The civil unrest since early July caused factory shutdowns and cargo stockpiles at sea and air freight terminals.

Major flooding in August halted rail and road transportation on the critical route between Chittagong and Dhaka.

Bangladesh’s air cargo market is very short-term oriented because about 70 per cent of the capacity procured by freight forwarders comes at a price which is valid for no more than a month.

This series of adverse events led to outbound Bangladesh air cargo spot rates accelerating at one of the highest paces on record (plus 163 per cent year on year [YoY]) in the week ending August 25, reaching their highest level in over two-and-a-half years.

Bangladesh also holds the record for the highest air freight rate increase so far in 2024 across all global air corridors, Norway-based Xeneta noted in a blog post on its website.

More specifically, the air cargo spot rate from Bangladesh to Europe, one of Bangladesh’s major corridors, exceeded its previous Red Sea peak in May by reaching $4.95 per kg in the week ending August 18. The market did ease slightly in the week following the August peak, falling to $4.77 per kg.

The spot rate from Bangladesh to North America in the week ending August 25 reached its highest level in over two years, rising to $6.91 per kg—an increase of 127 per cent YoY.

As a result, shippers are facing hefty demand surcharges and shrinking margins. These increases are driven purely by a supply-demand imbalance, demonstrated in the fact the air cargo load factor from Bangladesh to Europe hit 97 per cent in the week ending 25 August, Xeneta observed.

This will likely prompt some shippers with urgent cargo to re-route from Dhaka and truck it to alternative air freight hubs, such as Delhi and Kolkata in India.

There is currently also a financial incentive for shippers to re-route supply chains away from Bangladesh, Xeneta noted. In the week ending August 25, the air cargo spot rates from India to Europe and North America were $3.14 per kg and $4.78 per kg respectively—about 30 per cent lower compared to corridors out of Bangladesh.

Fibre2Fashion News Desk (DS)