Updated: 2022-03-03 14:55:07
The Q4 peak season, though exciting for dropshipping sellers, was hit by the constant increase in air freight rates. With the ports, rail stations, and truck warehouses around the world filled with holiday merchandise, the ruthless demand for goods and limited capability of shipping push the shipping prices to new levels. The air freight rates of major routes from Asia to Europe and the US have risen severely in particular. The air freight rates this year exceeded the highest record of last year.
We are working with all mainstream shipping companies that ship parcels from Shanghai, Shenzhen, Hong Kong, and Zhengzhou by air. The prices of CNE, Yun Express, Yanwen, USPS, UBI, DHL, etc have been rising since September. So what are the main reasons that caused the soaring air freight prices? Let's figure it out.
Cancellation of Shanghai flights lead to a drop in air freight capacity.
The International Import Expo was held in Shanghai from November 5th to 10th. During the period from November 1 to November 13, a large number of cargo charter flights have been forced to be canceled. A large number of outbound cargoes originally planned for Shanghai International Air Freight overflowed to the airports of other cities, driving up the price of international air freight in other cities like Shenzhen, Hong Kong, and Zhenzhou.
Source: Donghua Administration of Civil Aviation of China
It is understood that the air freight price from Shanghai to North America has exceeded 10$/kg as early as last month, and the price to Europe has reached 7$/kg. In addition, European air cargo rose 1.5-2$/kg overnight, North America rose 12$/kg, and Latin America rose 16$/kg.
Freight volume surges force sellers to shift to air freight.
According to IATA, freight volumes in 2021 have increased by 7.9% compared to 2019, and freight demand will be 13.2% higher than it was before the pandemic. At the same time, with the recovery of the world economy and the rapid growth of the manufacturing industry, the demand for air freight has become stronger.
At the peak of the promotion season, to avoid container shipping delays, sellers have shifted to air freight, which is faster than the ocean freight. Therefore, air freight rates skyrocket as forwarders scramble for air freight capacity. The price of air freight is almost double what it was before the pandemic.
The epidemic has repeatedly erupted, and the air cargo capacity is in shortage.
Recently, international epidemics have repeatedly erupted. China has canceled more than 10,000 flights. Among them, Hong Kong and Shenzhen have been congested due to airline cancellations. In addition, since October 29th, American Airlines has canceled 2,000+ flights due to severe weather and personnel shortages under the COVID-19 epidemic. Due to the suspension of a large number of flights and the serious shortage of air cargo capacity, the price increase has accelerated.
During the pandemic, many commodities that are usually shipped by sea are converted to air freight. It can be seen from the survey results of statista that since the outbreak in the United States, the air freight rate from Hong Kong to North America has continued to rise, and it has reached 9.74$/kg in September this year. And there is a continuing upward trend. According to the latest data from TAC Index, the air freight rate from Hong Kong to North America has reached 10.4$/kg in October.
Impact of coronavirus on major global air freight rates between December 2019 to September 2021 (in U.S. dollars per kilogram)
Air freight is more cost-effective than ocean freight.
Although the price of air freight is almost double what it was before the pandemic, the price of ocean freight seems to be more expensive. The price of air freight is 12 times that of ocean freight before the pandemic, but in 2021 it is only 3 times. The ocean freight is becoming slower because the ocean supply chains are stretched by the high shipping demand and supply chain disruptions. These have all contributed to the increase in air freight demand and price increases.
In addition, due to the slow recovery of the international economy, the increased demand for Chinese products is also an important factor leading to increased pressure on air freight from China to overseas. According to China's public statistics, from January to September, the international cargo volume of Shenzhen Airport increased by 35.19% year-on-year.
Keep profits, raise product prices appropriately, and meet challenges.
As the increase in air freight rates comes from the impact of the epidemic, shortages in the supply chain, and other uncontrollable factors. It is expected that this year’s air freight rate will remain above the pre-pandemic level for a long time. As dropshipping sellers, all you can do is to face the challenge by raising the selling prices to offset the rise on cost.
● Estimate and compare different shipping methods and rates, and use the most profitable shipping method as much as possible.
● Reserve freight budget and shipping time to deal with sudden price increases or shipping delays.
● Evaluate the profit of the products, and increase the prices of the hot-selling products appropriately to make up for the loss of shipping cost.