Picture credit: Xeneta
In its September market update, Xeneta reported that it was the first month of the year not to post double-digit year-on-year growth with air cargo demand up 9% on September last year.
Volumes stayed strong due to e-commerce growth, the ocean-to-air shift due to container shipping disruption, typhoon disruption and the cargo rush ahead of China’s Golden Week holidays.
Air cargo supply grew at 3%, the slowest rate of the year as airlines adjusted their schedules for the winter.
The dynamic load factor increased three percentage points year-on-year and two percentage points month-on-month to 60%.
Xeneta expects a 20% reduction in transatlantic capacity this winter due to falling passenger demand.
Niall van de Wouw, Chief Airfreight Officer of Xeneta said September is already old news and that October is a new ballgame.
He says, “We could see rates rising very quickly on some trade lanes because of the fear-of-missing-out (FOMO) effect as air cargo capacity leaves the market for the winter, US port workers go on strike, and conflict is escalating in the Middle East, potentially bringing further Red Sea disruption for ocean freight.”
One week of port strikes could cause four to six weeks of disruption, adds van de Wouw, which will be November, the busiest month of the year for air cargo.
He says, “It’s a difficult situation. Covid was worse but this is an accumulation of many events and things can change very quickly. FOMO is a powerful force.”
The average global spot rate increased 26% in September to $2.71 per kg, the fourth straight month of double-digit growth and the highest of the year.
Spot rates are highest on the South East Asia – North America lane at $6.15 per kg, 90% above last year, followed by North East Asia to – North America at $4.90 per kg, a year-on-year increase of 45%.
Middle East & Central Asia – Europe had the largest increase, rising 112% to $3.16 per kg due to Red Sea disruption.
Global events will put preparations for this year’s peak season to the test, with van de Wouw saying, “As we’ve said before, companies are more prepared this year and the rules of the game have been clarified between airlines and forwarders as well as between forwarders and shippers. There are now more precise agreements in place on how to navigate the storm the market is likely entering.”
He adds, “There are agreements around rates, surcharges, and the timeframes in which they can be applied, but there’s going to be a fine balancing act between maintaining relationships and being tempted by the short-term benefits these market conditions are creating.”
The macroeconomic outlook for 2025 is not great, says van de Wouw, which may tempt carriers to raise rates for short-term gain.
Xeneta is picking up signals that peak surcharges are being accepted by forwarders and shippers because carriers have the upper hand.
Van de Wouw says, “The rules that have been agreed upon mean there’s less room for the temptation of large rate increases during a hot peak. But we do see a piece of the market where you’ve got to ‘pay to play’ and that could become a potential ‘wild west’. Shippers or forwarders may end up there due to unforeseen demand and it could be an expensive game.”