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Global air cargo market braces for rate hikes in Q4: Xeneta


The global air cargo market is bracing for a ‘hot fourth quarter (Q4)’ of rate hikes following a sixth consecutive month of double-digit growth in June 2024, according to the latest analysis by Xeneta, a leading ocean and air freight rate benchmarking and market analytics platform. Shippers and forwarders who are not well-prepared for this year’s peak season may find themselves ‘at the mercy of the market.’

Demand in June, measured in chargeable weight, surged by 13 per cent year-on-year (YoY), maintaining the upward trend observed throughout the first half of 2024. In contrast, cargo supply grew at its slowest pace this year, increasing by just 3 per cent YoY, as per Xeneta.

The global air cargo market is preparing for Q4 rate hikes after a sixth month of double-digit growth in June.
June saw a 13 per cent YoY rise in demand and a 17 per cent YoY surge in spot rates.
Shippers are shifting to longer contracts to avoid volatility.
Market uncertainties persist with slower manufacturing growth and soft retail sales in Europe.

As a result, the global air cargo dynamic load factor—Xeneta’s metric for capacity utilisation based on the volume and weight of cargo flown alongside available capacity—rose by 4 percentage points YoY.

While June’s data, along with previous months of annual growth, must be considered against the weak comparison from the same period in 2023, market participants are now strategising on how to navigate the financial challenges and opportunities anticipated in Q4.

The main factors driving up global air cargo spot rates in June included the e-commerce boom, disruptions in ocean freight due to conflict in the Red Sea, and general improvements in global manufacturers’ activities. Spot rates saw their largest increase of the year, rising 17 per cent YoY to $2.62 per kg. Month-on-month, the air cargo spot rate edged up by 2 per cent in June, as the 4 per cent month-on-month growth in cargo demand continued to outpace capacity supply.

At the corridor level, Southeast Asia to Europe and the US markets experienced the largest spot rate increases in June, growing by 14 per cent compared to May, reaching $3.65 per kg and $5.32 per kg, respectively. Northeast Asia to Europe and the US also saw modest spot rate increases, up 5 per cent to $4.26 per kg and 4 per cent to $4 per kg.

Conversely, outbound China markets stalled, with rates from China to Europe and the US both dipping by 1 per cent to $4.09 per kg and $4.80 per kg, respectively. The Europe to US spot rate fell by 4 per cent to $1.69 per kg due to increased belly capacity from summer passenger flights.

Looking ahead, many uncertainties persist. The latest manufacturing purchasing managers’ index (PMI) indicated slower growth in manufacturing production in June, with its subindex of new export orders showing the first decline in three months. This coincides with still-soft retail sales volumes in the US and Europe, despite cooling inflation.

Given the market turbulence and the potential for an air cargo rate boom in Q4, shippers are adjusting their preferred contract lengths. In the second quarter of 2024, contracts lasting more than six months topped the list, accounting for an increasing share of 28 per cent. Shippers are moving towards longer contracts to avoid the anticipated extreme freight rate fluctuations during the year-end peak season.

The decrease in three-month contracts suggests unease among shippers about renegotiating rates just before the year-end peak season. Freight forwarders share this view, procuring fewer cargo volumes in the spot market. In the second quarter of 2024, the proportion of cargo volumes procured in the spot market accounted for 42 per cent of the total market, showing a 3-percentage-point reduction compared to a year ago.

“June’s growth in demand was not surprising and we would expect to see a continuation of double-digit year-on-year growth in July and August because of low demand in the same months last year. The global machine is humming along nicely at this level—but this is likely the calm before the storm in terms of air freight rates,” said Niall van de Wouw, Chief airfreight officer at Xeneta.

Fibre2Fashion News Desk (DP)



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