Global Freight Rates and Peak Season: Dimerco’s Kathy Liu Explains

[00:00:03] Speaker A: Turning to freight markets, on 28th of August, shipping consultancy Drury reported that its World Container Index had fallen for an 11th straight week. Trans Pacific spot rates are collapsing as US retailers slow down import while the Asia Europe trade is also seeing spot freight rates decline despite relatively healthy demand. Most of this is down to excess capacity even though a lot of those ships are diverting around Southern Africa or almost all of them. What does this mean for shippers right now? Is this good news, we've got cheaper shipping or is this just a sign that we've probably got more volatility to come? Cathy? [00:00:39] Speaker B: I think yeah for the ocean freight wise it's really, I think the rate has keeps flat and we didn't see any sign for the peak season in the rest of the year. And especially there's more capacity in the market because during the pandemic all those shipping line acts actually deployed a lot of those big vessels and they add a lot of capacity into the market. But this year I think maybe also because of the tariff, but both US and Europe the buying power is not as strong compared with before. So we didn't see that much demanding in the market. For the ocean freight and for the air freight I think it will be a little bit different. We still think the peak season I will be back from end of September like normal. But this year the peak season will be more related in Southeast Asia into U.S. compared with China in U.S. because the demand from China is still very soft not only because of tariff but also related with E commerce. So we will see the demand growing in Southeast Asia especially Vietnam, Thailand and Malaysia. That's how we see and also another reason why it will be peak because of there's not that much capacity in those market especially for long haul into US or into into Europe. This is actually also related with the construction at the different airport. I mean even the airline like to add on more flights but maybe it's not really possible because of the ground handling capacity, everything. It's not that cannot support this kind of growth. So we will see the disruption will be in those area into U.S. and Europe during the fourth quarter. Yeah, that's how we see but for China I think it will be still slow. So what I think most of the global player, including US we are doing is that we are trying to connect Southeast Asia's freight into China and then connect China's capacity into US so it somehow can release the pressure from origin in Southeast Asia. But on the other side you also can fill up the empty capacity out of China. So it's a kind of win win situation for both sides. [00:02:58] Speaker A: Yeah, that's very interesting Kathy. The US is sticking on air freight. This is particularly relevant to it. The US has ended the de minimis exemption which allowed packages worth less than $800 to enter duty free. [00:03:12] Speaker B: Right. [00:03:12] Speaker A: Just to give listeners a view on this. In 2024, 1.36 billion packages entered under this exemption and that was goods worth 64.6 billion. It also drove that air cargo market through most of last year. This is the temu, this is the sheen. It's Alibaba people that shipping direct to customers in many B2C shipments but using air cargo. So what does this change mean for shippers and how their transport partners are adapting and what does it mean for the peak season? [00:03:44] Speaker B: Yeah, I think it's impact a lot on the peak season, especially out of China because in the past that E commerce cargo almost occupied over 50% of the air freight cargo market in the past especially after pandemic since 2023 but since this year after the diminished be removed and we have seen that the demand for E commerce out of China into US dropped so 30% same time compared with last year for the 30% actually it's quite a lot. And that's also why from now since this year may that the capacity from China into US actually is more than demand because most of those E commerce players like Timu Xin they have stopped shipping directly and most of those goods they are moving those let's say frequent ordered the commodities they're moving via ocean freight into US and they find a warehouse over there and then to store the inventory in US and then do the last mile delivery from their side. So the B2C mode somehow changed to B2 B2C mode. Yeah. So means that there will be less demand on air freight but switch to oceanfront. [00:05:08] Speaker A: Okay. Yeah that'd be a blow for many people in that market. I've been doing a bit of research into how this is affecting different industries. It's not just about fast fashion publishers are also affect I had a chat to a few people we might we might come back to this in a bit more depth in future episodes. My research said was just a little bit of background. So big publishers basically ship full container loads into the US mostly from Asia. Smaller importers piggyback those operations. But the smaller players are also shipping B2C direct to students and colleges. Cathy, is that typical? So this is sort of. We don't really cover publishing logistics that much but I guess there's not just that sector that's affected. It must be other sectors out there beyond fashion and publishing that are also being hit by this de minimis change. [00:05:55] Speaker B: Yeah, sure. I think not only those fashion but all those. Let's say they take advantage of the diminish in the past whilst sending whilst more parcels. Now it's all be impacted. And then that's why I think we will see more general cargoes in the market compared with before. Because that's somehow. It's like a switchback because you know, before COVID that in the market is more general cargo. And then because of the COVID the pandemic we see more online shopping, e commerce start from US Europe. Then those general cargo actually they start to split to small, small puzzle and to send directly because of those diminished rules. And now they just switch back the small puzzle back to the general cargo to do the consolidation. Yeah, so because I think just because of the in the past the 800 US dollar the diminish is really attractive. So they changed the way. But now I think back to the old ways. B2B 2C. Yeah. To make the transportation and also under this way I think there's more can be moved via ocean freight compared to air freight.