Are India’s air and ocean freights stable amid holiday rush?

India’s air freight rates remain stable for now but may rise as the Christmas rush picks up, urging shippers to plan shipments in advance, according to a report by Dimerco. On the ocean front, the sector has returned to regular weekly schedules, with carriers maintaining available space for cargo. Most Christmas and New Year orders have already been shipped, as shippers are avoiding deliveries during the holiday period to minimise delays.

Meanwhile, on the global front, air cargo volumes have experienced an unusual surge since mid-December. Traditionally, the market slows down after December 5, but this year has seen a marked increase in demand, expected to continue until late January.

This unexpected rise, driven by evolving trade dynamics and manufacturing activity, highlights a shift in typical market behaviour. Dimerco attributes the growth to several factors, including port strikes, tariff uncertainties, and an improvement in the global manufacturing PMI, which rose from 49.4 in October to 50.0 in November. This slight expansion signals a broader economic recovery, aligning with forecasts of 2.7% global growth in 2024. The Purchasing Managers’ Index (PMI) provides a timely indication of changes in the manufacturing sector and offers insights into global trade trends that are reshaping cargo demand.

According to the report, “Global PMI reached a 3-month high in November, aligning with the expected 2.7% growth for 2024. The US led with its strongest growth since April 2022, while the Eurozone saw a decline due to political instability. Japan and Australia experienced minimal growth, while India continued to outperform other BRIC countries with the highest growth. China also saw a boost, reaching a 5-month high in growth, driven by government support and stronger exports.”

Air cargo: A surge in volumes and shifting trade patterns
A key contributing factor to the surge is the growing shift from ocean to air freight, driven by port strikes, the looming threat of new tariffs under the Trump administration, and the need for shippers to meet deadlines ahead of potential cost increases. Many businesses, particularly those in China, are rushing to ship goods to the US via air freight to avoid the anticipated tariff hikes set for implementation before January 20. This has created a rush in capacity, putting pressure on available air cargo space, which is now nearing critical levels.

“Starting mid-December, we’ve seen a significant uptick in cargo volumes, particularly for consumer electronics. This is unusual, as the market typically slows down after December 5. However, this year, the peak is expected to extend all the way to late January, just ahead of Chinese New Year. What's interesting is how general cargo has avoided the usual October-November e-commerce rush to better optimise capacity and costs—this could indicate a new trend going in to 2025,” said Kathy Liu, VP, Global Sales and Marketing, Dimerco Express Group.

"Many shippers are rushing to move stock via air freight from China to the US."

Kathy Liu, Dimerco Express Group

“At the same time, many shippers are rushing to move stock via air freight from China to the US, hoping to beat potential tariff increases before January 20 under the Trump administration. This has created a surge in demand, pushing capacity to critical levels,” added Liu.

2025 outlook: Air freight and growing trade between Asia and Taiwan
Looking ahead to 2025, airlines are anticipating a 10% increase in contract rates for both long-haul and intra-Asia routes. However, the market remains cautious, with rates still lower than the peak seen in 2023. Trade between Asia and the US remains uncertain, especially in light of potential tariff policies. In particular, the China-Taiwan trade route is expected to see significant growth, driven by Taiwan's advanced production lines for semiconductors and consumer electronics. This will likely result in more parts being shipped from China to Taiwan for assembly before being sent to the US to avoid tariffs.

Impact of Chinese new year on freight rates
As Chinese new year approaches earlier this year on January 29, the expected influx of cargo to avoid high tariffs has led to carriers pulling back their special bullet rates, returning to higher spot rates. Intra-Asia freight rates peaked in early December and with the holiday season looming, the key question is whether these elevated rates will stabilise through the Chinese New Year period. Alvin Fuh, Vice President – Ocean Freight at Dimerco, mentioned, “In the intra-Asia sectors, rates peaked in early December. The key question now is whether these elevated rates will remain stable through Chinese New Year, and it will be interesting to monitor how this plays out in the coming weeks.”

Rising rates and tight capacity in air freight
Air freight has seen significant rate increases due to heightened demand and capacity shortages. Asia-Europe lanes remain stretched, exacerbated by flight cancellations from China Cargo Airlines and Japan Airlines, which have constrained space and pushed rates higher. Relief is anticipated after January as pre-Lunar new year demand subsides. Transatlantic routes have also experienced similar trends, with rates rising due to reduced capacity during the winter season and strong European imports from the Middle East driven by sea-air logistics and disruptions in the Red Sea region.

