As the Christmas holiday approaches, consumer awareness of the supply chain has heightened. Global supply networks have actually been struggling for 18 months. Continual disruptions have elevated the rates of ocean shipments and air-cargo costs are now on the rise. Additionally, delays at U.S. seaports have not abated.
Transatlantic air cargo rates climbed this week, according to cargo marketplace Freightos, although U.S. importers were hoping that the additional air cargo capacity accompanying the influx of Europeans now able to fly to the U.S. would bring down rates propped up by a capacity shortage.
- The Freightos Air Index saw Europe-U.S. air cargo rates climb 4 percent to the East Coast to $5.24/kg, and hit $6.08 to the West Coast, a 10 percent increase since the start of the month, and 2.5-3X the norm.
- Climbing peak season demand and congestion caused by under-staffed ground crews in both the U.S. and Europe may be blunting the impact of the added capacity for now.
- Asia-U.S. West Coast prices (FBX01 Daily) increased 4 percent to $14,478/FEU. This rate is 276 percent higher than the same time last year.
- Asia-U.S. East Coast prices (FBX03 Daily) climbed 3 percent to $16,390/FEU, and are 246 percent higher than rates for this week last year.
Airlines have added transatlantic flights to accommodate vaccinated European travelers who are now allowed to enter the U.S. Importers hoped the additional cargo space on those flights would bring down air cargo rates which had been more than twice typical levels due to a shortage of capacity.
But so far that has not been the case as the Freightos Air Index saw Europe-U.S. air cargo rates climb 4 percent to the East Coast to $5.24/kg, and hit $6.08 to the West Coast, a 10 percent increase since the start of the month.
Rising rates could indicate that despite the increase in capacity, climbing peak season demand and congestion caused by scarce warehouse space and under-staffed ground handling crews in both the U.S. and Europe – that limit how much cargo can be processed regardless of the space on planes – are enough to blunt the impact of the added capacity.
The Institute for Supply Management noted earlier this month that U.S. land transportation is also constrained. There’s a shortage of drivers and shipping containers are slow to unload.
In ocean freight, following a significant, post-peak season fall earlier in November, transpacific ocean rates were stable the week of Nov. 15, increasing 3-4 percent to both coasts, though they remain extremely elevated at 8-9X the pre-pandemic norm.
The easing prices are not being driven by any significant improvement in the port congestion that is tying up a significant share of the lane’s capacity, according to Freightos.
Following some improvement in the number of boxes waiting to be picked up from their container yards, the ports of LA/Long Beach were able to delay the implementation of a new fee on boxes that overstay their welcome, the firm said. But the number of ships waiting for a berth hasn’t fallen yet, leading some carriers to cancel upcoming West Coast services and others to move capacity to the under-served intra-Asia services, especially as manufacturing in Vietnam recovers.
Continued struggles with disrupted schedules and the resulting port congestion have been enough to keep Asia-Europe rates from experiencing a rate dip similar to the one on the transpacific. But the rise and fall of prices around peak season for Asia-U.S. lanes suggests that normal – though outsized – seasonal trends will take place this year, meaning that the recent lull will likely end as the Lunar New Year approaches at the start of February.