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Xeneta: Challenges on the horizon in 2025

The global air cargo market is entering 2025 with double-digit growth but there are concerns about the outlook, according to Xeneta.

Volumes increased 11% year-on-year in December, the 14th consecutive month of double digit growth and average spot rates finished the year up 15%.

Xeneta is forecasting 4-6% demand growth for 2025 but Chief Airfreight Officer Niall van de Wouw warns that the air cargo market is affected by geopolitical tensions, subdued manufacturing outlook and political intervention.

Capacity increased by 2%, increasing Xeneta’s dynamic load factor, which measures capacity utilisation based on volume and weight alongside available capacity, by three percentage points to 62%.

Global average spot rates increased by 15% to $2.99 per kg with Xeneta adding that the high level seen in December 2023 means this was the slowest growth rate in the last seven months.

Spot rates increased by 11% between September and December, which compares to 21% in 2023.

Van de Wouw says that the rebalancing of the market from the volatility seen in 2023 shows that the market was more prepared in 2024.

He says, “The efforts made by industry stakeholders ranging from strategic capacity allocation by airlines, securing capacity ahead of ‘hot’ e-commerce corridors by freight forwarders, and locking-in longer-term contracts by shippers, all contributed to a healthier industry based on longer-term relationships instead of a push for short-term gains.”

E-commerce, which is projected to grow at 14% annually to 2026, was the main driver of growth in 2024 with the general freight market remaining subdued. 

Van de Wouw says, “So, the overall outlook for air cargo remains one of growth. But reports of countries aiming to crack down on the Chinese e-commerce platforms, for example, if this was to happen, would have a sizeable impact in markets around the world because what’s going to take the place of these volumes?”

Looking at corridors, Europe to North America spot rates increased 21% month-on-month to $3.27 per kg due to airlines reducing their passenger schedules for the winter and reallocating freighters to Asia.

Concerns about a second round of US East Coast port strikes did not result in a shift to airfreight in December and the news on 8 January of a tentative agreement between the International Longshoremen’s Association (ILA) and United States Maritime Alliance for a new six-year Master Contract makes a spike in air cargo demand less likely.

In early January, Europe to US spot rates dropped 25% from their peak two weeks earlier to $2.56 per kg.

Northeast Asia to North America rose 5% month-on-month in December to $5.57 per kg and Northeast Asia to Europe was up 4% to $5.28 per kg.

Spot rates on the China to US lane failed to match 2023’s peak season and declined 9% from its mid-December peak of $5.61 per kg to early January.

This compares to the same period of 2023 when rates dropped nearly 40% to $5.91 per kg.

Xeneta says this is likely due to a combination of strategic allocation of cargo capacity and tightened scrutiny on e-commerce activity subduing peak season levels while potential tariffs could have reduced the rate decline due to increased frontloading.

Growth in 2025 will be affected by geopolitical tensions, tariffs, tightened de minimis rules, increased security risks and extreme weather impacting global demand and supply chains.

The upcoming tender season could be challenging as shippers are increasingly looking at long-term contracts while freight forwarders negotiate half of the rates on the spot market, which is eroding their revenues as airlines increase their rates.

Van de Wouw says stakeholders cannot rely solely on historical trends when making purchasing decisions, saying, “Heightened market volatility due to rising global uncertainties will continue to impact air cargo demand and this could force air freight rates to fluctuate significantly. Therefore, embracing more flexible freight rate negotiation methods, such as indexing or transparent pricing, could foster mutual understanding and better collaboration across the industry this year.”