Looking at Asia/Europe trade, several factors are shaping the freight rate outlook. By the end of the year, many major BCOs (Beneficial Cargo Owners) are expected to review their long-term rates for the Europe Westbound (WB) routes with carriers. Carriers are likely to maintain high spot rates to support these long-term rates. Still, economic challenges in the Eurozone, combined with hopes for the reopening of the Suez Canal, may delay rate renewals.

The US air freight market remains tight, fuelled by shippers rushing to move goods ahead of potential tariff changes under the Trump administration. Charters are helping stabilise rates, but advanced bookings remain critical to avoiding delays. Taiwan’s prominence in exporting AI chips and servers has further tightened capacity, with soaring demand for routes to the US, EU, and SIN. Fuel surcharges effective December 16 have added additional cost pressures for shippers.

India’s air freight sector, however, has seen stable rates, though increases are anticipated due to the Christmas rush. Shippers are advised to plan in advance to avoid delays during the festive season.

Ocean freight: Port strikes and tariffs reshape the landscape
On the ocean freight side, the situation is equally complex. Despite a tentative wage agreement between US East and Gulf Coast dock workers reached in October, negotiations over technology and automation have stalled, raising concerns of a strike post-January 15. Additionally, the introduction of new tariffs under the Trump administration is expected to further disrupt global supply chains, with shippers moving to frontload cargo to avoid the higher costs associated with these tariffs.

In light of these factors, the Global Port Tracker has raised its projections for 2024 cargo volumes, anticipating 25.6 million TEUs (twenty-foot equivalent unit - The unit used in shipping to describe a ship's capacity or freight it can carry), a 14.8% increase over 2023. This surge is expected to surpass 2022’s volume, highlighting the broader shift in global trade dynamics as companies react to both tariff risks and potential labour disruptions.

Ocean freight saw a spike in rates for Asia-Europe lanes in December, driven by pre-Lunar New Year demand and general rate increases. However, these rates are expected to decline after January as European demand weakens. Port strikes remain a significant risk, with the International Longshoremen's Association (ILA) warning of potential disruptions starting January 15, 2025. Such a strike could cause widespread economic losses, necessitating contingency planning by shippers.

In India, carriers have returned to regular weekly schedules, and space availability has improved. Most Christmas and New Year orders have already been shipped, with shippers now avoiding deliveries during the holiday period.

A complex freight market in transition
The freight market in late 2023 and early 2024 reflects a unique convergence of challenges and opportunities. North American air cargo demand has shown consistent growth through the end of Q4, driven by rising e-commerce and shippers expediting goods ahead of potential regulatory changes under the Trump administration. While 2024 appears promising for air cargo, caution is advised as 2025 could bring significant disruptions.

Donald Trump, the newly elected President of the United States, may implement substantial tariffs on key trade partners such as Canada, China, and Mexico. These measures could disrupt global supply chains and dampen consumer confidence. Willie Walsh, Director General of IATA, noted that the air cargo industry’s resilience will be tested by a range of geopolitical and economic factors, including ongoing conflicts in the Middle East and Ukraine, uncertainties within the EU and NATO, and a potential International Longshoremen's Association (ILA) strike in mid-January.

The upcoming Chinese New Year in 2025, which falls on January 29, adds another layer of complexity. With public holidays in China spanning January 28 to February 4, factory closures during this period could significantly disrupt global supply chains, causing production halts and shipping delays. According to the report, shippers are advised to plan proactively by placing orders well in advance, securing sufficient inventory, and coordinating with logistics partners to mitigate potential impacts. Moreover, Taiwan-China trade is expected to grow, particularly in semiconductors and electronics, as manufacturers move parts for assembly and export to bypass tariffs.

Additionally, the looming possibility of an ILA strike starting January 15, 2025, could exacerbate supply chain challenges. The strike could lead to widespread port closures, potentially costing the economy up to $7.5 billion per week. Businesses must explore alternative routes, secure additional inventory, and remain vigilant about updates to minimize potential losses.

The Trump administration’s inauguration in 2025 is likely to bring changes to tariffs and trade regulations, affecting cross-border commerce between the U.S., Mexico, and Canada. Businesses should prepare for possible disruptions by considering alternative suppliers, transportation strategies, and adjusting logistics plans to mitigate increased costs and delays.

As global supply chains adapt to these evolving dynamics, the freight industry faces both challenges and opportunities. Effective planning, collaboration, and adaptability will be critical for shippers and carriers to navigate the uncertainties of 2024 and 2025.

A similar version of the story was originally published on The STAT Trade Times.