Shippers drive up Asia-US air cargo prices as port congestion worsens

Shippers drive up Asia-US air cargo prices as port congestion worsens

Port congestion on the West Coast has seen higher volumes of ocean freight shifting to air cargo, DHL says.

HONG KONG — Shippers of trans-Pacific ocean freight trying to avoid crippling West Coast port congestion are turning to air cargo in such numbers that forwarders report space shortages and prices going “through the roof.”

Hong Kong Association of Freight Forwarding and Logistics chairman Paul Tsui said available air freight space to the U.S. had reached critical levels and costs “have jumped through the roof.”

“It looks like the situation in Los Angeles is not going to be resolved quickly, and I can see demand being strong until the third or fourth week of December,” he told JOC.com. He warned that the situation could “further deteriorate.”

Carriers and terminals have been battling congestion in Los Angeles and Long Beach all year, but conditions have worsened in the peak-season months. The delays are impacting holiday season goods and desperate shippers are looking to the skies.

Li Wenjun, head of air freight, DHL Global Forwarding Asia Pacific, said the integrator was trying to minimise delays for its ocean freight customers and had secured additional air freight capacity on all major trade lanes into the U.S., including from China and Hong Kong.

“We expect air freight volumes to grow as more shipments are being diverted from ocean freight due to U.S. port congestion and delays,” he told JOC.com.

“Currently, DHL Global Forwarding Asia Pacific has already received a number of requests from customers seeking air chartering solutions for sea freight-converted goods into the U.S.”

More than 40 percent of all U.S. containerised imports enter the country via the port complex of LA-Long Beach in Southern California. However, a toxic mix of extended longshore contract negotiations; the introduction of new, large ships and alliances; growing cargo volumes; chassis and other equipment shortages; and rail- and drayage-related delays, have seen containers stuck in the yards and ships forced to anchor at sea and wait to berth. On Tuesday, 12 container vessels were waiting to come in.

Cathay Pacific director of cargo James Woodrow said the U.S. West Coast port congestion was “definitely having an effect” on volumes carried by the Hong Kong-based airline and “most forwarders have backlogs.”

“The market is certainly strong currently – we are very much in a peak. I expect that market to remain strong right up until Christmas and am also cautiously optimistic that 2015 will start strongly with good loads up until Chinese New Year,” he said.

Increasing volumes are also leading to improving yields. “Trans-Pacific air cargo is currently strong and is likely to continue. This has a knock-on effect on intra-Asia, and Asia-Europe has also seen an encouraging improvement in rates,” Woodrow said.

October figures are not yet available, but Cathay reported robust growth in August of almost 20 percent year-over-year and a 14.5 percent rise in September. That trend is expected to continue into next year.

“Overall, I am expecting 2015 to be a better year for air freight than 2014 – a continuation of the recovery that we have seen this year,” Woodrow said.

The air cargo industry has been losing market share to ocean freight for several years, but it remains the default option for shippers requiring emergency deliveries, despite this year’s rise in air freight pricing relative to much weaker container shipping rates that has served to increase the differential in pricing between the two modes.

Shippers of ocean freight are forced to send goods by air as a result of port congestion, rolled cargo, missed sailings or a host of supply chain disruptions. It is not a welcome option and gets shippers complaining bitterly.

At the recent TPM Asia conference in Shenzhen, Electrolux vice president of global freight and logistics services Bjorn Vang Jensen said he was spending a “ridiculous amount” on air cargo because of poor reliability from container lines.

Contact Greg Knowler at gknowler@joc.com and follow him on Twitter: @greg_knowler.