Increase of Demand Cause Capacity Challenge for Euro-Asian Cargo Industry

Increase of Demand Cause Capacity Challenge for Euro-Asian Cargo Industry

A sudden and rapid increase in airfreight demand in the Europe-Asia trade industry has caused a capacity crunch in ocean shipping. Because of this, shippers and forwarders are forced to switch transport modes.

Industry experts have noted that there is a surge in demand in places such as Europe into Asia last January to March of 2017.

It has been noticed that cargo volumes going to Asia went up by more than 23% in the first quarter of 2017. Because of the rising demand for fashion, spare parts, produce and leather goods – the need for shipping increased as well.

The huge increase in demand happened when challenges on sea freight capacity across Asia and the Pacific routes became noticeable.

As Demands Rise, Capacity Lessens

Other carriers have also experienced a rise in demand from March to the first weeks of April. However, this is not linked to the shortage of box capacity of cargo being shipped to Asia from Europe.

Shippers are upset at the lack of shipping capacity being experienced by the industry in recent weeks as a result of developments brought about by Hanjin’s bankruptcy, as well as the joint alliance of Japan’s three major container carriers.

In a recent report by the European Shippers’ Council (ESC), European shippers are showing concern about a shortage of capacity as a result of the alliance changes and other factors.

However, it is also noted that there wouldn’t be any impact on airfreight capacity.

Meanwhile, there will also be some exceptions, considering that the additional cost of airfreight is lower than the sum of expenses, for example, if a factory closes.

Where Will Cargo Shift? Air or Sea?

If the concerns in cargo capacity continue for the remaining months of 2017, it is predicted that businesses will be shifting toward airfreight, which might lead to a capacity problem in air cargo and an increase in the price of shipping by air. Such instance happened in the second half of 2016 with the fall of Hanjin, when shippers moved to air, which led to capacity problems in air freight. Causing a major concern among shippers, business owners and cargo back office operators.

If this problem persists for several weeks, and as more shippers will have to move more and more goods, then problems may happen.

A few weeks ago, during the World Cargo Symposium, Boeing Commercial Airplanes announced that air cargo could reap benefits from the challenges being encountered by container shipping.

In 2016, the container shipping industry lost 4 Billion US Dollars. Problems emerged from the need to augment the 5,200 containerships that ply the world’s maritime trade routes, which had trouble meeting the cargo demand.

Early in April, Reuters stated that the US Justice Department has demanded that top executives from some major container shipping lines must testify in an investigation based on anti-trust. The US inquiry is just one of those that follow the inquiries also held in countries under European and African jurisdiction.