Air Freight Rates Surge Drastically Due to Limited Cargo Services

Globally, air freight rates are abnormally high as there is limited supply for the cargo transport services offered from commercial airplanes. Several passenger flights that connect China and its neighboring countries have stopped their operations due to coronavirus outbreak which left limited spots for cargo transport.

Small Firms and investors dealing with the freight transport business are currently facing tough times as they have to continue their business amid the skyrocketing cargo shipping price following the reopening of Chinese industrial production.

A surge of Cargo Shipping Pricing

Since the outbreak of the virus epidemic, the deep cut of flight services around the globe has limited the space for cargo transport activities. According to a Freight forwarder Agility Logistics, the air cargo capacity of China has reduced at least 39% in February 2020, comparing to last year’s figure due to heavy restrictions on travel to the country.

Refael Elbaz, the chief executive of Israel-based Unicargo, a freight provider for Amazon.com Inc. (Amazon) sellers, expressed that the cargo shippers who wish to transport products from China by air modes were shocked to witness the skyrocketing prices of the services. Elbaz explained, “The price is three times higher – at least – because there is just no capacity.”

A firm, Freight Investor Services talked to clients on Monday, March 9, 2020, that cargo pricing on China-to-US routes had reached “abnormal highs” and intra-Asia traffic pricing has increased up by 22% over the previous week. Similarly, TAC Index data showed that China-US cargo rates have tripled over the last two weeks which set the price more than $3.50 a kilogram.

Meanwhile, some Asian airlines such as Cathay Pacific Airways Ltd, Korean Air Lines Co Ltd, and Japan’s ANA Holdings Inc., which operate their business on cargo-heavy haulers, are likely to extract advantages of the surge of freight pricing.

Increasing Freight Services

The air cargo services that based on China or connected to it are likely to increase since the factories, which have shut for over months, are now reopening their production in the country.

Following the resume of factories and their productions, a source stated that the number of freighter arrivals has increased in recent weeks in mainland China. The country’s aviation regulator estimated that freight services would be reaching around 870 this week as compared to 788 trips in the week starting from February 17, 2020.

Brian Bourke, the chief growth officer at SEKO Logistics, a Chicago-based freight forwarder, revealed, “The number of air charter requests we’ve gotten in the past week is more than the number we’ve received in a normal quarter.” Bourke added that most of these requests for cargo services would be shipping goods from China to the US.

Meanwhile, Chris Mu, who runs a small logistics company in Shenzhen, China, said, “With reduced options, we have to take whatever we can get, flying goods from the UK to the Netherlands, then from Liege in Belgium to Nanchang in Jiangxi province, just to get them to a factory in Shanghai.”

Mu added, “For the airlines, it’s fine because they’re still making money, but it’s the middlemen like us who are bearing the costs, and we don’t like to go to our customers every day and tell them the price has gone up.”

I’m Roshan, a journalist, blogger and music lover. I like covering global news related to finance, business, and technology. Focusing on the collection of true and reliable information, I rely on working by conducting interviews with business leaders and talking to the inside sources of companies.

You can reach out to me at: [email protected]

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