Peak season is fast approaching and this leaves many shippers concerned about the cost of fast shipping and air freight rates. The logistics world will have been watching freight prices closely in recent months, particularly with the ongoing Red Sea crisis.
Store owners will not want empty shelves come holiday season. They also wouldn’t want to land themselves in turbulent waters following last year’s peak season challenges.
Xeneta, an ocean and air freight rate benchmarking and market analytics platform, reports that “sell cargo” rates hit the highest level in nearly a year-and-a-half.
Air freight heats up for peak season
The Northeast Asia to Europe air freight market is heating up even more.
“By the first half of August, newly-contracted long-term general cargo sell rates hit US$ 4.42 per kg, up 30% year-on-year. The peak season surcharges introduced in May and June have now been removed, but the increasing base rates were clearly enough to elevate the market,” Xeneta explains.
What’s driving the recent spike in forwarder buy spot rates?
The increase in forwarder buy spot rates, which are prices valid for up to a month, often predicts changes in forwarder sell rates on this route about nine weeks in advance.
In early August, the forwarder buy rate for general cargo rose by 40% compared to last year, outpacing the 30% increase in forwarder sell rates. This growth also surpassed the global average spot rate increase.
The main factors behind this increase are strong e-commerce demand and a surge in semiconductor demand, fueled by high-performance computing and the growth of artificial intelligent technology.
Airlines, get ready for peak season
Xeneta points out that airlines are hopeful about the year-end peak season and are better prepared this time. Many are increasing capacity on the Northeast Asia to Europe route, with some even moving their freighter capacity away from Latin America.
Expedited shipping
In its latest quarterly report, the US Postal Service (USPS) reported a significant drop in demand for its expedited packaging shipping services.
Why is this happening? It’s because customers are choosing cheaper options due to price sensitivity and tough competition.
What factors are causing shippers to shift their priorities?
- Shippers are cutting costs by choosing affordability over speed.
- Carriers have improved their ground transportation, leading to faster delivery times.
- Companies are moving inventory closer to customers, reducing the need for fast shipping.
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Photo Credit: Canva
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About the author
Sharl is a qualified journalist. He has over 10 years’ experience in the media industry, including positions as an editor of a magazine and Business Editor of a daily newspaper. Sharl also has experience in logistics specifically operations, where he worked with global food aid organisations distributing food into Africa. Sharl enjoys writing business stories and human interest pieces.
