Global airfreight spot rates fell 40% in May to $2.41 per kg, the lowest level since March 2020, days after IATA predicted yields would fall 29% this year.
Demand fell 1% year-on-year, the smallest decline in over 12 months but the influx of belly capacity for the summer pushed down yields with capacity up 14%.
Falling demand and rising capacity pushed CLIVE’s dynamic load factor down 5 percentage points to 55%.
Niall van de Wouw, Chief Airfreight Officer of Xeneta says ambitious forwarders want to grow but this is not possible with their current customer bases because the demand is not there so they are looking to take a bigger share from rivals.
He says, “At the same time, we see a lot of shippers going to market now because they want to refresh their rates and benefit from the different conditions to 3-6 months ago. Challengers for their business – not the incumbent freight forwarders – smell a chance to buy volumes and are going in and offering low rates. And, whether they get the business or not, the overall rates drop because shippers often stick with their current provider but expect them to adjust their rates accordingly to this lower market level.”
Rates fell dramatically on some lanes with outbound spot rates from southeast Asia to the US and Europe falling 68% and 62% respectively while northeast Asia excluding China to the US was down 60%.
China to the US experienced a price surge compared to the last month due to dockworker absences due to US west coast labour contract negotiations and weight limits in the Panama Canal due to low water levels.
Shippers are in charge of the market, says van de Wouw, because freight forwarders and airlines are nervous of losing the volumes they are offered.
He says, “It’s a time of ‘stick or twist’ for airlines and forwarders. Do they become more short-term driven and flick the ‘let’s-just-buy-the-volumes’ switch or do they sit it out? Do they take drastic action or hold their course? If companies become trigger happy in using such tactics, we could see more downward pressure on the air cargo market than the actual changes in demand/supply.”
