The air freight market is on an upswing. The momentum from the first half of this year is not only expected to continue in the 2nd half, but it is also anticipated that demand will continue to increase.
This increase in demand has the potential to create a further imbalance in capacity. Historically, for the most part, 2H usually experiences stronger demand due to seasonality – typically during retail peak from July to October and even up to early November. Although ecommerce drove most of the demand YTD for airfreight out of China to the U.S. and Europe, general cargo is also seeing incremental increases as well.
The market is not without some challenges
Add the current geopolitical stresses around the world along with ocean transportation routing challenges for traditional ocean movements, and the 2nd half of 2024 will be anything but uneventful.
These added challenges to traditional ocean routes have created what some call “artificial air demand” which are orders that were planned for ocean but converted to air due to the lengthened lead times. Challenges that can be easily managed when shippers partner with an experienced and trusted forwarder.
Current economic realities
All these events impacting supply and demand have also impacted economics, as one may suspect. Air freight rates have continued to rise since the beginning of this year, even now during what is traditionally known as “slack season” and are expected to not stop increasing as we enter the second half.
Hedging or budgeting reduced shipping costs for the remainder of the year may not be wise and could potentially prove to be detrimental in trying to obtain the needed space.
Shippers are strongly encouraged to align with their forwarders and do their best to obtain accurate forecasts from their own internal demand teams. The more granular a shipper can get with their forecast, the higher their chances of success will be.
Achieving success
Success is measured differently by each respective company, however one measure that should be shared is how well disruptions to the respective supply chain are minimized – this, as a result, translates to minimized surprises to the costs associated with needed capacity. That is the goal.
Shippers should constantly revisit their forecasts to ensure accuracy as well as identify any possible fluctuations up or down in needed capacity. This type of open line of communication between a shipper and their dedicated forwarder of choice will only increase the chances of getting through the year successfully with minimal to no disruptions.
