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Lack of airfreight space drives up "sky high" rates

Freight forwarders are continuing to report a lack of cargo space and "sky high rates", while claiming that some shippers are turning to ocean transport to avoid delays.

According to the latest Freightos International Freight Index, the rush in demand for airfreight capacity has not abated, and shippers are turning to ocean shipping as an alternative.

The latest Freightos Index Update, which covers week 49 of 2017, also points to “sky high rates” for air cargo capacity on many sectors.

This is backed up by the latest figures from TacIndex, which shows that airfreight rates on services from Hong Kong to North America last week remained above the $5 per kg mark for the third week in a row.

Prices from Hong Kong to Europe were also high, staying above the $3 per kg mark.

Freightos said that US airports are experiencing significant congestion in the run-up to Christmas, affecting both domestic and international freight movements; that, in Europe, air cargo hit capacity two weeks ago and hasn’t yet pulled back; and that airlines aren’t expecting congestion to ease any time soon or for prices to return to normal until the middle of January.

Congestion in airfreight capacity appears to have encouraged frustrated shippers to switch mode to ocean transport.

This week, bad weather has hit a number of European airports, including Zurich, Schiphol and Frankfurt.

Manel Galindo, chief executive of Freightos WebCargo, explained: “Airfreight hit capacity late last month and with bad weather in Northern Europe, the situation is getting worse. I expect this auction-like market behaviour to continue.

“I’ve seen forwarders paying more than €18 per kg (over $20/kg) for Europe to South America, and even one offer around €30 per kg. These prices aren’t realistic – or at least they shouldn’t be.”

Galindo added: “Excepting pharma and tech products, which have enough margins to absorb high airfreight costs, many shippers are no doubt reviewing their mode mix and looking to shipping by ocean next year.”

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