Dive Brief:
- Global air cargo spot rates jumped 41% year over year in May to $3.40 per kilogram, but relief may be in store this month, according to a June 5 Xeneta report.
- During the last week of May, average spot rates from Northeast and Southeast Asia to North America were up 39% and 33%, respectively, compared to the week of Feb. 23 to March 1.
- However, spot rates on the Europe to North America trade lane followed a lower trajectory, down 26% over the same timespan, according to the report.
Dive Insight:
Rates typically climb during globally impactful events, such as the Iran war, which has influenced annual contract negotiations between carriers and forwarders. Subsequent service disruptions, surcharges and fuel supply volatility since the conflict began in February have impacted the air freight market and driven up prices.
But regardless of May’s higher global spot rate, there are signs that freight prices may cool in June, Xeneta reported. For instance, despite long-term rates — or rates valid for more than one month — being up 22% YoY, prices started to dip after peaking at the end of April. Long-term rates typically provide insight into forward-looking pricing, meaning that the market pricing peak may have been reached.
“Looking ahead, for shippers who have postponed tenders and bought time with short-term extensions and surcharges, the combination of an anticipated slack summer, and long-term rates already past their peak, is a more useful and welcome signal,” Xeneta reported.
The return of Middle East carrier capacity to nearly full-scale operations further contributes to the possibility of lower rates in the short term, according to Xeneta Chief Airfreight Officer Niall van de Wouw. Xeneta also reported that rate reductions may be influenced by the typical summer slack season for air freight due to an increase in passenger capacity in the northern hemisphere.
“We are on record saying rates wouldn’t come down as fast as they went up, and that is the case,” van de Wouw said. “It takes a while for rates to adjust to the market situation, but I would not be surprised to see year-on-year spot rate comparisons decline in June, especially as there are not a lot of industry verticals that are booming at the moment.”
Elevated rates still exist on certain trade flows, versus across a broad global market, per Xeneta. For instance, shipments related to data centers and semiconductors are driving Transpacific volumes.
The state of the ocean market may also have a part to play in the air freight outlook. Shipper frontloading has already begun on the ocean side — possibly a leading indicator that air freight might follow suit, van de Wouw said.
“In many cases, the shippers doing this are acting now because they expect energy to become more costly, so they are producing now in anticipation of higher costs later, as well as to avoid traditional peak season surges in rates,” van de Wouw said. “But they then must move and sell their goods, and this is at a time of higher transportation costs. So, what happens? Demand rises and rates go up.”
Meanwhile, bumpy skies remain for air freight e-commerce volumes, which continue to stall, per Xeneta. Low-value and e-commerce exports from China to the U.S. dropped by 33% YoY in April, while other trade lanes held up a little better.
Although the B2C e-commerce growth engine has cooled, the decline is partially attributed to a “shift out of individual B2C parcels into bulk, consolidated air freight shipments that fall outside the e-commerce parcel data” instead of volumes just disappearing, per Xeneta.
“Don’t expect a hot summer for air freight demand,” van de Wouw said.
