News / Air cargo market enjoys some calm before an expected Q4 storm

© Andrei Dzemidzenka

It has been a quiet couple of weeks in airfreight, owing to China’s Golden Week.

Overall rates have edged lower, although are starting to rise again; some European freighter airlines cut capacity to China significantly over the holiday, but that is expected to change.

In North America, shippers had prepared for the east and Gulf coast port strikes by ensuring goods were already in place – discounting the need for emergency airfreighted shipments.

Flexport said customer inventories were high. In an interview on CNBC, CEO Ryan Petersen said: “People planned for what might’ve been a much longer strike.

“Almost 80% [of attendees that we surveyed at a recent Flexport webinar] said they had either enough inventory or too much inventory on hand.

“Brands are starting to learn that you’ve got to have extra inventory if you want to ride out these problems,” he added. “It’s really interesting that these companies had to plan for a potentially longer strike, so they bought a lot of inventory.

“Now they may have too much.”

Despite the anticipated lack of emergency airfreight, industry executives believe the fourth quarter will still be strong, as the likes of Shein and Temu gear up for the Christmas season, while industrial traffic also tends to pick up in Q4. Xeneta has warned shippers to hold off on negotiating 2025 contracts, in case they feel under pressure from a busy peak season.

“Postpone tenders until 2025 and give the market a chance to calm before you enter negotiations,” advised Niall van de Wouw, its chief airfreight officer.

“Current market sentiment influences both sides of the negotiating table and vendors will, understandably, use the peak season turmoil to paint a gloomier picture for 2025. Recency bias gives greater importance the most recent event, so both shippers and vendors discussing the market in 2025 are going to be influenced by what is happening around them in the here and now.

“As long as you have your T&Cs in place, you can bide your time and wait out the storm. The market may look very different in early 2025, and you will be much better placed to enter negotiations with clarity and decisiveness.”

He also pointed out that shippers should also be aware of the major ecommerce routes, which will have limited or expensive capacity.

“One of the biggest mistakes a shipper can make is to ignore the threat of ecommerce – companies such as Shein and Temu may not be a competitor in your chosen industry, but they represent a major risk to supply chain resilience.”

But – they could also represent an opportunity for backhaul traffic, he noted.

“The massive ecommerce volumes being shipped out of China means there is a significant trade imbalance between fronthaul and backhaul markets.

“Use this to your advantage during conversations with your vendors.”

One potential issue for some shippers will be lower capacity out of Europe to China, with several passenger-focused airlines cancelling their services in the face of high costs related to having to avoid Russian airspace.