How Temu and other Chinese e-commerce platforms are pushing the freight market

What is the problem?

In a nutshell: The large e-commerce platforms, such as Temu, Shein and Wish, are buying up large parts of the air freight from China to Europe and the US. This puts pressure on an already challenged freight market - especially in air freight. It applies to imports from China to Europe and the US, but also exports from Europe to the rest of the world. Our expert, Lars Søvsø Jensen, explains: “Because rates are so high, many air freight carriers are shifting capacity from routes that previously carried cargo from Europe to, for example, the US, to instead focus on departures from China to Europe. In addition, it has also become more difficult to get goods home from the Far East to Europe and the US because a large part of the space on the aircraft has been taken.”

Consequences across sea and air freight

The direct consequences are significant price increases and capacity shortages for exports from Europe to the rest of the world and imports from China to Europe, affecting companies' budgets and ultimately consumers.

“As a company, when you calculate your freight, you always add a margin. But that margin has long been exceeded. Right now, we're seeing prices almost double. And that's because the big companies are buying almost all the space,” says Lars Søvsø Jensen.

The main challenge concerns air freight, but because many are struggling to get their goods onto planes - both due to the lack of capacity and rising prices - they are changing their strategy to sea freight, which increases the pressure on the sea. “Year after year, autumn is the peak season because many of the Christmas goods are imported from the Far East. In the past, we were used to shipping most of it by sea freight, but platforms like Temu have changed the rules because they fly it all. They are taking a lot of air freight capacity out of the market, which we have never seen before,” Lars Søvsø Jensen adds.

Normally we see a 20-30% price increase during the peak season, but this has doubled. Additionally, there are fewer flights from Europe to the US in the winter months due to fewer tourists. Since a significant part of the freight to the US is transported by passenger aircraft, this also affects the capacity and delivery time of goods.

“Right now, we're in the perfect storm because it's also low season for flights to the US. And when airlines change their routes at the same time, space becomes even more limited. That's why prices are going up. At the moment, it’s almost a vertical curve, and I've never experienced that before in my career,” says Lars Søvsø Jensen.

Unfortunately, a parallel consequence of the situation is that we are experiencing more errors from the air cargo companies. This is due to the huge volumes of cargo they have to handle.

Like trading on the stock market

The large price increases have made the freight market as unpredictable as trading on the stock market.

Because Miami, USA, is an important hub for the whole of South America, the decrease in flights also affects routes to Buenos Aires.

Furthermore, the situation affects courier companies. Despite the fact that they negotiate fixed rates every year, the lack of capacity combined with price increases has led many to introduce surcharges during the peak season.

What can you do yourself?

Our experts' best advice is simply to make sure you book your shipments well in advance if you are sending via air freight.

“You used to be able to book the day before – and you still can, but it can be very expensive and delays are a common risk,” says Lars Søvsø Jensen.

More than ever, having a strong logistics partner is critical in navigating the various challenges we are experiencing. Because we are able to pre-buy allotments with the airlines, we can ensure that your goods get on the plane and that the price is kept as low as possible.

At Blue Water, we also offer different alternatives, for example, you can read more about our short sea solution.

If you need advice or guidance, you are always welcome to contact Lars or one of our other experts at Blue Water.