIN, TikTok, and AliExpress are gradually resuming air freight operations from China to the U.S.
Strategic Recommendations
Dimerco’s latest Asia Pacific Freight Report advises high-demand customers to pre-arrange capacity with logistics service providers to avoid uncontrollable costs and capacity constraints. The narrowing gap between sea and air freight rates has indirectly fueled air freight demand. Even a 0.2% shift in global cargo transported by sea can increase air freight volume by 10%.
Historically, air freight rates have been 12 to 15 times higher than sea freight rates. However, ongoing sea freight pressures and the Red Sea crisis have caused container rates to spike, driving up both freight volume and rates. The gap between sea and air freight rates has significantly narrowed, reaching its smallest since Q3 2022, with global sea freight rates currently only six times lower than air freight rates.
Market Outlook
Niall van de Wouw, Chief Air Cargo Officer at Xeneta, attributes sea freight issues to shippers pre-loading peak season goods to avoid the already-tight market’s Q3 peak. WorldACD notes that these conditions have added extra pressure on air cargo. Disruptions in container shipping services, partly due to Red Sea ship attacks and further exacerbated by port congestion and vessel shortages in key markets, have driven more shippers to seek air freight solutions.
Many shippers are shifting from sea to air freight, further straining air cargo capacity as carriers struggle to allocate space without accelerating services. This trend is impacting major airports and airlines, which are experiencing significant volume surges, particularly on intra-Asia routes due to the Red Sea issues and traditional peak season factors.
Conclusion
The explosive growth of e-commerce is driving up air freight demand and costs. At the same time, sea freight disruptions and capacity shortages are compounding global logistics challenges, leading shippers to increasingly opt for air freight solutions. This trend not only affects global supply chain costs and efficiency but also poses new challenges to the narrowing rate differential between air and sea freight. As the peak stocking season approaches, businesses must strategically balance and optimize their supply chains.
How will the upcoming peak season affect your logistics strategy? Share your thoughts and strategies in the comments below!