Picture credit: Xeneta
The latest analysis from Xeneta says demand increased 2% year-on-year in January, which said that despite the drop being bigger than expected, there is no reason to change its forecast of 4-6% growth in 2025 despite market nervousness caused by tariffs.
January’s data was affected by the early Lunar New Year reducing volumes out of China and the comparison against January 2024.
Niall van de Wouw, Chief Airfreight Officer of Xeneta says that US tariffs against China, Mexico and Canada are just the start of a negotiation as President Trump is looking for a deal and is ready to negotiate.
Uncertainty is not good for trade confidence as people like stability before making investments, he said.
“If I was a shipper, I would not be rushing to make too many plans or take any drastic measures. I’d have my team ready to do things differently, but I’d wait to see what actually happens because, right now, there’s a lot of sabre rattling and noise but little clarity,” he said.
Cross-border e-commerce fuelled global air cargo growth since Q3 2023 with China cross-border e-commerce to the USA accounting for 25% of its total global sales and filled over 50% of cargo capacity from China to the USA.
Suspension of the de minimis exemption could impact airfreight capacity between China and the USA and beyond by prohibiting import shipments from de minimis entry, increasing costs and adding entry filing requirements and potential customs delays.
Van de Wouw says, “E-commerce volumes out of China grew +20-30% last year, following similar growth in 2023, so it's going to take a sledgehammer to crack that level of consumer demand and I'm not sure blocking de minimis alone is enough. China e-commerce was not set up to take advantage of de minimis loopholes - it has taken advantage of consumer demand for cheap, fast goods.”
He says that e-commerce products may be a bit more expensive if the de minimis is removed but they will still be cheaper than using retailers though customs delays could make them less attractive.
Chinese e-commerce platforms knew this would come and their business model will not collapse with the removal of de minimis so there is unlikely to be an impact on rates in the short term even if it causes disruption at US airports, adds van de Wouw.
There will be an impact on demand and rates if consumers feel the time to receive their goods is not worth the low prices, with van de Wouw commenting, “In this scenario, we’d expect to see a major downward impact on freight rates at a global level – but to predict this now would be to ‘cry wolf’. Let’s wait and see. Maybe nothing changes.”
General freight shippers would benefit from muted e-commerce volumes, says van de Wouw but general freight demand has shown no real growth in recent years and is not expected to grow in 2025.
The global demand growth of 2% was matched by the 2% growth in capacity, keeping the dynamic load factor at 57%.
Despite this, global air cargo spot rates were up 17% in January to $2.65 per kg and 56% above pre-pandemic levels in 2019 due to the e-commerce boom, limited capacity due to low aircraft production, flight re-routing due to Russian airspace closures and the delayed adjustment of freight rates to supply-demand changes.
January’s global air cargo spot rate fell 11% month-on-month, lower than the 13% drop seen in 2024.
Looking at corridors, the largest year-on-year increase in rates was in fronthaul trade from the Middle East and Central Asia to Europe, up 63% to $2.59 per kg due to the ongoing Red Sea disruption.
Europe to North America saw the next largest increase with spot rates growing 24% to $2.36 per kg.
The strategic shift in freighter capacity towards Asia-related trade contributed to moderate rate growth from northeast Asia with spot rates to Europe rising 19% to $4.40 per kg and rates to North America up 14% to $4.38 per kg.
Backhaul trade on the corridors saw rates declining due to trade imbalances, ranging from 22% on the North America to north east Asia corridor and 2% from North America to Europe.
The only corridor where spot rates grew in both directions was between Europe and Latin America with high single-digit increases.