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Dimerco and Cathay Pacific launch PVG-ORD charter service in peak season

In preparation for possible cargo capacity constraints this peak season, Dimerco Express Group has partnered with Cathay Pacific to offer a weekly air cargo charter service from Shanghai (PVG) to Chicago (ORD) using a B747-800F aircraft from September to December.

“The service is a response to clear market signals that capacity constraints this peak season – both in air and ocean freight – could lead to shippers fighting for high-priced cargo space, similar to 2021,” Dimerco’s press release said.

Dimerco’s weekly air cargo service from Shanghai to Chicago will run from September 12 to December 5. Cathay Pacific’s B747-800F aircraft will depart PVG every Thursday morning local time, make a stopover in Hong Kong and arrive in ORD at 1:40 p.m. local time on Friday.

The charter solution can be either port-to-port or door-to-door. Dimerco will work with its trucking network for last-mile delivery from Chicago.

Dimerco reported that its discussions with a number of sources point to a busy peak season in 2024, during which there is no guarantee that capacity will be found to move cargo from China to the U.S. Carriers are preparing for a surge in demand.

It states: “A large, independent air cargo handler in Hong Kong plans to hire more than 300 additional staff to cope with peak season demand.”

Many shipping companies, especially consumer electronics companies, are launching new products this holiday season and are anticipating high demand.

It states: “If freight volumes exceed expectations, our freight forwarding contacts will inform us that available capacity may not be sufficient to handle this volume.”

Typically, 30-40% of cargo space is reserved in advance under contracts with carriers, with the rest available to the rest of the market. However, this year that percentage is much higher, limiting the space that can be sold.

One reason for this is that Temu, Shein and other e-commerce companies in China require their freight forwarding partners to sign at least a Block Service Agreement (BSA, Space Under Contract) with a freight forwarder. For this reason, many small and medium-sized freight forwarders have entered into minimum quantity agreements with freight forwarders (e.g. 25-50 tons per month).

“This way,” the report says, “you have more space already reserved and limited additional space to sell ad hoc on the open market.”

According to Kathy Liu, vice president of global sales and marketing at Dimerco, “the signals are eerily similar to those seen in the 2021 peak season, with container shortages, port congestion and astronomical prices.”

According to Dimerco, there are two camps among the carriers in view of the upcoming peak season.

There is the “wait and see” group, which hopes that the Red Sea crisis will ease, as well as the current container capacity challenges and tariff increases on the Trans-Pacific East route. Then there is the “no risk” group, which is now planning to secure additional capacity for the fourth quarter – particularly for air and ocean freight from China to the US.

“Given the signals we are seeing, we believe it is wise to secure capacity. That is why Dimerco is bringing additional capacity to the China-US shipping route in the fourth quarter,” the statement said.

“Traditional air cargo carriers will be looking for additional capacity,” says Liu, “especially brands launching new products for the holiday season, as they cannot afford inventory delays that would jeopardize a high-sales day like Black Friday.”

But she also believes there will be strong interest from ocean freight companies who see air freight charter services from China to the US as an alternative to ocean freight services, which, as we have seen in 2021, could become unreliable and very costly as peak season approaches.

“Air freight is typically 12 to 16 times more expensive per kilo than container freight,” says Liu. “But currently that difference is only 6 to 8 times and shrinking. Combine that with a door-to-door transit time for container freight from China to the US of up to 40 days, and brands will be open to alternative transportation options.”

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