Air cargo demand soared in May, seeing its highest year-over-growth since January as global e-commerce giants like Shein and Temu bolster freight volumes and spark an industrywide battle for cargo capacity.
According to the International Air Transport Association (IATA), cargo tonne-kilometers (CTKs), rose by 14.7 percent in May, marking the sixth consecutive month of double-digit year-over-year growth in the metric.
Air cargo demand on international routes had an even bigger year-over-year jump at 15.5 percent, with flights out of Africa leading the way at an 18.2 percent increase and those originating from the Asia Pacific region coming right behind at 18.1 percent.
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The Asia Pacific boost is impressive when accounting for the fact that it has the largest global share of outgoing cargo demand, at 29.8 percent. Shein and Temu, both of which are headquartered in the region and operate factories out of China, are likely pulling plenty of the weight in the increasing movement of product via air.
Temu and Shein combined ship around 9,000 tons of cargo worldwide every day, while Alibaba ships 1,000 metric tons daily and TikTok airs 800 metric tons per day, according to February research from Cargo Facts Consulting.
When combining all four online businesses, the amount shipped would fill 108 Boeing 777 freighters a day, the consultancy said. By comparison, Amazon has a fleet size of 93 aircraft as of June 30, according to data from Planespotters.
The air freight competition out of China could get even more fierce if Amazon has anything to say about it. According to various reports from the end of June, the tech titan is debuting a new marketplace that will enable Chinese merchants to ship discounted, unbranded merchandise across fashion and home goods directly to U.S. customers. The reported move appears to take a direct shot at Temu and Shein, with the inventory sold expected to cost less than $20 per item.
As a result of the constant competition, air freight rates are continuing to rise worldwide, and heavily out of the Asia Pacific region. According to weekly data from WorldACD, which calculates rates based on more than 450,000 transactions per week, rates have increased 9 percent from the year prior to $2.54 per kilogram of cargo, from $2.31 in 2023’s Week 25.
For flights originating in the Asia Pacific, rates have escalated 19 percent over 2023. And when comparing the past two weeks with the preceding two weeks before that, rates from the Asia Pacific region to North America jumped 3 percent—yet another indicator of a hastened rush to fly products over the Pacific Ocean, particularly ahead of the peak shipping season as back-to-school shopping begins.
Although the race to get more product from China to the U.S. seems likely to keep ramping up, the IATA didn’t rule out the possible impacts of a U.S. crackdown on the $800-per-package de minimis trade provision. Lawmakers and American businesses alike have been highly critical of the provision, which they argue is a loophole that allows Chinese businesses to skirt U.S. tariffs.
“Some dampening, however, could come as the U.S. imposes stricter conditions on e-commerce deliveries from China,” said Willie Walsh, IATA director general, in a statement. “Increased costs and transit times for shipments under $800 may deter U.S. consumers and pose significant challenges for growth on the Asia-North America trade lane—the world’s biggest.”
Across all regions, air cargo capacity, measured in available cargo tonne-kilometers (ACTKs), increased by 6.7 percent compared to May 2023. This number was even bigger for international operations, at 10.2 percent.
For cargo exiting Asia Pacific, the cargo capacity jumped 8.4 percent year over year, less than half of the 17.8 percent demand increase in the same time frame.
With capacity growing at a slower pace than air cargo demand, more concerns could be on the horizon for the remaining U.S. shippers that are jockeying for more cargo space out of the region. In the end, this could signal higher spot freight rates, as well as longer freight times as the peak shipping season approaches.
And with more shippers being spooked by continued capacity constraints out on the ocean due to the ongoing Houthi attacks on commercial vessels in the Red Sea, as well as some of the looming trade tariffs with China expecting to go into effect Aug. 1, rates could see further upward pressure, while capacity sees even more constraints.
