Temporary Suspension of US Port Strikes: Has Air Cargo Pressure Eased?

Air Cargo Capacity Under Pressure

The suspension of port strikes in the US until next year has brought some relief to companies concerned about the shortage of air freight capacity during the year-end peak season. However, according to Neil Wilson, editor of TAC Index, the forecast for air freight market tightness had already been bleak even before the strikes were suspended.

Wilson noted that many companies had secured air cargo space through long-term contracts, which means that a sudden surge in demand may not occur as expected. On the other hand, if demand does spike, rates will likely rise sharply due to the very limited available capacity".

“Capacity constraints could push spot market rates very high, especially since much of the demand has already been locked into fixed transport contracts,” Wilson remarked.

Global Air Freight Rates See Modest Increase

The air freight market has been relatively stable in recent weeks. However, certain underlying factors, such as large orders for products like solar panels and mobile phones, are driving expectations of price increases in the upcoming peak season.

Data from the Baltic Air Freight Index (BAI) shows that global air freight rates rose 1.8% in the four weeks ending September 30, up 7.5% compared to the same period last year. Specifically, the Hong Kong-North America route—one of the most important air cargo lanes in the world—saw a 0.3% increase for the month, up 16.8% year-on-year.

Similarly, air cargo rates from Shanghai rose by 2.7% month-on-month, marking a 20.4% increase year-on-year, indicating that the market is gradually heating up as the peak season approaches.

Cargo Backlogs at Ports

While the worst-case scenario of extended port strikes has been avoided, the temporary shutdown of US ports has still left a significant impact. Judah Levine, head of research at Freightos, noted that even as port operations stabilize, the pressure on air cargo rates remains, as importers continue to expedite essential goods into the US.

In just three days of the strike, the backlog of containers at major ports caused congestion, with approximately 50 vessels waiting to dock at East Coast and Gulf ports. Some experts estimate that it could take two to three weeks to clear the backlog, though officials at the Port of New York are more optimistic, expecting it to take only a few days.

Freightos Air Index data indicates that air cargo rates on the Europe-North America route have increased by 4%, reaching $1.77/kg since early September. This increase may reflect a shift in some ocean freight volumes to air transport, as port issues have yet to be fully resolved.

Transpacific and Other Routes See Continued Rate Increases

Air cargo rates on the Transpacific route, particularly from China to North America, had not risen significantly before the strike. However, when the strike began, rates jumped from $5.91/kg to $7.07/kg in just one week. This shows the immediate impact that port strikes can have on the supply chain.

Levine also emphasized that Transpacific rates were already elevated before the strike, supported by a surge in e-commerce volumes from China. These rates have remained around $6/kg—higher than typical Q4 peak season rates in previous years.

In addition, Dubai-North America routes saw a 30% increase, reaching $3.12/kg compared to mid-September, reflecting a modal shift from ocean to air transport.

"Rates on these routes remained at these elevated levels through the end of the week, suggesting that pressure on air cargo rates from the port strikes may continue until operations on the East Coast fully recover," Levine noted.

Conclusion

Although the temporary suspension of US port strikes has provided some relief, its impact on the air cargo market remains clear. Tightened capacity and rising demand during the peak season are continuing to push air freight rates higher. Other factors, such as the growth of e-commerce and large orders for specific goods, are further exacerbating the situation.

Businesses face considerable challenges in securing air cargo space for their goods while also grappling with price fluctuations. In this context, proactive planning and supply chain optimization are more crucial than ever.

Ultimately, companies need to consider their transportation strategies holistically, from forecasting demand to signing long-term contracts, to ensure they are not caught off guard by sudden supply chain disruptions. As ports continue to deal with congestion and air cargo demand rises, flexibility and foresight will be key to maintaining business stability in this volatile period.

By Van Tam