As demand for air freight grows, Shein and Temu are putting pressure on higher rates

Air freight demand surged in May, posting its biggest year-over-year increase since January, as global e-commerce giants like Shein and Temu boosted shipping volumes and ignited an industry fight for capacity.

According to the International Air Transport Association (IATA), cargo tonne-kilometres (CTK) rose by 14.7 per cent in May, marking the sixth consecutive month of double-digit year-on-year growth.

More from Sourcing Journal

International cargo demand increased further year-on-year, up 15.5 per cent, led by flights from Africa with an 18.2 per cent increase, closely followed by flights from the Asia-Pacific region with an 18.1 per cent increase.

Growth in the Asia-Pacific region is impressive, given that it accounts for the largest global share of outbound cargo demand, at 29.8 percent. Shein and Temu, which are headquartered in the region and operate factories outside China, are likely to be contributing significantly to the growth in product flows by air.

According to research from Cargo Facts Consulting conducted in February, Temu and Shein together move about 9,000 metric tons of cargo globally per day, while Alibaba ships 1,000 metric tons per day and TikTok ships 800 metric tons per day.

Combining all four internet companies, the amount shipped would fill 108 Boeing 777 cargo planes per day, the consulting firm said. By comparison, Amazon has a fleet of 93 planes as of June 30, according to data from Planespotters.

The competition for air freight from China could get even fiercer if Amazon has a say in the matter. According to multiple reports in late June, the tech giant is launching a new marketplace that will allow Chinese sellers to ship discounted, non-branded fashion and home goods directly to customers in the U.S. The reports appear to be a direct blow to Temu and Shein, with the items being sold costing less than $20 each.

As a result of continued competition, air freight rates have been steadily rising around the world, especially in the Asia-Pacific region. According to weekly data from WorldACD, which calculates rates based on more than 450,000 transactions per week, rates rose 9 percent from a year earlier to $2.54 per kilogram of cargo, from $2.31 in the 25th week of 2023.

For flights originating in the Asia-Pacific region, rates are up 19 percent compared with 2023. And comparing the past two weeks with the previous two, rates from Asia-Pacific to North America are up 3 percent — another indicator of the accelerating pace of product movement across the Pacific, especially ahead of the peak shipping season when back-to-school shopping begins.

The story continues

While the race to get more products from China to the U.S. is likely to intensify, IATA did not rule out the possibility of a U.S. crackdown on the $800-per-package de minimis rule. Both lawmakers and U.S. businesses have been highly critical of the rule, which they say is a loophole that allows Chinese companies to bypass U.S. tariffs.

“However, some softening could occur as the U.S. imposes tougher conditions on e-commerce shipments from China,” IATA Director General Willie Walsh said in a statement. “The rise in costs and transit times for shipments below $800 could put off U.S. consumers and pose a significant challenge to growth in the Asia-North America trade lane, the world’s largest.”

Across all regions, cargo capacity, measured in available cargo tonne kilometres (ACTK), increased by 6.7 per cent compared to May 2023. For international operations, this figure was even higher at 10.2 per cent.

For cargo shipped from the Asia-Pacific region, capacity rose 8.4 percent year-on-year, less than half the 17.8 percent increase in demand during the same period.

As capacity grows slower than air cargo demand, there could be more concern on the horizon for remaining U.S. carriers vying for more cargo space outside the region. Ultimately, that could mean higher spot freight rates as well as longer freight times as the peak shipping season approaches.

And as more carriers fear continued ocean capacity constraints due to ongoing Houthi attacks on commercial vessels in the Red Sea, as well as looming trade tariffs from China due to take effect on August 1, rates could come under further upward pressure and capacity could become even more constrained.