Air Freight Challenges: Lunar New Year and Red Sea Crisis

Air Freight Challenges: Lunar New Year and Red Sea Crisis

Lunar New Year-related spikes in demand for air freight and the distressed ‘Red Sea crisis’ cargoes are contributing factors to the increasing volumes, putting pressure on capacity and costs, which could rise further.

The early Chinese New Year and shipper concerns about Red Sea supply chain delays contributed to a 10% increase in air cargo volumes last month, applying pressure on rates on many routes, including those from the Indian Subcontinent and Southeast Asia into Europe and the US.

February began with a spike in air cargo demand due to the Red Sea crisis creating lower than expected inventory levels. Spot rates from China to North America rose by 14% in the first week, while China-Europe rates increased by 8%.

Although there has been no definitive immediate increase in air cargo demand due to the Red Sea crisis, a slow and steady increase in demand seems more likely as the crisis continues.

There is some evidence that fashion importers are already shipping more goods by air freight, with air cargo volumes from Vietnam spiking by 62% in one week in January, up 16% from the same week in 2023.

There has been a three-week consecutive increase in air cargo volumes from China and Vietnam to Europe in January, surpassing peak season highs, with spot rates from Northeast Asia to Europe climbing by 11% in the week ending January 28th.

Data does suggest that there may be a shift to air and sea/air solutions, with global air cargo tonnages rising by 24% in one week in January. While there is usually a strong bounce back after the Christmas break, this year’s increase is 5% above 2023’s.

Elevated tonnage figures to Europe from Asia Pacific and from the Middle East & South Asia do reflect some contribution from modal shift on these lanes from sea to air and to sea/air, though spot rates are not rising as rapidly as feared, given the disruption to ocean shipping in the Red Sea.

The situation in the Red Sea is unsettling for many supply chains, and it is inevitable that some shippers will need to shift some urgent orders to airfreight while bringing others forward to secure capacity.

However, this will not have a long-term impact on airfreight, and the initial nerves and uncertainty will subside as shippers accept that ocean freight will just take two weeks longer.

While an increase in airfreight and sea/air volumes is apparent, it is not at a magnitude likely to cause disruption, and it remains to be seen if it will be sustained past the Lunar New Year.

Source: normanglobal.com