How peak season impacts freight rates (air/ocean)

Introduction

The logistics industry experiences significant fluctuations in freight rates throughout the year, with peak season being a crucial period that can dramatically impact pricing and capacity. Understanding when peak season occurs and how it affects freight rates is essential for shippers and freight forwarders to plan effectively and optimize their supply chain operations. In this article, we’ll explore the dynamics of peak season in the air and ocean freight markets and discuss how FreightAmigo’s digital logistics solutions can help navigate these challenging periods.

When is peak season?

Peak season in the freight industry typically occurs during two main periods:

• Summer peak season: Usually runs from August to October
• Holiday peak season: Generally spans from mid-November through December

However, it’s important to note that peak seasons can vary depending on the specific trade lanes and industries involved. For example, the electronics industry may experience a peak season leading up to major product launches, while the fashion industry might see spikes before the spring/summer and fall/winter seasons.

Factors driving peak season freight rates

Several factors contribute to the surge in freight rates during peak seasons:

1. Increased demand

During peak seasons, there is a significant rise in consumer demand, particularly for retail goods. This surge in demand leads to higher volumes of cargo needing transportation, putting pressure on available capacity.

2. Limited capacity

As demand increases, available space on vessels and aircraft becomes scarce. This scarcity drives up prices as shippers compete for limited slots.

3. Seasonal events

Major holidays like Christmas, Chinese New Year, and Black Friday create spikes in consumer spending, leading to increased shipping volumes.

4. Weather conditions

Certain peak seasons coincide with challenging weather conditions, such as the hurricane season in the Atlantic, which can disrupt shipping routes and further constrain capacity.

Impact on air freight rates

Air freight rates are particularly volatile during peak seasons due to the limited capacity and high demand for expedited shipping. Some key impacts include:

1. Significant price increases

During peak seasons, air freight rates can spike by 30-100% compared to off-peak periods. This dramatic increase is due to the high demand for fast shipping and limited aircraft space.

2. Reduced flexibility

As capacity fills up quickly, shippers may find it challenging to book last-minute shipments or secure preferred routes and schedules.

3. Longer transit times

Despite air freight being the fastest mode of transport, congestion at airports and increased processing times can lead to delays during peak seasons.

Impact on ocean freight rates

Ocean freight rates also experience significant fluctuations during peak seasons, albeit with some differences compared to air freight:

1. Gradual rate increases

Unlike the sudden spikes seen in air freight, ocean freight rates tend to increase more gradually as peak season approaches. However, the cumulative increase can still be substantial.

2. Capacity management strategies

Shipping lines often implement blank sailings (canceling scheduled voyages) to manage capacity and maintain higher freight rates during peak seasons.

3. Equipment shortages

Peak seasons can lead to shortages of containers and other equipment, further driving up costs and causing potential delays.

Recent trends in peak season freight rates

According to the Freightos Baltic Index (FBX), which measures global container freight rates, there have been significant fluctuations in recent years:

• As of April 2023, the global container freight index (FBX) stands at $2,074.60
• The China/East Asia to North America West Coast route (FBX01) is currently at $2,465, showing a 9.75% increase
• The China/East Asia to North Europe route (FBX11) is at $2,365.20, with a slight decrease of 0.84%

These figures highlight the ongoing volatility in the freight market, emphasizing the need for shippers and forwarders to stay informed about market conditions and plan accordingly.

Strategies for managing peak season challenges

To navigate the complexities of peak season freight rates, consider the following strategies:

1. Plan ahead

Start planning for peak season well in advance, ideally several months before the expected surge in demand. This allows you to secure capacity and potentially lock in more favorable rates.

2. Diversify shipping options

Consider using a mix of air, ocean, and even rail freight to balance costs and transit times. This approach can help mitigate the impact of rate increases in any single mode of transport.

3. Leverage technology

Utilize digital logistics platforms like FreightAmigo to gain real-time visibility into freight rates, compare quotes from multiple carriers, and book shipments efficiently.

4. Build strong relationships with carriers

Maintaining good relationships with carriers can help secure priority access to capacity during peak seasons and potentially negotiate better rates.

5. Consider alternative routes

Explore less congested ports or airports as alternatives to major hubs, which may offer more competitive rates and shorter transit times during peak seasons.

How FreightAmigo can help navigate peak season challenges

As a full-service digital logistics platform, FreightAmigo offers several powerful features to help shippers and freight forwarders overcome peak season challenges:

1. Real-time rate comparisons

Our platform allows users to compare door-to-door freight quotes for various modes of transport, including air, sea, rail, and trucking solutions. This enables quick identification of the most cost-effective and efficient shipping options during peak seasons.

2. Automated shipment tracking

With connections to over 1000 airlines and shipping lines, FreightAmigo provides real-time shipment status updates, allowing users to monitor their cargo and proactively address any potential delays.

3. Streamlined customs clearance and insurance

Our one-stop solution includes arranging customs clearance and cargo insurance, simplifying these critical processes during the hectic peak season.

4. Document automation

FreightAmigo’s document automation feature helps reduce errors and save time on paperwork, which is especially valuable during busy peak periods.

5. 24/7 expert support

Our round-the-clock logistics expert support ensures that users have access to assistance whenever they need it, helping to resolve issues quickly and keep shipments moving smoothly.

Conclusion

Understanding the impact of peak seasons on freight rates is crucial for effective supply chain management. By staying informed about market trends, planning ahead, and leveraging digital logistics solutions like FreightAmigo, shippers and freight forwarders can better navigate the challenges of peak seasons and optimize their shipping strategies.

As the logistics industry continues to evolve, embracing technology and adopting a proactive approach to peak season planning will be key to maintaining competitive advantage and ensuring smooth operations throughout the year. With FreightAmigo’s comprehensive digital logistics platform, businesses can stay ahead of the curve and turn peak season challenges into opportunities for growth and efficiency.

References

Freightos Baltic Index, “Global Freight Pricing & Market Rate Trends”, https://fbx.freightos.com/