AIR FREIGHT
The air cargo market is navigating a period of uncertainty as e-commerce dynamics shift and US trade policy developments reshape demand patterns. After a strong start to the year, February brought early signs of easing—particularly on the transpacific.
Recent US tariff changes and the reinstated (but still pending) de minimis exemption for Chinese goods are causing volatility across e-commerce-driven lanes. Though spot rates from China to the US remain elevated, recent weeks have seen a gradual decline, with Freightos Air Index data showing prices dipping below $5.00/kg for the first time since August. Rates to Europe remain steady above $3.80/kg, while transatlantic spot prices have cooled slightly to $2.43/kg, likely due to returning freighter capacity as volumes out of China ease.
Airlines continue to recalibrate capacity. There are increasing reports of canceled China – US charters and a growing shift of freighter capacity back to other lanes—especially to Southeast Asia where demand out of Vietnam, Thailand, and the Philippines remains strong. These emerging manufacturing hubs have seen steady export growth, driven by e-commerce fulfillment diversification.
Still, the outlook remains murky. Retailers are cautious, holding off on long-term air freight commitments while inventory levels remain high and shipping conditions fluctuate. US Customs and Border Protection has until April to finalize systems to handle the spike in formal entries once de minimis eligibility for Chinese parcels is removed—an event expected to dramatically reduce China – US air cargo volumes.
In short, capacity remains available and rates elevated, but signs point to an air cargo market preparing for a broader transition in sourcing strategies and fulfillment models as the impact of policy changes materializes.
ROAD FREIGHT
The road to zero-emission vehicle (ZEV) adoption in Europe’s road freight sector is facing a significant speed bump. Lobby group Transport & Environment (T&E) has called on EU member states to urgently agree on new weight allowances for electric and hydrogen-powered trucks, ensuring they remain competitive with traditional diesel rigs.
The EU’s Weights and Dimensions (W&D) directive is at the heart of the issue. This directive determines the maximum allowable weight and length of trucks across the bloc. While the directive has been revised to support ZEVs, its current structure still disadvantages them compared with their diesel counterparts.
Under existing regulations, ZEVs can weigh up to two tonnes more than diesel trucks (42 tonnes vs. 40 tonnes). However, due to the weight distribution of battery packs along the chassis, many ZEVs hit the driving axle weight limit (11.5 tonnes) before reaching their full weight allowance. This lowers payload capacity, making zero-emission trucks less attractive for long-haul logistics.
To address this issue, the European Commission (EC) proposed an update in July 2023 that would increase total vehicle weight to 44 tonnes and raise the axle weight limit to 12.5 tonnes. However, EU member states remain divided over the proposal, with concerns that higher axle weights could damage road infrastructure.
Without a timely decision, the lack of regulatory clarity could slow down fleet investments in electric and hydrogen-powered trucks, delaying the EU’s sustainability goals.
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SEA FREIGHT
After a brief and modest rebound in early March, ocean freight spot rates out of Asia have resumed their downward trend, with current prices falling below 2024 lows. The market is facing a complex mix of post-Lunar New Year demand weakness, ongoing carrier alliance reshuffles, and growing fleet capacity that together are outpacing demand.
Recent General Rate Increases (GRIs) on Asia–Europe lanes slowed the rate slide temporarily, but have since proven largely ineffective. Despite port congestion at many European hubs, Asia–Europe rates fell 11% last week to around $2,740 per FEU, dipping 14% below their early-year floor. Similarly, Asia–Mediterranean rates are now roughly 10% lower than their previous 2024 low, reflecting a more pronounced post-LNY lull as shippers had frontloaded shipments to account for Red Sea diversion-driven lead time increases.
Capacity management remains a major challenge. The ongoing alliance reshuffle has complicated blank sailing strategies and led to more aggressive competition among carriers. MSC, for instance, has been reallocating capacity from North Europe to more profitable Mediterranean and West African services—a move echoed by other carriers optimizing networks toward higher-yielding trades.
On the transpacific, rates have continued to fall despite signs of frontloading-driven demand strength tied to tariff uncertainty. Spot prices to the US West Coast have dropped to around $2,400/FEU and to the East Coast near $3,500/FEU—both roughly 18% below their 2024 lows. Rate negotiations for long-term contracts appear to be trending toward levels lower than carriers had hoped, reflecting expectations of oversupply in the coming months, especially if frontloading ends and demand dips as anticipated in H2.
While recent US tariff actions and proposals—like port call fees for Chinese-made vessels and reciprocal tariff structures—continue to disrupt planning, uncertainty remains high. The upcoming April deadlines for agency reports and hearings related to trade policy could trigger new rate volatility depending on the outcomes.
Port congestion is still a concern, particularly in parts of Europe and Asia. Delays in Hamburg, Rotterdam, and southern China continue to strain schedules, although the global impact of congestion is easing slightly compared to early-year peaks.
On the transatlantic, spot rates have held relatively stable in the $2,300–$2,500 range. However, carriers like MSC and Hapag-Lloyd are planning peak season surcharges and FAK rate hikes in early April, with MSC’s Antwerp–New York FAK rate set to increase to $7,000/FEU. Whether these increases will stick remains to be seen, given the softening demand outlook.
Looking ahead, the container shipping market remains under pressure. Rate movements will likely depend on how frontloading trends evolve, the degree of oversupply from fleet growth, and the direction of trade policy in the US and beyond. For now, the balance of risks continues to lean toward further downward rate pressure across key lanes.
RAIL FREIGHT
China’s once-heavily subsidized rail freight network is set to undergo a major transformation, with the Chinese government reportedly fast-tracking reductions in financial support. This shift threatens to significantly increase rail freight costs in Europe, making it less competitive against air and ocean alternatives.
For years, China has positioned rail as a “middle ground” between air and ocean freight, offering a balance between speed and cost. However, industry experts suggest that without subsidies, the cost of rail could skyrocket, pricing it out of the market just as ocean freight rates are declining.
A freight forwarder operating across China and Europe noted that businesses relying on rail should brace for a sharp increase in rates in the near future. They added, “Rail competes with ocean freight only when ocean rates are high. But as ocean prices start to drop, the time savings of rail will no longer justify its cost.”
Beyond pricing concerns, China-Europe rail freight faces logistical bottlenecks that continue to limit its scalability. A typical freight train carries only around 48 containers, a fraction of what ocean liners transport in a single voyage. Additionally, cross-border complexity remains a major hurdle, with transit times delayed due to bureaucratic customs procedures in multiple countries.
Adding to the challenge, supply chain shifts away from China could further erode rail freight volumes. With low-cost manufacturing migrating to Cambodia, Thailand, and Vietnam, demand for direct China-Europe rail services may shrink. While efforts are being made to extend rail links to these emerging hubs, such as Vietnam’s recent approval of an $8 billion investment into railway expansion, the infrastructure isn’t developing quickly enough to match shifting trade flows.
ABOUT US
Wiima Logistics is a provider of fourth-party logistics (4PL) services. The 4PL service provides the customer with a complete solution for supply chain management, administration and outsourcing.
4PL operations can be described as outsourcing the management and coordination of the entire supply chain – this allows the customer to focus on their core business.
Wiima staff will be more than happy to advise you in supply chain and logistics related matters. Our logistics experts and digital tools will provide you with a winning combination if you are looking for an effective and efficient logistics management setup.
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