Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was no summer slack season in this year, said Niall van de Wouw, Chief Airfreight Officer, Xeneta.
CT Bureau
The global air cargo market’s double-digit demand growth continued in August too with average spot rates showing their largest year-on-year growth of 24 per cent, as per the latest weekly analysis by Xeneta. Global average air cargo spot rates of US$ 2.68 per kg in August were boosted by continuing supply-demand imbalance.
August’s global cargo supply grew at its slowest ratio in 2024 to date at 2 per cent year-on-year, while global cargo demand continued its double-digit growth, increasing at 11 per cent. The rise was supported by ocean-to-air shift due to Red Sea crisis and e-commerce demand.
e-commerce continued to display growth as the market continued to cruise towards its peak season. According to Trade and Transport Group, e-commerce and low-value goods exports from China in the first seven months of this year increased by 30 per cent YoY. Notably, shipments to Europe and the USA recorded a growth of 38 per cent and 30 per cent, respectively.
“Typically, the market’s performance in August tends to follow the July trend. But another
month of double-digit demand growth and the strongest rate growths of the year means there was no summer slack season in this year,” Niall van de Wouw, Chief Airfreight Officer, Xeneta, said.
“Air cargo rates, which bottomed out in late July, started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we are at the threshold of Q4. It will be interesting to see what will happen (about the anticipation of a ‘hot’ season),” he said materialises.
It is worth noting that the growth momentum of volumes slowed down in August compared to earlier this year. This, however, was anticipated, with the following months likely to follow suit. This is in part because demand in the corresponding months earlier in the last year was weaker compared to the peak in cargo volumes in fourth quarter of 2023.
In terms of dynamic load factor (DLF), Xeneta’s measurement of capacity utilisation based on volume and weight of cargo flown alongside available capacity, the supply/demand imbalance led to the global load factor increasing 4 percentage points year-on-year to 58 per cent in August.
Looking at month-on-month developments, the market saw spot rates soften (-1% month-on-month) in August, likely to reflect a slight cooling of ocean-to-air shift due to ocean shipping frontloading of imports.
Zooming into the corridor level, inbound North America air cargo rates among selected global corridors, registered the largest increase from a month ago during what is the industry’s traditional slack season. Topping the list, Europe to North America air spot rates rose 7 per cent from a month ago to US$ 1.77 per kg in August. In addition to a low comparison base, the increase in Transatlantic freight rates could be a result of the surging transhipments originating from Asia. This is followed by Southeast and Northeast Asia to North America rates, which rose by 6 per cent and 4 per cent to US$ 6.15 per kg and 4.68 per kg, respectively.
Europe to the Middle East and Central Asia rates, the last corridor in Xeneta’s selected list to show growth, ticked up 2 per cent from a month ago to US$ 1.58 per kg. For the inbound Europe air cargo market from Asia and the Middle East, summer breaks and relief from Red Sea disruptions led to softened air cargo rates, down 1 to 2 per cent month-on-month.
Lastly, inbound Northeast and Southeast Asia spot rates from North America and Europe experienced the largest decrease up to 4 per cent from a month ago. This is due to the increased trade imbalance between fronthaul and backhaul trades. DLF from Asia-Pacific to Europe and North America stood at 86 per cent and 87 per cent, respectively, in August. In contrast, their return legs were below 45 per cent during the same period.
van de Wouw said, “September will be a good indicator of what Q4 of 2024 will bring. Let us see if the peak surcharges some carriers’ are planning to implement will hold. The forwarders are more than prepared this year. And based on what we hear, they are spending a lot of time with the shippers on how to manage the unpredictable nature of these market conditions. We see financial and operational derisking going on but, if the heat is on, let us see what happens with all the contracts that are being negotiated.”
He added, “We have seen rates increasing throughout the summer, which is not usually the case. Q4 will be busy in terms of volumes, but how busy? e-commerce demand will play a big role and with 30 per cent growth this year ex-China and a 37 million new downloads of the TEMU App in July, the indicators suggest demand for capacity, and this will impact the market on major corridors.
“I was speaking to a shipper last week; I told him you get a little bit nervous for Q4,” van de Wouw said. “We should not be surprised if the market heats up in Q4 out of Asia. We expect to see a seller’s market out of Asia and across the Atlantic due to the latter’s reduction in winter capacity. We have had a hot summer, and we may have an even hotter autumn ahead.”
