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Air freight faces prolonged capacity constraints amid rising demand

Nov 13, 2024 | , , , , , , , ,

The tightening capacity situation could continue for several years, with constrained availability of freighter aircraft and high demand driving up rates across key routes.

While air cargo demand has not yet surged during this year’s peak season, rates remain elevated due to the limited capacity available, particularly on export lanes from Asia to Europe and North America. Looking ahead, supply chain pressures are expected to persist as new aircraft production delays and sustainability regulations further restrict capacity growth.

Steady rate increases
Despite a quieter-than-anticipated peak season, air freight spot rates have seen steady increases on major trade routes in October. Spot rates out of Asia showed notable increases, with outbound rates from Hong Kong rising by more than 8% month-on-month and over 10% compared to last year. Shanghai showed an even stronger performance, with rates increasing by over 12% month-on-month and over 22% year-on-year. Other Asian markets, including India, Vietnam, and Thailand, have also seen sustained rate increases, reflecting strong export demand and constrained capacity.

While the peak season leading up to major holidays like Thanksgiving and Christmas has not delivered the significant rate spikes anticipated, the rise in prices signals a solid demand foundation.

Long-term capacity shortages expected to intensify
As the air cargo market looks beyond the current year, long-term capacity shortages are likely to become an enduring feature. Boeing’s production challenges and limited feedstock for aircraft conversions have constrained the introduction of new freighter capacity, while delays in new technology, such as Airbus’s A350 freighter and Boeing’s 777-8 freighter, further tighten the timeline for expanded availability. The first A350 freighter is now expected in late 2026, and production of the 777-8 freighter remains uncertain.

Additionally, the International Civil Aviation Organization’s (ICAO) 2028 emissions standards deadline is anticipated to impact freighter availability. These standards will limit the production of certain aircraft types, likely exacerbating the capacity shortage. As capacity remains restricted, competition for available space will drive rates higher.

The air freight sector faces an extended period of rate volatility and capacity restrictions that may last well into the decade.

Our block space agreements (BSA) and capacity purchase agreements (CPA) protect space and capacity on the busiest routes, so we can fly your cargo at the best rates.

Regardless of your cargo type, size and requirements, we have extremely competitive rate and service combinations, to meet every deadline and budget.

EMAIL Elliot Carlile, Operations Director, for insights and prices. 

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November: North American market update

Nov 13, 2024 | , , , , , , ,

The North American freight market faces a complex set of challenges as ongoing labour disputes, potential trade policy shifts, and evolving service offerings reshape the landscape.

Canadian port strikes strain supply chain
Labour disputes have disrupted operations at Canada’s east and west coast ports, with significant impacts on supply chains. At the Port of Montreal, the Maritime Employers Association (MEA) imposed a lockout after the Longshoremen’s Union CUPE Local 375 rejected their offer, halting operations since 31st October. On the west coast, stalled negotiations between the International Longshore and Warehouse Union (ILWU) and port authorities in Vancouver and Prince Rupert effectively paralysed these critical gateways for Canadian imports and exports.

The closures forced Canadian freight to be diverted to US west coast ports, including Seattle, Oakland, Los Angeles, and Long Beach, adding to congestion and creating backlogs that could take months to resolve.

Government intervenes to resume operations
In a decisive move on the 12th November, the Canadian government directed the Canada Industrial Relations Board (CIRB) to end the strikes at Vancouver and Montreal and impose binding arbitration. While business groups welcomed the intervention, union representatives criticised the move, arguing it undermines workers’ rights.

As operations begin to resume, the Montreal Port Authority announced plans to gradually clear terminal backlogs and restore fluidity, although it could take weeks to return to normal. Meanwhile, Vancouver’s container terminals remain delayed, with limited anchorage availability adding further challenges.

US east and gulf coast strike uncertainties persist
Following a brief three-day strike in October on the US east and Gulf coasts, concerns remain about potential further disruptions. The strike’s conclusion hinged on a provisional wage agreement between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX), with more complex issues such as automation still unresolved.

