The global air cargo market is on a pathway to double-digit growth in volumes in 2024 after a +12% year-on-year (y-o-y) jump in demand in May, according to the latest data analysis by Xeneta.
Despite conservative, low single-digit industry growth forecasts at the end of last year, expectations have been boosted by six consecutive months of ‘quite extraordinary’ regional demand for cargo capacity, according to the benchmarking platform’s research.
The global air cargo spot rate in May consequently registered its second consecutive monthly growth, rising +9% y-o-y to $2.58 per kg, and up +5% pts month-on-month.
“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.
While the growth in general spot rates must be measured against a low comparison in May 2023, Van de Wouw says the market this year adjusted well to absorb the +5% increase in airlines’ summer capacity.
The highest year-on-year rate increase for May was the +110% rise in the air cargo spot rates on the Middle East and Central Asia to Europe corridor to $3.21 per kg due to continuing Red Sea disruption. Southeast Asia and China to North America spot rates rose +65% and +43% to $4.64 per kg and $4.88 per kg respectively, while China-Europe spot rates also recorded double-digit growth, up +34% y-o-y to $4.14 per kg.
Dynamic load factor in May - Xeneta’s measurement of cargo capacity utilisation based on volume and weight of cargo flown alongside capacity available – was largely unchanged month on month (m-o-m) at 58%, but up by +3% pts y-o-y.
How companies see the current market, Van de Wouw acknowledged, depends on the region in which they are active. Spot rates from North America and Europe to China, for example, fell -32% and -23% y-o-y respectively in May to $1.61 and $1.65 per kg. The Transatlantic market also suffered, with the corridor experiencing freight rate declines in both the front and backhaul lanes. Increased belly capacity due to summer passenger travel led to drops in air cargo spot rates.
As the air cargo market heads towards the second half of the year, Van de Wouw point to other positive market indicators. A bright outlook for Q4 2024 may be on the horizon following last year’s bumper end-of-year volumes. This may also be helped 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, due to port congestion and wider disruption caused by conflict in the Red Sea, reducing the cost gap for shippers or forwarders contemplating a modal shift to air cargo.
A major shift of volume from ocean to air, however, is unlikely, Xeneta says. Compared to the onset of the Red Sea crisis or the Covid pandemic, cost spikes this time around are most likely triggered by shippers frontloading imports ahead of the ocean peak season to eliminate impacts from increased supply chain disruptions.
China’s cargo market to North America continued to gain from the resilient US economy and its strong e-commerce demand. The big question for the air cargo industry is what happens following the US crackdown on e-commerce shipments out of China?
“At the end of 2023 we saw the dramatic impact China’s e-commerce behemoths had on the air cargo market. Everyone is now waiting anxiously to see what happens in the upcoming peak season. But if the potential rising costs and increasing transit times of e-commerce ex-China lead US consumers to procure less and less, that can have a ripple effect globally.
“If fewer freighters are required to carry e-commerce, they will enter the general air freight market (again) and produce a noticeable supply impact, putting downward pressure on rates. This possibility cannot go unnoticed.”
