Booming western demand for fast fashion and ecommerce goods sold by Chinese online brands such as Temu and Shein is buoying air freight rates and creating fierce competition among logistics companies shipping from Asia.
Consumers in the US and Europe began buying more from Chinese ecommerce platforms during the pandemic, with some orders being delivered within a week. That demand has continued and sustained air freight rates, supporting logistics companies in an otherwise weak cargo market.
Some ecommerce platforms have been willing to pay close to double what general cargo customers are charged in some cases, in order to secure sufficient capacity to meet rigorous delivery schedules, according to logistics executives.
“There’s a change in behaviour . . . apps like Temu and Shein are [among] the number-one downloaded apps [in the US],” said Jacob Cooke, chief executive of WPIC Marketing + Technologies, which handles ecommerce logistics for brands in Asia, “And that’s all [shipped] by air.”
Air cargo and logistics executives say the effect of the Chinese ecommerce boom can be seen in a comparison between air freight rates, which have risen markedly in the second half of 2023, and rates for sea cargos, which have cratered since pandemic supply chain snarls were untangled.
In the first half of this year, China shipped Rmb1.1tn ($155bn) worth of ecommerce goods, equivalent to roughly 5.5 per cent of its total goods trade, according to official customs data.
Air freight rates on transpacific routes from Hong Kong and Shanghai have steadily risen over the peak Christmas delivery period and are now “comfortably” above 2022 levels, said Neil Wilson, editor of air freight data provider TAC Index.
Sea freight rates, including for transpacific trade routes, have fallen since the pandemic. Global prices per 40ft container fell 35 per cent between December last year and by the end of last month, according maritime consultancy Drewry.
“This year, the market out of southern China, in particular, has had a firmer tone for several months now — driven very largely by strong ecommerce business,” said Wilson. He added that ecommerce probably accounted for about 40 to 50 per cent of freight volume on most routes, and as much as 70 per cent in some cases.
Chandler So, north Asia freight director for Geodis, a unit of France’s state-owned SNCF, said platforms such as Temu and Shein, which had captivated western customers with their cheap fast-fashion designs, had unearthed “hidden demand” among US and European consumers, who were buying more items than they needed.
“That ecommerce model also creates demand on air freight which we didn’t see before,” he said.
That high demand is limiting traditional customers’ ability to negotiate lower rates in China.
Sunandan Ray, chief executive of US company Unique Logistics, which manages trade for exporters globally, said his staff in China “go to airlines and try to negotiate rates”. But “the pushback they get is the capacity is being utilised by [the Chinese ecommerce groups] “.
Global cargo carriers are increasing their investments in ecommerce management and reallocating aircraft to keep up with increased bookings, while Chinese ecommerce platforms have expanded their cargo offerings and some domestic producers are chartering planes to carry their goods.
JD.com’s logistics spin-off now has its own fleet of at least five aircraft, according to aviation consultancy Ishka, while Hainan-based private cargo carrier Central Airlines has a joint operation with ecommerce logistics firm YunExpress from Shenzhen to Paris, flying around six times per week.
Alibaba’s Cainiao logistics service said it operated on average 170 chartered flights or block-space agreements per week.
“In a nutshell, it is fiercely competitive given the . . . relative weakness in other sectors of air cargo,” said Tom Owen, cargo director at Hong Kong’s Cathay Cargo. “It is highly sought-after traffic.”
Owen estimated that ecommerce made up about half of the air freight that Cathay Cargo shipped through Hong Kong, adding that the company had accelerated investment in ecommerce and southern China to keep up with demand. He declined to provide specific figures. Cathay also had arrangements to charter aircraft to ecommerce producers in China, he added.
But the growing reliance on Chinese ecommerce also raises concerns for logistics groups, who are grappling with the fraught trade relations between Washington and Beijing.
“Everybody’s radar is fixed on China-US relations,” said one Asia-based air cargo executive. “If all of sudden there was some legal ruling in the United States that said there was an issue with Shein or some other ecommerce company in . . . China that would have an impact.”
However, some long-established cargo groups are confident demand for ecommerce and fast fashion will continue to provide a tailwind.
“I would expect for next year as well, whilst we will not see the heights of [the pandemic] again, I do not think that the air freight market would stay globally depressed,” said Tobias Meyer, chief executive of DHL Group. “We are going to continue to also see some spikes, as certain markets show extraordinary demand.”
Additional reporting by Eleanor Olcott in Hong Kong
