Frontloading becomes “no brainer” for shippers

Figure of the week

87% 87% of e-commerce companies based in the US and Europe plan to change manufacturing locations within the next three years, according to a survey of 1500 supply chain professionals by Fidelity Fulfilment.

Quote of the week

“Spot rates will keep climbing for as long as the Strait of Hormuz is not fully open. That could be four more weeks or longer depending on how complex the de-mining operation turns out to be. Shippers should plan for a peak around the point the strait formally reopens, followed by a gradual easing.” Xeneta chief analyst Peter Sand warns shippers to prepare for further spot rate rises.

Frontloading becomes “no brainer” for shippers

Analysts have been taken by surprise by the extent of this year’s import surge and it looks as though a greater degree of frontloading has taken place than anyone imagined . US imports from Asia rose nearly 20% in May year over year and were almost 13% higher than in April. Merchant readers will recall that analysts have been predicting an early demand spike for some time, but not on this scale. One of the most pressing questions is why volumes have taken the industry by surprise. On the one hand, demand has proved difficult to predict. An early Amazon Prime Day was one unexpected factor. Another was that consumers appear to be cutting back on travel spending due to higher energy costs, but compensating by spending more on goods. Seeing this, importers have been keen to make sure they stock up inventory, especially for the home improvement, outdoor leisure, sporting goods, and value retail categories. Even though the prospect of peace in Iran looks set to bring down fuel costs, fear of more potential surcharges and extra tariffs later in the year means frontloading has been a no-brainer for many shippers . Another factor, however, is that carriers are increasingly starting to shift capacity away from the trans-Pacific - helping their GRIs stick. Trade volumes have become so unpredictable and difficult to forecast that carriers have begun redeploying vessels to more profitable trades, such as Asia-Europe and Asia-Mediterranean. This, in turn, has put more pressure on trans-Pacific rates. There is also a degree to which ocean carriers are making hay while the sun shines. They may be seeing tightness in capacity now, but their order books indicate that overcapacity in coming years will be impossible to avoid. Shippers, then, can expect to encounter relatively aggressive pricing strategies until later in the summer .

Capacity crunch keeps a lid on shifts to air freight

Congested ocean routes have led many shippers to consider shifting towards air freight, but a lack of capacity has limited their options . A relatively large-scale frontloading surge has led to shortages of space on the trans-Pacific ocean freight trade. As a result, many shippers have looked towards air freight. “There are clear signs that some shippers are actively exploring air freight solutions as an alternative to congested ocean routes, particularly as ongoing bottlenecks continue to disrupt supply chains,” one industry insider told The Loadstar. He described this as “targeted mode shifts for critical, high-value, or time-sensitive cargo rather than a broad-based shift”. However, trans-Pacific air freight capacity is tight across much of Asia. Semiconductor, AI server, data center, and other high-tech demand has stepped in to fill much of the gap left by e-commerce. This has limited the extent to which shippers have been able to shift modes when necessary. In terms of capacity, Taiwan, for example, has recorded 276% year-over-year air cargo volume growth over the first four months of 2026, while AI-related exports from Thailand have risen 223%. What this means is that flights may be canceled suddenly, often without advance notice, because of shortages of capacity or fuel. Backlogs are building at many airports, available space is being filled rapidly, capacity is selling out quickly, and rates can rise almost overnight. Analysts note, however, that importers are increasingly taking a more measured response to supply chain disruption. This often means considering multimodal strategies that are in line with their risk management profiles. But it also underscores how the air freight market is becoming increasingly volatile. Six months ago, shippers would have been surprised to find themselves facing a capacity crunch in trans-Pacific air freight markets, but that is exactly what they are seeing right now .

Double trouble warning as surcharges wind down

After a rocky start, peace talks between the US and Iran appear to be progressing well and, therefore shippers are beginning to see an end in sight for fuel surcharges . Optimism is rising amid reports that vessels are slowly but surely exiting the Strait of Hormuz and oil prices are falling. “If you just follow the oil price trading pattern over the past couple of weeks, you’re seeing the markets telling you they’re increasingly confident that we’re closer to the end of the conflict,” said Citi Research’s Scott Chronert. “This energy price overhang, with its inflation connotation, should be lessening in the weeks and months to come.” Inevitably, shippers will expect emergency fuel charges to fall as oil and bunker prices adjust. But Drewry has warned that some will face a nasty surprise in the shape of increasing BAF surcharges. These tend to be levied on a quarterly basis and represent prices over the previous quarter rather than those moving forward. “Standard BAF mechanisms are designed to capture increases in bunker and oil prices, albeit with a time lag,” said Drewry. However, the analysis firm warns shippers to be on the alert for potential duplicate fuel recovery charges. This could mean that carriers charge both quarterly fuel surcharges and emergency fuel surcharges. However shippers would be in a relatively strong position to negotiate the removal of the emergency surcharges and deal with ongoing fuel price volatility through quarterly BAFs instead, Drewry added.

🤔 Did you know ?

Stronger than expected demand has caused congestion and delays in several major Asian ports. Shanghai was reportedly seeing delays of four to five days due to strong demand for solar panels and the early peak season. Taiwan and Singapore were also seeing congestions due to disruptions in global shipping networks and overbooking.

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