Air freight costs soar to record highs
As the company tries to meet the surge in demand on Christmas Eve, freight costs around the world have reached record levels.
In the past three months, prices on major air routes connecting Chinese manufacturing centers with consumers in the United States and Europe have almost doubled, making it difficult for the industry to find enough aircraft to keep up.
Last week, the price of the route from Shanghai to North America reached US$14 per kilo for the first time, up from US$8 at the end of August, and higher than the record of US$12 set by the pandemic when it first hit the supply chain in early 2020.
According to data from the Baltic Exchange’s airfreight index and freight data provider TAC Freight, similar growth has occurred in trans-Atlantic routes from Hong Kong to Europe and the United States, and between Frankfurt and North America.
“Everyone knows that if they want to put things on the shelves before Christmas, they must use air freight,” said Yngve Ruud, head of global air freight at Kuehne+Nagel, one of the world’s largest freight forwarders.
The company has been airlifting finished products such as fashion goods and consumer electronics, as well as parts such as auto parts or semiconductors.
According to industry executives, they are also eager to order coronavirus tests and personal protective equipment from Europe in response to the new Omicron coronavirus variant.
Due to Black Friday sales and Christmas, the supply chain has been at its busiest in the fourth quarter, but the surge in seasonal demand has been accompanied by tremendous pressure on the industry.
After the chaos in the shipping industry, the company turned to air freight, and there was a shortage of containers. Port bottleneck.
Half of air cargo is usually transported by passenger aircraft, but many cargoes have been grounded during the pandemic, and when airlines restart flying, it is usually on leisure routes rather than major trade centers. The change of Omicron is reflected in the possibility of disrupting passenger transport.
Some airlines have switched to air cargo, and specialized air cargo companies such as FedEx and DHL have filled some of the vacancies.
However, Marco Bloemen, head of freight consulting at Accenture’s Seabury Consulting, said that the industry’s production capacity is still down by 13% compared to 2019.
Bloemen said that while the shortage occurred, demand increased by 6%, resulting in a gap of nearly 20 percentage points between supply and demand.
Ruud said that even the reopening of transatlantic travel will not help, because airlines have changed aircraft from carrying cargo to receiving passengers, and since leisure travelers who tend to check in multiple suitcases return faster than business travelers, the number of passengers carried is also restricted.
Since the Biden government announced that it would open the border to international tourists, the price between Frankfurt and North America has risen from US$3.50 per kilogram to US$5.40.
East Midlands Airport is the UK’s main cargo hub and is expected to handle 470,000 tons of cargo this fiscal year, up from 370,000 tons before the pandemic.
“Companies that rely on passenger aircraft belly space to transport cargo may continue to use dedicated air cargo services…until transatlantic passenger routes return to pre-pandemic levels,” said Claire James, managing director of East Midlands Airport.
Bharat Ahir, chief executive of 28one, a supply chain consulting firm, said that consumers will eventually feel the impact due to pressure on the supply chain.
“There are two obvious effects-usability will decrease, and what you get will be more expensive,” he said.