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In May, the global air cargo spot rate saw its second consecutive monthly growth, rising by 9 per cent YoY to $2.58 per kg, and increasing by 5 per cent month-on-month. The most significant YoY rate increase was observed in the Middle East & Central Asia to Europe corridor, where the spot rate surged by 110 per cent to $3.21 per kg due to ongoing disruptions in the Red Sea. Spot rates from Southeast Asia and China to North America also saw significant rises, up by 65 per cent and 43 per cent to $4.64 per kg and $4.88 per kg respectively. The China-Europe spot rate recorded a 34 per cent YoY increase to $4.14 per kg, as per Xeneta.
“In terms of growth data, analysts sometimes say ‘once is an incident, twice is a coincidence, and three-times is a pattern’. In the world of air cargo, there’s an undeniable pattern emerging. We can’t use the word ‘surprising’ anymore. When we take a mid-term view of the market, with these kinds of numbers, we might be on track for double-digit growth for the year. It is now a possible scenario,” says Xeneta’s chief airfreight officer, Niall van de Wouw.
Xeneta's dynamic load factor, a measure of cargo capacity utilisation based on volume and weight of cargo flown alongside available capacity, remained largely unchanged month-on-month at 58 per cent in May, but increased by 3 per cent YoY.
However, not all regions experienced growth. Spot rates from North America and Europe to China fell by 32 per cent and 23 per cent YoY respectively in May, to $1.61 and $1.65 per kg. The Transatlantic market also suffered, with freight rate declines in both the front and backhaul lanes due to increased belly capacity from summer passenger travel. The Europe-North America spot rate declined by 21 per cent to $1.77 per kg in May compared to the previous year, while the eastbound North America-Europe corridor spot rate was 16 per cent lower at $1.08 per kg.
Looking ahead to the second half of the year, Wouw, highlighted positive market indicators. A bright outlook for Q4 2024 may be on the horizon, potentially bolstered by a threefold increase in ocean container shipping spot rates from the Far East to North Europe and the US West Coast compared to the previous year. This increase, driven by port congestion and disruptions in the Red Sea, could narrow the cost gap for shippers considering a shift to air cargo.
Despite these developments, Xeneta notes that a major shift of volume from ocean to air is unlikely. The current cost spikes are more likely due to shippers frontloading imports ahead of the ocean peak season to mitigate supply chain disruptions, rather than a long-term shift in shipping preferences.
China's cargo market to North America continues to benefit from the resilient US economy and strong e-commerce demand. However, the air cargo industry faces uncertainty with the recent US crackdown on e-commerce shipments out of China, raising questions about future demand dynamics in this key trade lane.
Fibre2Fashion News Desk (DP)