News / As pressure grows, shippers must look ahead to keep cargo moving

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Air freight rates are expected to rise sharply in the coming days and shippers are advised to pre-authorise increase thresholds with their forwarders to keep cargo moving.  

Arno Hausch, head for German-speaking markets at Flexport, said multiple factors were combining to create a fresh demand surge across Asia-Pacific, which could lead to a significant tightening of capacity and increased rate volatility. 

“We have a lot of bigger companies having their fiscal year-end, and traditionally it’s already like a peak season after Chinese New Year  that starts to build up, and then we come to the next level which is the post lunar new year recovery,” he explained. 

“We have ecommerce again increasing after CNY, and that is coming together with shipments bypassing congested hubs, where cargo is getting moved into North Asia. We see another spike, and we expect another spike in North Asia within the coming days.” 

Mr Hausch warned shippers that securing capacity over the next few weeks would be critical, given the uncertain outlook on airspace restrictions, fuel costs, and airline operations. 

“If you’ve not already have done it, you need to secure capacity access, at least for the next three weeks,” he said. “Nobody knows how long this crisis will go on.

“We have a lot of pressure due to the high oil price, but it’s impossible to forecast how long this will impact the airspace and the activities of airlines and the oil price. 

“You need to make sure you have capacity secured for your steady flows, giving commitments to forwarders, to airlines for premium services, so that your pre-bookings are not getting bumped with express bookings.” 

He added that shippers should also prepare rates to increase “substantially” and underscored the need to “basically enable forwarders to have more flexibility on pricing” to keep their cargo moving. 

“On the rates side, you need to be prepared for more volatility. We have war-risk, fuel and other surcharges, so be prepared for spikes you  probably need to absorb, due to the increasing demand. 

“Make sure that you have a very transparent discussion with your service provider and pre-authorise, maybe, thresholds at which you say ‘okay, if the rate goes up 30% please keep the cargo moving, I need it’.” 

According to Mr Hausch, improved communication between shippers and logistics partners will also be essential, particularly through accurate demand forecasting. 

He advised: “Ensure you have a good rolling forecast for the next few weeks that you can share with your procurement teams or the forwarders: how much capacity you need; how much capacity the forwarder needs to procure for you to secure within the BSA or as an additional capacity, and as an overflow, if you expect more demand to quarter-end. 

“If you overbook your allocations, or you pre-book a shipment with one ton and you hand over to the forwarder two tons, they will have massive problems getting this absorbed, because airlines are very restricted on increasing bookings for the price agreed.” 

On the long-term contracting side, Mr Hausch also advised shippers against negotiating new fixed-price contracts in the current volatile market. 

“If you have a pricing agreement that ends with the first quarter – especially a classic winter schedule agreement – we recommend you try to extend the winter schedule rates, or have an open discussion with the forwarder heading the service,” he said. “It will be very difficult to implement new volumes for a new forwarder in thr current market conditions, because everything is congested.” 

For ocean-freight shippers looking to negotiate fixed pricing, it is a similar story.  

Yannik Amstutz, senior manager ocean freight for the German speaking region at Flexport, said: “One option is you price the long-term rate itself, based on current market conditions from two to three weeks ago, clearly stating that it will have an emergency fuel surcharge and possibly also other surcharges on freight levels.”