Negotiations resumed with a new contract deadline of 15th January 2025, but ended early on the 12th November, when the ILA broke off talks with the USMX. According to ILA, the decision was made after USMX continued “pushing automation and semi-automation language in its Master Contract proposals that will eliminate ILA jobs.” The ILA added it “remains hopeful that USMX will alter its un-winnable strategy, and resume negotiations as soon as possible.”

The uncertainty surrounding contract outcomes is likely to push shippers to expedite shipments before January, amplifying capacity constraints across North American ports. The October strike impacted trans-Atlantic and Asia-US trade lanes, with trans-Atlantic westbound volumes falling by 15% and Asia-US east coast capacity expected to drop 17% in mid-November.

Potential tariff escalation under new US administration
The US presidential inauguration in January may bring significant trade policy changes, with proposed tariffs that could reach 60% on China and 20% on other countries.

While the EU, which has a $130bn trade surplus with the US, is preparing counter-tariffs, the UK, which enjoys a relatively modest surplus, appears unlikely to retaliate, favouring open trade instead.

This potential tariff escalation could lead to intense front-loading of shipments before January, creating a pre-inauguration shipping peak, which might align with the pre-Lunar New Year demand surge.

Metro’s expanding US focus
The United States is Metro’s 2nd largest origin/destination and client location, with a large number of customers also having their head office located in North America.

To better support this large and growing client base, Metro will open its first office in the US next year. The non-operational office will focus on local American customers, to enhance the level of service and support provided to them, including the oversight of 3rd country movements through the Americas.

In-house shipping line offers Express US service
Wholly-owned group subsidiary, Ellerman City Liners, has launched the weekly sailing United States Express Service (USX), delivering some of the fastest containerised transit times available. Direct to Philadelphia from just 13 days, USX utilises non-congested ports and terminals, to streamline port clearance and inland movements.

USX is the only direct service operating to and from Jacksonville, serving the Baltic, Scandinavia, Europe and the United States, with four calls on the East Coast, including Philadelphia.

Ellerman’s USX service offers fast and reliable transit times, with lots of flexibility and operates in cooperation with MSC. It is gratifying to see our group working closely with the world’s largest carrier, which underlines our continued commitment to supporting our partner carriers. Many of whom we have worked with for decades.

As North America’s sea freight market adapts to labour uncertainties and fluctuating trade policies, shippers face a complex landscape of demand pressures, capacity constraints, and fluctuating costs.

To discuss the current situation and how Metro can support your North American supply chain, please EMAIL Andrew Smith, Chief Commercial Officer.

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North American Sea Freight Market Strained

Oct 30, 2024 | , , , , , , , , ,

The North American sea freight market faces ongoing challenges, with recent labour actions on the US East Coast fuelling local anxieties and adding congestion and capacity pressures on the West coast.

The three-day strike by the International Longshoremen’s Association (ILA) on the US East Coast in early October sent ripples across the industry, as importers scrambled to reroute shipments to West Coast ports. Record-breaking import volumes in Los Angeles and Long Beach in September have strained rail and terminal operations, pushing rail container dwell times over nine days, their highest in two years.

The impact of the ILA strike is compounded by recent actions in Canada, with Montreal dockworkers initiated a 24-hour strike last Sunday the 27th October, following earlier disruptions that have halted overtime work across the port. 

This seasonal surge in imports is expected to taper off in November, as most holiday merchandise arrives in the US by late October to be available for Black Friday and other peak shopping events. However, if contract negotiations between the ILA and East Coast employers, which are due to resume in November, remain unresolved into December, West Coast ports could capture a larger share of shipments, keeping demand elevated longer than usual on the Pacific Coast.

The main issue outstanding between the ILA and USMX is the use of terminal automation. The previous contract permitted semi-automation with union and terminal agreement on staffing but banned full automation. In this bargaining cycle, the ILA is pushing for a complete ban on all automation types.

Montreal’s container volumes have already dropped by nearly a quarter since 2022, with a growing shift of cargo to US East Coast ports—though the labour situation in the US may ultimately reverse this trend if Canadian ports gain relative stability.

