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Exceptionally strong air freight demand set to continue until Chinese New Year

Peak traffic levels heightened further by modal shift from ocean to air due to problems in sea freight markets.

Global air freight demand is exceptionally strong currently and is likely to remain so until Chinese New Year next February, according to a leading air charter broker, with peak traffic levels heightened further by modal shift from ocean to air due to problems in sea freight markets.

“We are in a very, very busy period at the present time,” Air Partner’s director for freight and VP for Asia Pacific, Mike Hill, told Lloyd’s Loading List in an interview. “Capacity was already stretched before the ‘double whammy’ of the traditional peak season during Q4 (the fourth quarter) – particularly strong this year, driven by the B2C e-commerce boom and given further impetus by the lockdowns triggered by the pandemic.”

Hill added: “Another factor is the modal shift from ocean to air as a result of the problems in sea freight – and in particular, a critical lack of containers for ex-China exports, together with vessel schedule disruption.

“Air freight rates are extremely high as there is so little capacity available on the market and there are hefty premiums to be paid on freighter charters in December. We are chartering lots of pax aircraft (in cargo-only mode) at the moment as well as taking forward bookings into January and February as clients seek to secure capacity. This is unusual for what is normally ad-hoc business and is a sign of the times.”

The distribution of Pfizer’s COVID-19 vaccine, which began in the UK last week and is now underway in the US, is set to add to the already buoyant air freight demand, Hill noted.

“It’s unclear at this stage what levels of capacity will be required for the vaccines and on which routes as doses will be coming from numerous locations and providers. Singapore, where I’m located, and other locations, are set to be established as logistics hubs for regional vaccine distribution.

“We’re currently moving ‘envirocontainers’ (containers tailored to temperature-sensitive pharmaceuticals) around for clients as they prepare for the distribution of the vaccines.”

Brexit factor

Capacity could be squeezed even further as shippers mull a modal shift from road to air amid bottlenecks and truck congestion at major cross-Channel ports, such as Calais, due to unprecedented volumes of cargo heading to the UK from mainland Europe – a consequence of the stockpiling of goods as the end of the Brexit transition period approaches, he observed.

“We are receiving some Brexit-related requests, but no firm decisions yet, while on the deep-sea maritime side,  importers are checking their options and waiting to see whether the current delays for ocean freight at congested UK ports are set to continue, before booking air capacity,” he added.

Forwarder perspective

As for a forwarder perspective, Frankfurt-based SME, Quick Cargo Services (QCS) confirmed the now-established market features of very strong air freight demand and elevated rates to a backdrop of tight capacity.

“There’s an element of chaos in the market at present as air freight capacity continues to be a problem and the ground handling companies at the airports are over-stressed in having to accommodate significant volumes of shipments. In September, October and November, Frankfurt Airport reported higher freight numbers (in kilogrammes) than in the same months in 2019,” CEO Stephan Haltmayer told Lloyd’s Loading List.

“We have more of an export (ex-Europe) than import focus. To China, we are full until Christmas and what capacity there is available for new bookings is at high rates. The absence of bellyhold space on passenger aircraft continues to make it itself felt and it really is a case of how much customers are willing to pay to secure capacity.

“Flights are also full to North America from Europe, but capacity does not seem to be as stretched from the US to Europe,” he explained.

PPE and vaccine shipments

With the pandemic now gaining momentum again in many countries in Europe, there has been an upturn in demand for PPE between China and Europe, Haltmayer noted.

“We are seeing a lot of PPE shipments, protective glasses in particular, as well as corona test sets flown from China to Germany. As for vaccines, we have orders placed from Chinese customers for doses to be transported at -70/-80 Celsius.

“There is some talk on the market of capacity issues at the beginning of next year because of vaccine shipments taking priority, but I am not sure this will be the case. Many of the vaccines may be flown in extra charter sections.”

Commenting briefly on the ocean freight market, Haltmayer said: “It’s similar to air freight. Carriers are full. Customers are turning to train services from China, but there are now backlogs and bookings are not being accepted for the next three weeks. This could fuel even more demand for air freight.”

Source: Lloyds Loading List

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