AIR FREIGHT

Ocean and airfreight rate differential narrows

• The air freight industry is witnessing a notable uptick in demand, with recent data indicating a significant increase in the volume of goods being transported by air. This surge in demand has put considerable strain on available capacity, leading to challenges in meeting the growing needs of businesses and consumers alike. Specifically, the demand for air freight has been observed to perk up, with certain sectors reporting a substantial rise in shipments. For instance, the e-commerce sector, driven by the ongoing pandemic-induced shift towards online shopping, has seen a remarkable increase in air freight volumes.

• Moreover, the rate differential between ocean and air freight is narrowing, suggesting that shippers are opting for air freight over sea transport due to its superior speed and reliability, even at a higher cost. This shift is particularly evident in the trans-Pacific trade lanes, where the time-sensitive nature of goods, such as electronics and consumer goods, necessitates faster transportation options. The narrowing gap in rates reflects the increasing preference for air freight among shippers looking to minimize transit times and ensure timely delivery of goods.

Air rates over ocean rates ratio, jun2018 – May 2024​

Ratio/multiplier

Source: AirCargoNews, TheLoadStar

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OCEAN FREIGHT​

Carriers cutting back on vessel space allotments for NVOs

• In the current ocean freight industry landscape, capacity constraints are a pressing issue, exacerbated by an early peak shipping season, diversions around southern Africa to circumvent conflict zones, and looming labor disruptions in key ports. These factors, combined with an overall increase in demand, create a tight market condition where carriers struggle to fulfill their space allotment commitments to Non-Vessel Operating Common Carriers (NVOs) and retailers.

• In response, carriers are focusing on maximizing profits by securing high-paying spot cargo, often at the expense of contractual obligations. Amidst these challenges, there are glimmers of hope with reports of easing congestion in select Asian ports like Singapore, Malaysia, and China. This relief is partly attributed to operational improvements and the redirection of cargo flows. Additionally, increased transshipment activity through India's Mundra Port offers an alternative solution, albeit with its own set of challenges as India grapples with congestion issues.

• While these developments signal some alleviation of the capacity constraints, the overall situation remains dynamic, influenced by a myriad of factors that continue to shape the ocean freight industry's landscape..

Total monthly TEU volume of US containerized imports from Asia, with YOY change

• The US imports from Asia up yoy. In May were 1.44 million TEUs, up from 1.39 million TEUs in April, according to PIERs. Carriers are maximizing spot market revenues and implementing peak season surcharges to tackle high demand.

Source: JOC, AJOT, AJOT-2