Looking ahead to peak season

Peak season for air freight is now just a few months away, so it is worth taking a look at factors that may affect demand this year. There are two conflicting theories, one of which predicts a fairly low peak, and one that predicts a high peak. We’d be interested in hearing your thoughts on this…

1. On one hand, many economists are saying that the need to restock inventories that has driven demand for the last few months is now petering out. Manufacturers and retailers have once again filled their warehouses and their shelves, so we should expect demand to fall off in the second half of this year.

2. However, a look at what is happening on the ocean indicates that we may see a fairly strong modal shift to air over the next few months. There is currently a significant shortage of ocean containers, and this, combined with increasing demand, has led to an early beginning to the peak ocean season. Ex-China ocean container traffic was up 22% y-o-y in May, and some lines have already introduced big peak-season surcharges. This has led some analysts to predict that backlogs will soon develop. Historically, when ocean freight rates spike and backlogs develop, there is a strong boost to peak season demand for air freight, as shippers shift modes in order to get their goods from Asia to Europe and North America in time for the holiday shopping season.

Despite the view that an end to the restocking binge means a fall-off in demand, air carriers, forwarders, and shippers all seem to be making plans for a strong peak this year, so some added demand due to modal shift shouldn’t cause too much difficulty, but it is worth thinking about now, rather than being surprised by it in October.