Why is Chaos Looming for Airfreight?
Updated: Sep 9, 2021
‘Big chaos’ is on the way as forwarders predict a lack of air freight capacity in the coming peak season. With the likelihood that demand will significantly outstrip supply out of Asia, get set to see some sky-high rates coming on the market.
Why is this all kicking off? Part of the problem starts in Shanghai, where a Covid outbreak has reduced the workforce by about two-thirds. The crew is so depleted that a temporary ban has been placed on passenger freighters and charters are on hold.
Get set to see some sky-high rates coming on the market
If this situation continues into the peak period, it looks likely to create some serious chaos. Last year, both freighters and charters helped to add capacity, but this avenue now seems closed.
Rates are already rising significantly. Over the last fortnight, rates from China to the US west coast rose to more than $10 per kg, prices were hiked to $11.50 to Chicago, and the direct service to JFK has jumped to $12 to $13 per kg. The high rates to the US have also disrupted capacity to Europe.
The capacity crisis is so severe that it has become challenging to move larger cargo shipments from major Asian airports. Key export airports, including Hanoi, Ho Chi Minh, Phnom Penh, and Bangkok, face high airfreight demand.
Manufacturing delays caused by Covid have exacerbated the crisis
Manufacturing delays caused by Covid have exacerbated the crisis; buyers are being forced to airfreight stock to reduce the lead time to market. On top of this, the instability of ocean freight has made the situation worse. Port congestion is leading to missed connections and increased transit times.
With the likelihood that airlines will continue to push up rates to take advantage of the situation, the near future is not looking good for forwarders. Be prepared for sky-rocketing rates coming your way very soon.