Impact of the US presidential election on container shipping
Looking ahead, next week’s US presidential election introduces potential regulatory and economic uncertainties for the container shipping market. A second term for Donald Trump could bring a more protectionist stance, with proposed tariffs of up to 20% on all imports and as high as 60% on goods from China. Such policies would likely dampen US demand for imports, reshaping sourcing and supply chain strategies across Asia, where countries like Vietnam and India are already gaining market share as businesses diversify away from China.

By contrast, a potential administration under Kamala Harris is expected to support US industries through subsidies rather than aggressive tariffs, reducing the immediate risk of sharp import declines. However, increased government support for domestic production could still influence trade patterns, with downstream effects on global shipping demand. In either scenario, US trade policies will continue to play a significant role in shaping the container shipping market, particularly in trans-Pacific routes.

As North America’s sea freight market adapts to labour uncertainties and fluctuating trade policies, shippers face a complex landscape of demand pressures, capacity constraints, and fluctuating costs.

As always, we will guide you through the most import strategic adjustments, such as diversifying shipping routes and anticipating regulatory changes, to maintain supply chain stability and manage costs in the months ahead.

To discuss the current situation and how Metro can protect your North American supply chain, please EMAIL Andrew Smith, Chief Commercial Officer.

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Sea Freight Outlook for 2025

Oct 30, 2024 | , , , , , ,

The global sea freight market is set for another turbulent year in 2025, with rates likely to remain high despite anticipated softening in some lanes. Although new vessel deliveries are expected to bring additional capacity, a combination of geopolitical uncertainties and market reconfigurations is forecast to sustain above-average rates, continuing the challenges faced by shippers throughout 2024.

Several factors will influence rates in the coming year, including the ongoing conflict in the Red Sea and potential labour disruptions on the US East Coast. The three-day strike by the International Longshoremen’s Association (ILA) earlier in October has already raised concerns about future disruptions, with further strike action looming in January. Such incidents could trigger inflationary pressure on spot rates across various trade lanes, not just those directly affected. Shippers looking for stability in an uncertain market may find long-term rate agreements more favourable than navigating the spot market’s fluctuations.

Geopolitical tensions and trade disruptions
Drewry has flagged continuing geopolitical instability as a significant concern for 2025, warning that unresolved tensions in regions like the Red Sea and Persian Gulf could impact shipping operations well into the future. The Suez Canal, for example, is not expected to resume full-scale operations until at least 2026, keeping carriers reliant on alternate routes around the Cape of Good Hope. This prolonged disruption not only adds to transit times and costs but also restricts available shipping capacity, exerting further upward pressure on rates.

Compounding these risks are potential tariff changes, particularly from the US, where increased duties on Chinese goods may prompt shippers to expedite imports. This could spike rates temporarily, particularly for trans-Pacific routes, as companies seek to avoid potential costs associated with new tariffs. Additionally, ongoing demand for China-Mexico routes as an alternative entry point to the US may also lead to price increases, especially as the US presidential election may result in policy changes to trade and tariffs, adding to the overall uncertainty.

New alliances and Carrier Strategies
The reconfiguration of carrier alliances in early 2025 will further shape the sea freight landscape. As carriers adjust to new alliance structures, shippers are likely to see shifts in service reliability, transhipment frequency, and schedule integrity, especially on key routes from Asia. These adjustments are likely to create occasional disruptions in operations, as changes in routing, port calls, and service frequency impact transit times and predictability.

In anticipation of these market shifts, many shippers are already opting for stable, long-term pricing agreements over the volatility of the spot market. Fixing rates over a 12-month period is increasingly seen as a strategic move, as it provides greater budget predictability and insulation from potential rate spikes. While rates on certain lanes may soften as the new vessel capacity is deployed, Drewry expects them to stabilise well above pre-pandemic levels.

Metro’s Fixed-Rate options Can Provide Stability in Uncertain Times
As geopolitical risks and market disruptions continue to loom over the industry, maintaining resilient supply chains and budgeting effectively will be key priorities for shippers navigating the complexities of 2025’s sea freight landscape.

In a volatile sea freight market, securing fixed-rate agreements on popular shipping routes can help reduce risk and provide essential budgetary certainty. To explore how Metro’s fixed-rate options could support your business in 2025, please EMAIL chief commercial officer Andy Smith.

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