Supply Chain Action Points
Read this first — the conclusion, and the moves to make:
- By 26 June, rebuild the rate baseline as multipliers rather than levels: air equals last year's lane rate times 1.48, ocean equals the first-quarter all-in times 1.8. One sheet, by lane, refreshed every Monday.
- Split your own book the way the 5% splits: report Asia-outbound volume and rate change separately from non-Asia by the end of the month, and stop managing one blended number.
- Audit every block space agreement for the overage rate and the covered share; any contract with spot-linked overage and coverage below 85% goes on the renegotiation list within 30 days.
- Track the capacity side monthly: the share of your lanes still running above their pre-rerouting transit time is the 17% in your own data, and a fall below 10% is the signal that the floor is going.
- Set the lock trigger in writing: when spot exceeds your contract rate by more than two weeks of inventory carrying cost, reopen the contract rather than absorbing the spread.
DHL's latest market reports show Asia Pacific remains the engine of global freight growth, but tightening capacity and early peak-season demand are pushing rates higher. Global air freight spot rates average $3.67/kg, up 48% year-on-year, while ocean freight rates are up 24% YoY and more than 80% above Q1 levels per the SCFI. Air cargo demand rose 5% YoY in April, with Asia accounting for half of global volumes and growing 8%. Ocean freight demand is up 4% year-to-date, but effective capacity remains constrained by congestion, rerouting and longer transit times, which take about 17% of usable capacity out of the system. DHL expects demand to remain resilient with dynamic e-commerce, technology shipments, and supply chain diversification driving continued growth.
The Analysis
Three dollars sixty-seven a kilogram. That is the global air freight spot average in DHL's latest market report, up 48% year on year. Ocean rates are up 24% year on year and more than 80% above where they sat in the first quarter, on the SCFI. Air cargo demand rose 5% in April. Ocean demand is up 4% year to date. And about 17% of effective capacity has been taken out of the system by congestion, rerouting and longer transit times.
Five numbers, and four of them are the wrong shape for a decision. A global average is a direction, not a price. A year-on-year percentage is a ratio with the base left out. A comparison against the first quarter is measured off the softest weeks of the year. The one figure in that list I would build a budget on is the 17%, because it is the only structural number in the set.
The part of the report that should change how you buy is not the rate. It is what happens when you take the demand number apart.
$3.67/kg is an average across every lane the report covers. The spread between the cheapest and the dearest lane inside that average is wider than the 48% move itself, which means the average can be perfectly accurate and still be wrong for your booking. If you move electronics out of Hong Kong into Los Angeles, the global print tells you which way the wind blows. It does not tell you what Monday costs.
The 48% has the same defect in a different form. Divide it back and the implied year-ago spot is about $2.48 per kilogram, since $3.67 divided by 1.48 is 2.48. That is arithmetic on the reported figure, not a new fact, and it matters because a 48% gain off a depressed base and a 48% gain off a normal base produce the same headline and different budgets. The percentage gives direction. The implied base gives level. Procurement needs the level.
The ocean pair repeats the trick. Twenty-four per cent year on year compares today with a point twelve months back. Eighty per cent plus against the first quarter compares today with a three-month average that contained the quietest weeks of the year. Both statements are true and neither tells you next month. The SCFI is also a weighted basket, and your lane's weight inside it is not your share of your own spend, so an index up 80% can correspond to your book being up 60% or up 100% depending on what you actually ship.
The 17% is the only number here that is structural rather than comparative. Congestion, rerouting and longer transit times have removed roughly 17% of usable capacity. Convert it into demand terms: losing 17% of capacity at constant volume applies the same pressure as a 20.5% increase in demand, because one divided by 0.83 is 1.205. That is why rates behave like a demand shock while demand is up 4%. It is not a demand shock. It is a supply event wearing a demand costume, and the costume is why so many forecasts have been wrong in the same direction.
Now the decomposition nobody printed. Asia accounts for half of global air volumes and grew 8%. Global volume grew 5%. If Asia is half the base and grows 8%, everything else grew about 2%, because half of 8 plus half of 2 averages to 5. Read that again. Resilient global demand is one region carrying a flat rest of world. That changes the hedge completely. An Asia-outbound book is exposed to the tight half and should be locking volume. An intra-European or transatlantic book is paying a rate set by somebody else's congestion, and its own demand does not justify the number on the invoice.
Put the two elasticities side by side. Air: price up 48%, demand up 5%, a ratio near 9.6. Ocean: price up 24%, demand up 4%, a ratio of 6. Neither resembles a demand curve. Both resemble a capacity curve. The practical consequence is that the variable to watch is not whether demand softens, because a 4% to 5% demand base does not carry enough mass to move these rates, it is whether capacity returns. Capacity returns when ships leave the queue, and queues empty more slowly than they fill.
Scale decides which of these numbers you actually pay. A shipper moving under ten tonnes a week by air holds no block space agreement and pays spot plus the lane premium, so the 48% lands on the next booking. A mid-size shipper with a monthly-reviewed allotment feels it at the review. A large shipper on an annual BSA feels almost nothing until renewal, and that is where the trap sits. The agreement covers the base allotment. The overage above it is usually priced off spot. If your contract covers 80% of your volume and you run 20% over, a 48% spot move hits that 20% at full force. The blended increase looks modest. The marginal rate does not, and the marginal rate is what you pay for the last container that keeps the line running.
Timing differs by mode. Air spot reprices weekly and peak season surcharges are usually announced a couple of weeks ahead, so the first Monday after the notice is when your cost changes. Ocean reprices weekly on the index but contractually at the GRI or the quarterly review, which buys you two to four weeks, enough to shift volume, not enough to renegotiate. The 17% is the slow one in both directions. It took months of rerouting to accumulate and will take months of queue clearing to give back, which is why the floor tends to survive the peak.
Run the money on a relative basis, because the report gives percentages and no rate level and I am not going to invent a benchmark. Take an ocean programme of 40 FEU a month. Every $100 per FEU carried in your first-quarter all-in cost is now $180 at the reported 80%-plus. That is $80 of extra cost per $100 of base, times 40 boxes, or $3,200 a month for each $100 of base, which annualises to $38,400 per $100. On air, a 20-tonne-a-week programme at $3.67/kg costs $73,400 a week; at the implied $2.48/kg it was about $49,600. The gap is $23,800 a week, roughly $1.24 million a year. Forty boxes and twenty tonnes are my assumptions, not DHL's figures, and the point survives any assumption you prefer: the multiplier is the budget, not the price.
Waiting for demand to soften means waiting through the cycle. Demand at 4% to 5% did not set this price. Seventeen per cent of capacity sitting in the wrong ocean did. The counterfactual of not locking is not that you pay more in aggregate, it is that you pay the marginal rate on the overage portion while believing the contract covers you, and you discover it in a quarterly variance report three weeks after the money left.
The lock line here is not a rate, it is a spread. When spot on your lane exceeds your contract rate by more than the cost of carrying two extra weeks of inventory, the contract has stopped protecting your volume and started subsidising the carrier's allocation. That is the day to reopen it. Paying a premium because the ships are in the wrong place is a strange thing to do, but at least the invoice is honest about it.
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