The air cargo industry is experiencing a significant boost in demand due to surging e-commerce volumes, with expectations of double-digit growth this year. However, potential regulatory actions from the US on online shipments could temper this growth in the latter part of the year.
According to supply chain data firm Xeneta, air cargo demand in May surged by 12% year-on-year, marking the fifth consecutive month of double-digit increases. Capacity also rose by 4% year-on-year, pushing the dynamic load factor up by three percentage points to 58%.
Global air cargo rates increased for the second consecutive month, rising 9% year-on-year to $2.58 per kg, although this is compared to a particularly low level in 2023. Xeneta’s chief airfreight officer, Niall van de Wouw, noted that the sustained demand increase suggests the industry might achieve double-digit percentage growth for the full year. “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,” he said.
Peak Season Outlook
Van de Wouw described a “bright” outlook for the fourth quarter, potentially bolstered by rising ocean shipping prices from the Far East to Europe and the west coast of North America due to port congestion and the Red Sea shipping crisis. This has narrowed the price differential between ocean and air shipping, although a significant modal shift is not anticipated as shippers are moving peak season inventory early.
However, geopolitical developments could impact the market negatively. “The big question for the air cargo industry is what happens following the US crackdown on e-commerce shipments out of China?” Xeneta queried. Van de Wouw explained that the significant impact of China’s e-commerce giants on the air cargo market in late 2023 leaves many anxious about the upcoming peak season. He cautioned that rising costs and transit times could lead US consumers to reduce their procurement from China, potentially triggering a global ripple effect.
“If fewer freighters are required to carry e-commerce, [the freighters] will enter the general airfreight market (again) and produce a noticeable supply impact, putting downward pressure on rates. This possibility cannot go unnoticed,” he added.
Regional Variations
Xeneta’s data also highlights regional variations in market performance. The highest year-on-year spot rate increase in May was a 110% rise on the Middle East & Central Asia to Europe corridor, reaching $3.21 per kg due to ongoing Red Sea disruption. Spot rates from Southeast Asia and China to North America rose by 65% and 43%, reaching $4.64 per kg and $4.88 per kg, respectively. The China-Europe spot rate also saw a 34% increase year-on-year to $4.14 per kg.
Conversely, spot rates from North America and Europe to China fell by 32% and 23% year-on-year, to $1.61 and $1.65 per kg, respectively. The Transatlantic market experienced freight rate declines in both directions, with the Europe-North America spot rate down 21% to $1.77 per kg in May compared to the previous year, and the North America-Europe corridor spot rate decreasing 16% to $1.08 per kg.
As the air cargo industry navigates these fluctuations, the broader trends indicate robust growth driven by e-commerce, tempered by potential regulatory and geopolitical challenges.