Xeneta: Classic seasonality should return in 2024

Market Data
Classic seasonality should return next year barring any black swan events, according to the Xeneta Air Freight Outlook 2024.

The report says muted consumer spending will be a key factor for the year ahead, saying airfreight demand in 2023 is down 8% compared to pre-pandemic and is predicted to grow by 1-2% in 2024 with supply expected to grow by 2-4%.

It says capacity will put downward pressure on rates, which have fallen substantially during 2023 but are still 32% above pre-pandemic levels.

Niall van de Wouw, Chief Airfreight Officer of Xeneta, says shippers should be able to catch their breath in 2024, saying, “The rapid rate decline which started earlier this year has calmed down in recent months. It seems to be the market has a new baseline, from which I expect classic seasonality patterns to emerge.”

He says key indicators are not good with muted demand and a lot of uncertainty in the world.

“People and companies are a bit more conscious how they are spending their money and we will likely not see demand pick up in any meaningful way in 2024. Yes, we will see a return of classic seasonality, but it will be muted seasonality,” he says.

Competition means freight forwarders want 12-month contracts to secure volumes and shippers want to lock in for longer periods to reduce their workload.

Van de Wouw says the problem is freight forwarders are selling long-term contracts but buying volume on the short-term spot market, which is a problem if rates go up.

He says, “We saw it recently out of Vietnam where 70% of volume is bought on the spot market. Rates suddenly went crazy prior to Golden Week and freight forwarders told shippers they could not honour the contracted service.”

Van de Wouw adds it only takes one event to disrupt supply chains, saying, “No one has a crystal ball, but you only have to look at the drought in the Panama Canal, threat of volcanic eruptions in Iceland and conflict in the Middle East to understand how delicate and sensitive to world events the air freight industry is.”

Saying the cargo market has been a rollercoaster ride, van de Wouw concluded by saying, “If we do get a black swan event in 2024 then strap yourselves in for another ride on the rollercoaster.”