Cargo agents struggle as demand declines

Global air freight spot rates fell by 40% in May from a year earlier, while YOY fall in freight rates on most major front haul lanes in May outpaced the industry average. While market sentiment seems to be changing, airlines and forwarders hope for an uptick, says Niall van de Wouw, Chief Air Freight Officer, Xeneta.

CT Bureau

As the global air cargo market heads into the weaker summer months with general air freight rates falling in May to their lowest level since March 2020, there is tension among freight forwarders.  Latest weekly market analysis by CLIVE Data Services, part of Xeneta indicated to the restlessness among forwarders and airlines, who went  in search of cargo volumes.

The air freight spot rates fell by 40 per cent in May from a year earlier, reaching its lowest ebb in over three years of US$2.41 per kilogram, just days after IATA forecast airline cargo revenues and yields could fall by more than 31 per cent and 29 per cent respectively, this year.

Softening of global air cargo demand saw a less severe YOY drop of 1 per cent in chargeable weight in May, the lowest monthly decline in the past 12 months. The influx of belly capacity for the peak summer leisure travel market applied more downward pressure on rates. Global air cargo capacity in May continued its double-digit increase, reflecting a rise of 14 per cent year on year.

An increase in capacity and a shortage in demand led to an inevitable fall in dynamic load factor, CLIVE’s measurement of global volumes and weight of cargo flown and capacity available, which fell by 5 per cent versus 55 per cent in May last year.

Niall van de Wouw, Chief Air Freight Officer, Xeneta said, “It is not only rising capacity, which is causing restlessness. There are several forwarders in the market who want to grow, but cannot because the air freight demand is absent. So, as we highlighted in April, they are looking to take a bigger share from someone else.”

The year on year decline of freight rates on most of the major front haul lanes in May outpaced the industry average. In line with deteriorating Purchasing Managers’ Index (PMI)  readings, the outbound south-east Asia market experienced the largest year on year rate fall among top fronthaul corridors. Its spot air cargo rates to the USA and Europe fell by 68 per cent and 62 per cent, respectively, over the month. Northeast Asia, excluding mainland China, to the USA saw cargo rates slump 60 per cent from a year ago. The only exception is the corridor from China to the USA. It recorded 31 per cent decline from a year earlier, below the industry average of -40 per cent. This is the only corridor among major lanes to experience a price surge from a month ago.

“The freight forwarders and the airlines are nervous of missing cargo volumes. “It is a time of stick or twist for the airlines and forwarders. Do they become more short-term driven and flick the let-us-just-buy-the-volumes switch or do they sit it out? Do they take drastic action or hold their course? In my conversations with the airlines and forwarders during Transport Logistic in Munich in mid-May, though the market was slow, there was no COVID. But the market sentiment seems to be changing. More airlines and forwarders are accepting that the hopes of an uptick in the peak season demand,” said van de Wouw.