<ul> <li>Asia cargo capacity shortages are impacting ocean, air and even euroasia rail routes.</li> <li>Carriers are racing to get equipment back to Asia where record rates are providing them with a huge pay day.</li> <li>Air freight capacity has been greatly impacted by the cancellation of most passenger flights.</li> <li>Ocean carriers have now reinstated most of their sailings, yet exporters are still paying premiums to be guaranteed container space.</li> <li>E-commerce is playing an increasing roll is shifting retail buying patterns.</li> </ul> First it was supply shortages, then we were hit with (consumer) demand shortages. Now it’s shipping capacity shortages. And there seems to be no end in sight. During the past two weeks air freight rates from Shanghai to North America <a href="https://insidefashionlive.net/freight-rates-poised-to-rise-further/" target="_blank" rel="noopener noreferrer">hit their highest level since June reaching</a> $6.07 per kg, according to Tac Index figures. That’s about 20 percent up from 2019. Rates from Hong Kong to Europe are now at $3.82 per kg, which is the highest level since the start of July. Full one-way charters from China/North Asia to the US are being sold between US$1.3-1.5 million with a few limited opportunities left for the November/December time period, according to <a href="http://www.flexport.com" target="_blank" rel="noopener noreferrer">Flexport</a>. On Asia to Europe, carriers appear to be pulling scheduled passenger flights again. This will further impact capacity since normally passenger flights carry a lot of cargo, in addition to passenger baggage. “We anticipate that the market will remain at these levels through at least the end of November but likely even well into December given the late expected surge of e-commerce volumes,” said Flexport. Rate surges out of Asia have ocean carriers sending equipment back to the region as quickly as possible. Most don’t want to wait around at ports in the U.S. and EU waiting for an export load when there is much more money to made out of Asia. With, for example, the current spot rate from China to the US west coast, before premium fees, is around $4,000 per 40ft, compared with a backhaul rate of just $500, the situation painfully clear. Exports from the EU and U.S. are now begging for space on ships with the situation facing crisis levels. <strong>Air Freights Continue to Hit New Highs</strong> Air cargo data from the <a href="http://www.freightos.com" target="_blank" rel="noopener noreferrer">Freightos.com</a> marketplace show rates from China to the US and Europe have increased from 25 percent to as much as 45 percent in the last two weeks as consumer tech product launches (in particular the new iPhone), eCommerce and holiday season products have shippers competing for space. While rising rates are typical of this time of year when retailers are rushing in holiday merchandise, what’s different is the decrease in capacity mainly due to cancelled passenger flights. Out of Asia Pacific, chargeable weight of cargo carried is up 11 percent, while capacity has only increased by 10 percent. Overall air cargo capacity is down 20 percent year-on-year, according to <a href="https://www.accenture.com/hk-en/services/travel/seabury-consulting-accenture" target="_blank" rel="noopener noreferrer">Seabury Consulting</a> by Accenture data. However that’s an improvement over July when capacity was down 28 percent year-on-year. The biggest capacity decrease is to the EU, where Asia to Europe capacity fell 26 percent. By contrast, intra-Asia capacity remained flat. <strong>If Not By Air, Then By Sea</strong> Although carriers have continued to restore previously blanked sailings, capacity is still tight with cargo being rolled and shippers paying premiums to secure container availability and for space guarantees. For ocean carriers, a new General Rate Increase (GRI) will come into effect on some lanes by early November, according to data from Flexport. It will impact both Asia to North America and Asia to Europe. Flexport also recommends shippers book 14 days in advance. Additionally, port congestion in LA has worsened leading to delays. On Asia to Europe routes, there will be a surcharge of US$150/TEU effective November 1. Capacity demand is expected to be very strong through the end of November. Very severe equipment shortage and worsening port congestion, particularly in the UK is likely to result in delays, said Flexport. The situation is the same on India to North America routes. <strong>E-commerce Becomes a Key Disruptor - of Logistics</strong> Part of the problem is being driven by e-commerce, where activities like ‘drop shipping’ are creating demand shifts that don’t coincide with typical shipping seasonal peaks and dips. The aggregate of a huge number of small to medium sized sellers, who tend not to carry a lot of inventory, is a growing force that is weighing on supply chain logistics. From importing to last mile delivery, the surge in e-commerce is changing buying - and hence - freight patterns. Even when we get past the pandemic and passenger flights are reinstated, there will still be the impact of e-commerce, especially as now even retailers who traditionally relied on bricks and mortar business models shift their focus to e-commerce.