News / Ex-China e-commerce surge triggers air capacity squeeze and rate hike

08/12/2023

A surge in e-commerce volumes out of China has triggered an air cargo capacity squeeze, leading to some consignments being transhipped to other points in Asia for on-forwarding to end-destinations such as the US and Europe, according to a major forwarder.

“We are hearing there are around 2,000 to 3,000 tonnes, maybe more, of e-commerce goods leaving Hong Kong every day,” Jan Kleine-Lasthues, Hellmann Worldwide Logistics’ COO airfreight, told The Loadstar.

The German group has a long-established presence in China, organising air cargo capacity for some of the country’s major e-commerce players.

“Maybe this surge is only because of Christmas, but, at least partially, it will be sustainable volume. It has driven up ex-Hong Kong air cargo rates over the past two months, and it’s an amazing development.

“The volumes being pumped out of South China are crazy right now, to the point where some of these shipments are being trucked to gateways all over the country as well, for transhipment to different airports across Asia. A lack of capacity out of Hong Kong, for example, means goods are being shipped via Vietnam.

According to Xeneta, e-commerce behemoths Shein and Temu between them almost accounted for the rise in air cargo volumes and rates out of Hong Kong and China last month, creating some welcome ‘havoc’ in an air cargo market devoid of a traditional peak season.

“The big question is, how long can this last? asked Niall van de Wouw, Xeneta’s chief airfreight officer.

“Airfreight is a key part of the e-commerce model because it relies on speed. This need for capacity is creating quite a bit of havoc in the market – but this is a local shift, and not a bellwether for a changing global economic tide. It is more related to US and European consumers buying more lower-value goods from these vendors.”

Mr Kleine-Lasthues added: “Earlier in the autumn, we were expecting nothing more than a mini peak but demand has increased significantly in the past four to five weeks with e-commerce changing the picture completely, driving up rates and producing a real end-of-year high.”

He noted that capacity on the transpacific lane out of China was particularly tight and some goods were having to be shipped first to Europe, then on to the US.

He said the going market rate per kg, China outbound to the US, was around $10, and to Europe a little less.

“It doesn’t matter what kind of product you are shipping, because that’s the spot rate on the market. If it’s automotive parts and you haven’t agreed the rate in advance, then the shipment goes spot price,” said Mr Kleine-Lasthues.

He added: “Ex-Vietnam rates this summer were lower than pre-Covid levels and there are probably two reasons which explain the upward trend. On the one hand, I think the market there has seen some good hi-tech business and increased demand for fashion goods, especially sportswear; secondly, some volumes have been pushed from China into the Vietnamese market outbound.”

He also noted that the rate hikes out of China/Asia were also giving a real boost to the sea-air segment of the market.

“This summer, rates out of Asia were so low there was no cost advantage going via Singapore, the UAE or other transhipment points. But now it’s really worth doing sea-air, which also contributes to reducing CO2 emissions.”

As to the reasons behind the surge in demand for Chinese e-commerce goods, Mr Kleine-Lasthues pointed to recent market reports which analysed the value of the goods imported through e-tailing channels, highlighting that very cheap merchandise from Chinese online marketplaces was flooding the market.

“Within the context of the global economy, interest rates are up, inflation is up and people’s purchasing power is down. The emphasis is on saving money, and this explains consumer behaviour in the US and Europe to buy not only cheap, but even cheaper.”

Mr Kleine-Lathues concluded: “My crystal ball is not telling me whether this e-commerce-driven peak will last beyond Chinese New Year. But at the moment, it is sustaining a veritable peak season, driving up rates, as well as impinging on long-term contract discussions. More shippers are going back to the spot market and hoping the rates come down.”