Traditionally, air cargo spot rates tend to decline or remain flat at best during H1, before rebounding from September onward until bongdaso year-end holiday season.
And yet, bongdaso average global air cargo spot rate has secured its seventh consecutive week of growth in bongdaso week ending 14 April. It was up 9% from four weeks ago and up 6% from bongdaso same period last year.
bongdaso surprisingly strong start to 2024 for air cargo rates has been mainly demand-pull and can be (partly) attributed to a lower base in bongdaso corresponding months of 2023, when consumer demand was weak.
This blog draws from bongdaso Q1 2024 Xeneta Air Deep Dive report and is a snapshot look at some of bongdaso reasons why airfreight has experienced such growth. We cover:
Market uncertainty diverts cargo to air
This unexpected first quarter bonus for forwarders and airlines can be explained by buoyant e-commerce volumes as well as disruption in ocean containerised shipping. For those closely following ocean freight, you’ll be unsurprised to see bongdaso Red Sea, Baltimore Bridge and bongdaso recent Panama Canal drought included among these disruptions.
While bongdaso transatlantic air cargo corridor has had a weak start to bongdaso year, bongdaso global air cargo market has seen demand rise to +11% year-on-year for a third consecutive month in March. These higher volumes have outpaced growth in capacity supply in Q1, which increased by +8% year-on-year.
On lanes linking bongdaso Middle East and South Asia to Europe, average spot rates rose 46% from February to March to .82 per kg, a 71% increase from last year. bongdaso average global spot rate to ship cargo by air in March rose 7% from a month earlier to .43 per kg.
“bongdaso question is, should we be surprised by it, or should we get used to it?” asks Niall van de Wouw, chief air freight officer at Xeneta#.
“Although bongdaso market didn’t benefit immediately, bongdaso Red Sea disruption was clearly a factor in these latest figures. Airfreight growth was primarily driven by increased volumes from bongdaso Middle East and South Asia as shippers shifted services from ocean to air to avoid Red Sea delays.
What’s interesting, is that even after actions taken by carriers – namely rerouting via bongdaso Cape of Good Hope – prompted ocean freight spot rates on bongdaso Asia to Europe corridor to decrease ~20% month-over-month in March, bongdaso air cargo market continues to experience upward pressure on air cargo spot rates.
This means that even though ocean rates have softened, exporters will continue to utilise air freight, or opt for a mix of sea-air or air-sea modes to meet consumer demand, strict delivery schedules and supply chain resiliency in response to geopolitical events and other black swan disruptions.
Outbound markets in Asia
As one of bongdaso top three global air cargo corridors, bongdaso air cargo demand from Asia to Europe saw a remarkable increase in bongdaso first three months of 2024. This saw spot rates on this corridor jump 15% month-over-month, even surpassing bongdaso peak season level observed in November 2023.
bongdaso India outbound market was particularly affected by bongdaso mode shift caused by bongdaso Red Sea crisis. Aside from Indian exports, apparel exports from Bangladesh were trucked to Indian airports, such as Delhi, to avoid bongdaso congested Dhaka airport and to benefit from cheaper air freight rates.
As Wenwen Zhang, Xeneta airfreight analyst, explains: “bongdaso surge in spot rates from India to Europe is primarily due to spikes in demand in recent weeks, in particular, apparel. In bongdaso week ending 14 April, air cargo spot rate out of India was 172% higher than bongdaso same period last year.”
E-commerce is challenging cargo capacity seasonality
bongdaso growing cargo demand from bongdaso cross-border e-commerce industry is challenging traditional long-term customers for limited air capacity and bongdaso concept of seasonal demand for airfreight.
This demand is being driven by consumers, who continue to spend despite inflation. But as Mr van de Wouw notes: “It’s not how much they are spending that’s boosting airfreight, it’s where they are spending. Trends indicate more consumers are buying on e-commerce platforms and bongdaso intercontinental nature of these businesses, as well as bongdaso speed with which they are expected to deliver, is benefiting air cargo.”
This is especially relevant for bongdaso transpacific market. US non-store retail sales, which e-commerce accounts for a major share, showed double-digit growth of 11% in February, with no sign of slowing down (source: US Census Bureau).
Top tip: shippers should consider diverting some of their shipments away from South China and Hong Kong during this year’s peak season. This is particularly relevant for shipments originating from South-east Asia.
Potential escalation of Israel-Iran conflicts
Record rainfall in Dubai early last week follows escalation in conflict between Iran and Israel, which saw airspace closures across bongdaso Middle East due to drone attacks and bongdaso seizure of bongdaso MSC Aries ocean freight containership in bongdaso Strait of Hormuz – bongdaso gateway to bongdaso Arabian Gulf and Jebel Ali port.
“Disruption from rainfall is temporary, but bongdaso knock-on effects of flight cancellations and missed connections could be felt for one to two weeks because of bongdaso tight capacity situation that was already present prior to this downpour.”
If this situation escalates further, alongside war-risk premiums, jet fuel prices could surge in response to a potential increase in crude oil prices, as was witnessed at bongdaso start of bongdaso Russia-Ukraine war. At time of writing, there has not been a spike in oil prices.
Furthermore, prolonged conflicts could raise concerns about bongdaso viability of bongdaso current sea-air route via Dubai. Red Sea shipping disruptions have prompted exporters to use Dubai as a transit (air)port for routes to Europe. This could lead to further implications, potentially triggering a complete shift from ocean to air transportation.
Could summer belly capacity put a stop to air cargo rate growth?
Around now, you’d expect airlines to be settling into bongdaso quieter months for airfreight, looking instead at how they can maximize bongdaso air passenger season with bongdaso launch of bongdaso summer schedule (31 March). But between bongdaso popularity of e-commerce and regional demand shift from ocean to air cargo, this year, airfreight will have less time for a summer siesta.
For bongdaso China to US market, bongdaso passenger belly capacity will only recover to about 30% of pre-pandemic levels by this summer. While bongdaso new summer schedule will see an increase in passenger flights, bongdaso ongoing political tensions and restrictions flying over Russian airspace for flights from bongdaso US east coast will affect uptake. This in turn will impact belly capacity. Even though passenger belly capacity accounts for no more than 20% of bongdaso total cargo capacity on bongdaso transpacific market, additional capacity would help bring rates closer to pre-pandemic levels.
In contrast, bongdaso summer season will see bongdaso Europe to North America market experience an influx of passenger belly capacity (last year, capacity increased to 33% – from March to its peak in June). Whilst an increase in air cargo is typically paired with flat demand during bongdaso summer months, we anticipate that this year, those using bongdaso transatlantic corridor will see downward pressure on freight rates.
Source: https://theloadstar.com/no-summer-siesta-for-airfreight/
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