Current Market Forces Resulting in Air Freight Rate Increases on Selected Lanes
In 2017, the air freight industry has witnessed considerable capacity congestion and increased demand. As a result, our airline partners are reacting to the challenges by demanding higher premiums. Global air freight rates are increasing and expected to increase further throughout 2017. To guarantee the priority of our uplifts, procure additional capacity, and ensure a high quality consistent service, DHL Global Forwarding (DGF) cannot avoid these increasing rate levels, Consequently, we will selectively increase our rates on the most impacted lanes, effective June 12, 2017.
The Following Factors Are Contributing to the Current Market Situation:
- Global Demand Increase:The market faces a significant global increase in demand with +11.2% (= additional +173,000 tons) year-on-year increase in January 2017. Demand growth has been outpacing capacity growth in recent months, further propelling load factors.
- Strong year-on-year air trade growth, November 2016 – January 2017, on key lanes, e.g.:
- North Asia Pacific – North America: +12%
- North Asia Pacific – Europe: +23%
- North Asia Pacific intra: +10%
- Europe – North America: +11%
- Europe – Latin America: +17%
- Europe – North Asia Pacific: +11%
- Ocean Freight Capacity Shortage:There is no immediate relief in sight for the ocean freight capacity crisis in Europe. Shippers should expect delays of up to eight weeks, further increasing demand for air transport.
- Fuel Surcharge Reinstated:Oil prices have risen over 50 percent since mid-2016. In reaction to this inflation, carriers are reinstating or raising fuel surcharges (FSC). In places like Hong Kong, with government regulated surcharges, the authorities have approved FSC increases with effective date April 1, 2017. Multiple carriers have already started to implement substantial FSC increases on top of existing rates (ranging as high as 21.00 Taiwan New Dollar which equates to USD 0.68).For all lanes from Italy to the United States, we will start applying a Fuel Adjustment of USD 0.03/kg as of May 15 to cover our increased costs on this trade.
- Massive Flight Cancellations:Chinese carriers, and now also others, have been cancelling scheduled freighter flights for various reasons and to unprecedented levels, removing significant capacity on key lanes, especially out of Shanghai. These actions can lead to doubling or tripling of market rates.
This is not a seasonal spike we observe, but a distinctive underlying trend in the market leading to overall higher rate levels. Since we are committed to offering the best possible service to our customers, we will issue rate increases on the affected lanes where the impact of the current market situation is most acute. We will ensure this volatile period is managed with minimal impact on your supply chain through seamless air freight operations. Customers currently undergoing a rate renewal exercise will be excluded.
We are observing the market closely and securing significant additional capacity for the third quarter of this year. While we do not aim to, we may still instate additional rate increases or Peak Season Surcharges (PSS) later in the year. As in previous years, the ‘6/20’ capacity protection plan will apply during peak season in 2017. Your local DHL Global Forwarding sales representative is available to discuss your expected volumes and keep you updated on any further developments.
DHL Global Forwarding is committed to keeping our customers informed of changes in the industry that could impact their business. Your ongoing support is highly appreciated and we thank you for your cooperation in advance. Please contact your DHL Global Forwarding sales representative for more details.