- Air freight spot rates fell 9% YoY in September as capacity growth continued to outpace demand, according to a news release from Clive Data Services last week.
- The fall in rates will likely persist, even with the busy holiday shipping season approaching, said Niall van de Wouw, chief airfreight officer at Clive parent company Xeneta, in a statement. This is because COVID-19 restrictions continue to be lifted globally, introducing more flight capacity in the process.
- "Shippers who have held their nerve and not shipped their peak season goods early by air are likely to find themselves in a stronger buying position," van de Wouw said.
September was the first month this year in which air freight spot rates fell below 2021 levels as weak demand (down 5% YoY) and expanding capacity (up 5% YoY) have continued to push down prices, according to Clive.
The market has responded quickly to global trends such as rising inflation, according to van de Wouw. Improved ocean shipping reliability is also motivating shippers to divert air cargo volume to the less expensive transport mode.
"It’s still early to judge how such events will be reflected in the air freight market over the rest of this year, but we see no indications that demand will pick up from a macroeconomic perspective,” van de Wouw said.
The softening conditions have particularly benefited companies shipping from Asia markets, as air cargo rates in those lanes have contracted significantly since the record highs seen in December 2021, according to a UPS Supply Chain Solutions market update on Oct. 6.
"Carriers in the Asia Pacific region expect a muted peak season despite improving conditions, which include the easing of travel restrictions in Hong Kong," the company said in the update.
Air cargo giant FedEx Express is responding to softening demand by cutting 17% of daily frequencies between Asia and Europe and 11% of transpacific daily frequencies, among other measures. It's part of a $2.7-billion cost-savings plan for FedEx, which expects the weak demand it experienced in late August to persist for the rest of the year.
Although market conditions are swinging in shippers' favor, spot rates still have a long way to go before they reach pre-pandemic levels. September rates were more than double what they were in 2019, before COVID-19 squeezed capacity and inflated shipping costs, according to Clive.
Air cargo demand and capacity for the month were down 2% and 7%, respectively, from 2019 levels.
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