January is traditionally a quieter month for demand but this year’s results were affected by disruption in the Red Sea due to attacks on ships by Houthi rebels in Yemen.
Xeneta says the Red Sea crisis is not impacting e-commerce volumes but did contribute to some of the increased air cargo demand into Europe as ocean shipping carriers re-routed vessels, increasing transit times, driving up costs and raising concerns about potential container shortages.
Shippers also need to move goods ahead of the Lunar New Year to optimise consumer demand in Europe and boost factory production in China with some of the higher air cargo volumes likely coming from shippers shifting from ocean to air transport.
Niall van de Wouw, Chief Airfreight Officer of Xeneta says though January had strong volumes, the market has not fundamentally changed saying the rising demand is due to the Red Sea disruption and the Lunar New Year, not because of strong consumer demand.
He says, “The situation in the Red Sea has brought nervousness to many supply chains and possibly encouraged some shippers to have a knee-jerk reaction, shifting to airfreight, bringing volumes forward, and securing capacity. However, the consensus seems to be that this will not produce a long-term positive effect on airfreight.”
Once the uncertainty has cleared, van de Wouw predicts stability will return and shippers will accept longer ocean freight journeys and stop using airfreight.
Economic anxiety and geopolitical tensions remain with Germany’s economy shrinking, China’s economic growth slowing and interest rates staying high likely to mute global air cargo demand for the first half of 2024.
Available capacity in a quieter month for demand means rates are not rising with the general air cargo spot rate in January declining 12% month-on-month to an average of $2.27 per kg and the global dynamic load factor dropped three percentage points to 56% versus December.
The global average spot rate in January was down 21% on 2023, a smaller drop than seen in January 2023 when it fell 38% year-on-year.
Extraordinary surges in air cargo volumes from China and Vietnam to Europe for three consecutive weeks in January were observed with general spot rates from north east Asia to Europe increasing 11% to $3.42 in the week ending 28 January after reaching their lowest point in the first week of January.
General spot rates from north east Asia to the US have been going down since mid-December, reaching $3.28 per kg in the week ending 28 January, down 7% on three weeks earlier.
The Lunar New Year did not push general cargo spot rates from China to the US higher, which remained around $3.43 per kg.
General spot rates from Europe to the US remained around $1.77 per kg, increasing 4% on three weeks, primarily due to reduced cargo capacity rather than stronger demand.
Van de Wouw says, “The market remains extremely difficult to predict. Let’s wait and see what happens in February when we might see air and ocean volumes as well as rates fall back if more stability returns to the market. But January was a strong slow month and, after a difficult year, the air cargo industry will not be complaining about starting the year on a positive note.”