US Demand For Goods From 2 Chinese Firms Sends Air Cargo Rates Soaring

Two Chinese companies have turned the global air cargo industry upside down. According to Forbes, Shein and PDD Holdings' Temu ship the majority of their products directly from factories in China to shoppers by air in individually addressed packages in the US. And in last one year, they became so popular with the Americans that it spiked cargo prices, the outlet further said. It has created a situation that's altering global trade routes for air freight and the industry is scrambling to keep up.

"Nobody saw it coming last year," Niall van de Wouw, the chief air freight officer of logistics analytics company Xeneta, told Forbes. "Their volumes could be the same order of magnitude as the largest freight forwarder in the world. Their volumes are crazy."

A report in Nikkei Asia said in April end, the growing demand in the US pushed up air cargo rates from China to the US by 14 per cent. The global average was down eight per cent in the same period, and rates for cargo from the US to China were down 29 per cent. Xeneta data showed the "average spot rate" from southern China to the US is now at about $4.75 per kilogram, more than double during same period in 2019, when the rate was $2.32 per kilogram.

Nikkei Asia cited a US congressional report from June last year to report that Shein and Temu were responsible for almost 600,000 packages per day arriving in the US.

"If demand is like this now, it's going to be really challenging in the fourth quarter during the traditional big season," said Brian Bourke, chief commercial officer of SEKO logistics, referring to the Christmas holiday period.

Temu sells clothing and housewares, and Shein has expanded to consumer electronics and kitchen items after starting with fast-fashion. They are able to keep the cost low by selling items directly by no-name Chinese companies, rather than selling an American brand that is made overseas.

These companies combined ship around 9,000 tons of cargo worldwide every day, or approximately 88 Boeing 777 freighters filled to the brim, the Forbes report said citing data from research firm Cargo Facts Consulting.

"Shein and Temu have a continuous 'thirst' for air freight, which is unparalleled to anything we have seen previously," Wenwen Zhang, an air freight analyst with Xeneta, told Forbes.