Air freight rates skyrocketed due to the difficulties of sea freight

Air freight rates spiked due to the difficulties of sea transport (Photo: Plotphoto)

It's all due to a production backlog and the shift from the struggling ocean freight to air freight.

An European forwarder said: “Since last week, rates are climbing everywhere.” "Demand increased massively, with distressed ocean freight being moved to air".

After a lull in May and June, which is normally a quiet period in previous years, however, cargo volume and air freight rates are increasing again.

“Demand from China to the US and Europe is starting to pick up, as more electronic products are ready to ship,” said a Singapore-based forwarder.

“There was a semiconductor chip shortage in May and June, which affected production. And there is a backlog of orders for Apple and Sony Playstation 5s products."

“We expect demand to continue to grow strongly through the end of 2021, given the traditional peak season. Freight rates from China to the US remain relatively high, but will likely increase towards the end of the year.”

A Shanghai-based forwarder said that while freight rates to the US were gradually increasing, "there must be some temporary factors affecting the European market all of a sudden".

“Price has been increasing over the past two weeks and this week, in general, all carriers have had strong price increases, around $1/kg, or even higher.”

The Singapore forwarding company said airlines appear to be shifting capacity from South Asia to China.

“Some production delays are expected, as most South Asian countries are in a state of shutdown due to Covid. Airlines are reducing their capacity from these countries and turning to China because of strong demand from China to the US.”

However, perhaps the Indian subcontinent (ISC) is facing a spike in demand and congestion, as Indian exports surged after the easing of lockdown restrictions.

An Indian forwarder said: “Air freight rates are really going crazy for both US and European routes. “The rates have almost doubled and I can't even imagine where we're headed. Until the week 24, freight rates  transport to Europe about USD 2.70 to USD 2.80, but the current market rate has increased to USD 3.40 to USD 3.50, even, for the route US transit time is up to eight - nine days and for Europe route, transit time is seven to eight days."

He explained that the Indian subcontinent is mainly dependent on Middle Eastern carriers, but he said they have reduced capacity in the region, while major Indian airports are congested. In particular, in Bangladesh it is "quite chaotic".

The European forwarder added: “So for now it looks like ocean shipping disruptions, high demand, shippers realizing their cargo will be late for deadlines, and local issues. Different directions and congestion all combine to form a very early peak, which is expected to continue for many months. "It's all been pretty abrupt over the past 10 days, with the turning point being on Monday, June 28 when it started to become noticeable."

“We are up 100% in air cargo volume year over year, and in some weeks, two to three times the normal rate for the year. This is on all shipping routes including UK/European exports.”

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Source: Phaata.com (According to The Loadstar)

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