Peak season ahead, air cargo demand to increase: Dimerco

As the peak season begins in September, demand for air freight is expected to continuously increase while available capacity will remain nearly unchanged.

"Additionally, charter resources will become increasingly limited. Customers with high demand are advised to start arranging their capacity with logistics service providers (LSPs) in advance to avoid uncontrollable costs and capacity constraints," says Dimerco in its latest Asia Pacific Freight Report.

Customs resolution boosts China-US volume
The U.S. Customs and Border Protection (CBP) has heightened its enforcement measures against e-commerce shipments entering the U.S., the update added. "Despite these challenges, the situation has shown signs of improvement, prompting expectations that major e-commerce players like Temu, Shein, TikTok and Alibaba will resume airfreight from China to the U.S. with volumes projected to rise by the end of June. Last month, CBP suspended "multiple customs brokers" from its Entry Type 86 Test programme, which allows duty-free import of shipments valued under $800 into the U.S. However, Tim Van Leeuwen from air cargo consultant Rotate reports that their data shows no discernible impact on freighter flight numbers from Northeast Asia to North America due to CBP's actions."

Air vs ocean - advantage air
The gap between ocean and air freight rates has narrowed significantly amid ongoing supply chain challenges, reaching its smallest difference since Q32022, the update added. "Global ocean rates are now only six times lower than air freight rates. Historically, air freight rates have been 12 to 15 times higher than ocean rates. The recent surge in container rates is due to ongoing pressure on ocean shipping, intensified by the Red Sea crisis, causing higher volumes and rates due to capacity shortages and port congestion."

Kathy Liu, Vice President, Dimerco Express Group says: “With the rate difference between ocean and air freight narrowing, approaching levels similar to those seen in 2021, this trend is expected to drive up both ocean and air freight rates in the coming months. We can anticipate rate increases and potential capacity shortages in Q4.”

Strong economic outlook
The global Purchasing Managers’ Index (PMI) increased significantly from 52.4 in April to 53.7 in May. (A PMI reading over 50 indicates growth or expansion of the manufacturing sector of the country as compared to the previous month.)

"This strong growth can mainly be attributed to improvements in the manufacturing and service sectors where output rose at the fastest rates in 29 and 12 months, respectively. However, this robust growth is overshadowed by ongoing inflation concerns. Although inflation has eased substantially from a peak of 7 percent to 2.7 percent, it remains above the Federal Reserve's target of two percent. Consequently, it remains uncertain whether the Fed will delay rate cuts until the end of the year and limit them to one or two cuts only."

Country report
Spot rates from China to the U.S. have surged in 2024, driven primarily by a boom in e-commerce demand from companies like Shein and Temu. Disruptions in ocean freight have also impacted air freight. Since 80 percent of the world’s cargo is transported by ocean, even a 0.2 percent shift in this percentage could lead to a 10 percent increase in air freight volumes. This highlights the sensitivity of air freight to disruptions in ocean shipping, says the report.

The overall rate has increased and space is tight in North China. "Exports from Tianjin

to the U.S. are experiencing increasing rates due to tight schedules for connecting flights and Asiana Airlines (OZ) temporarily refusing cargo for the U.S. West Coast. Despite the backlog at ICN improving, rates continue to trend upwards."

Due to the demand for e-commerce products, it is expected that rates will increase in the coming short period from Hong Kong.

Air export space from South Korea to the U.S. is tightening, similar to last month, due to the current ocean market situation and higher freight rates. This is driven by a shortage of supply and strong demand for China's outbound cargo, including e-commerce and e-cigarettes, routed via Korea.

"The surge in consumer demand, particularly for e-commerce cargo, has resulted in full air

freight capacity from Vietnam to Europe and the U.S./Canada through the first week of July. The connecting hubs continue to face backlogs for both Europe and U.S. routes. Airlines are still requiring forwarders to book flights to Europe and the U.S./Canada 10-15 days in advance."

Shipping delays in Singapore have more than doubled in recent weeks, potentially leading to

higher rates in upcoming shipping cycles. "Additionally, many shippers are switching from sea freight to air freight, further affecting the backlogs as carriers struggle to allocate space without expedited services. As a result, rates are expected to rise further with longer lead times due to space shortages, particularly on routes to the U.S., Canada and Europe."

For intra-Asia lanes, airlines are facing a substantial surge in volume at major airports in India, the update added. "This increase is due to ocean volume being diverted to air as a result of issues in the Red Sea, combined with the traditional peak season for air cargo. For U.S./Canada and Europe lanes, the rates are fluctuating and increasing due to a surge in volume and carriers not offering long-term rates."