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E-commerce drives up air cargo demand, leading to tight space, higher rates

DEMAND for air cargo is being propelled by cross-border e-commerce and high levels of emergency shipments, leaving shippers scrambling for space on aircraft and paying higher freight rates as strong volume in Asia-Europe and Asia-North America trades quickly fills up available capacity.

Airfreight prices from Shanghai to Frankfurt in the past two months have doubled, according to data from eBooking and air freight automation platform Freightos WebCargo. In September, the rate was US$2.5 per kilogramme, rising to $3.7 per kilogramme in October and $5 per kilogramme in November, reported IHS Media.

"Driven by strong e-commerce sales and the buildup for holiday season, air capacity is stretched incredibly thin," said Freightos WebCargo CEO Manel Galindo. "The spot market is being heavily impacted by early capacity reservations by forwarders, as well as product launches such as Apple"s iPhoneX release."

Atlas Air Worldwide Holdings senior vice president Greg Guillaume agreed that the underlying reason for rising demand was e-commerce. "Over the longer term, e-commerce will account for an increasing share of retail sales - the mega-trend of our times," he said.

"Particularly in developed economies, we are seeing that e-commerce often uses express air freight as a mode of delivery to the customer. With the anticipated future expansion of e-commerce in emerging economies, its effect on air freight will drive growth for many years to come," said Mr Guillaume.

Retail e-commerce sales globally are forecast to total $2.29 trillion in 2017 and will rise to $4.48 trillion by the end of 2021, which would represent 16.1 per cent of total retail sales. Consumers in China will generate half of all worldwide e-commerce sales in 2017, according to research consultant eMarketer.
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