Air cargo rates expected to increase through yearend

Despite airfreight rate volatility in the past couple of years, analysts expect rates to stabilize and possibly even increase moderately through the rest of the year. “Our expectations overall for airfreight rates are that we will see a moderate increase in both Q3 and Q4, and a steady increase through that period in line with the volume uptick we have in terms of capacity,” Michael Clover , head of commercial development at logistics industry analytics firm Transport Intelligence (Ti), said in today’s Ti webinar on ocean and airfreight rates. Clover said rates will dip in the first quarter of 2025 as peak season ends, but rates are expected to bounce back toward the middle of the year. “We see a bit less volatility [in airfreight than in ocean freight], although there’s still quite a lot of uncertainty in the airfreight market as well,” Clover said. Rates, volume, capacity Air cargo rates have been decreasing since Q2 2022, but now appear to be improving, according to Nathan Donaldson , data team leader at Ti. “We appear to be on the end of quite a long downwards trend in global airfreight rates,” he said in the webinar. [caption id="attachment_57144896" align="alignnone" width="668"] (Courtesy/Ti)[/caption] “Global airfreight demand is a lot more pronounced, so the growth in airfreight is a lot more pronounced than sea, even though we’re not seeing that same effect in the rates and less direct disruption in the supply side,” Donaldson said. So far in Q3, global volume has increased 6.7% quarter over quarter with the strongest growth coming from North America, where volume increased 9.6% QoQ, Donaldson said. “We also saw a smaller increase for Asia-Pacific but European volumes are staying flat,” he said. [caption id="attachment_57144895" align="alignnone" width="786"] (Courtesy/Ti)[/caption] Capacity grew in all world regions in July, though more slowly than in June, according to Jenan Hasan , economic analyst at Ti. “Continuing capacity constraints in ocean shipping are encouraging a partial shift from sea to air transport,” Hasan said. “Available cargo tonne kilometers (ACTK) rose 4% compared to June and 8% since last year. ... [ACTK data] reflects a consistent capacity expansion over the first seven months of this year.” [caption id="attachment_57144894" align="alignnone" width="833"] (Courtesy/Ti)[/caption] E-commerce has modest impact While e-commerce is increasing rates and volumes, other factors keep them from growing too rapidly, Donaldson said. “We’re seeing large e-commerce volumes out of China to the rest of the world and they’re [primarily using] airfreight,” he said. “We’re seeing large e-commerce volumes out of companies such as Shein and Temu .” But the airfreight market is also seeing “really low-cost freighter services and reduced amounts for expensive express providers like DHL , UPS and FedEx ,” he said. “So, even though we have more demand pressure, it’s more on the lower end of the market. So, we’re seeing the rates in the market remain quite low.” E-commerce out of Asia comprises 5% to 6% of all airfreight on those lanes, according to Clover. “There’s a strong cross-border e-commerce demand, especially from U.S. and European consumers, that’s contributed to high CTKs, although it’s not vastly prevalent throughout the industry,” Hasan said. Fuel price volatility Jet fuel consumption in July reached 8 million barrels per day, up half a million barrels per day from July 2023, according to Hasan. “Jet fuel has been a volatile market this year due to the political tensions and unpredictable demand dynamics,” she said. “Prices have increased 16% since their peak in February this year and, quarter on quarter, prices have dropped 5% and are down 17% since last year. Month on month, our latest data shows that prices have declined by 7% and, on a more micro level, the jet fuel price last week rose 0.6% compared to the week before to $92 per barrel.” [caption id="attachment_57144897" align="alignnone" width="800"] (Courtesy/Ti)[/caption] Sustainable aviation fuel (SAF) is also playing a role in jet fuel price volatility, Hasan said. “Currently, airlines must use a blend of SAF with ordinary fuel and with SAF taking up [to] and not exceeding 15%,” she said. “However, modern planes are capable of burning 100% SAF. This will alter the cost dynamics of operations for airlines, not to a huge extent now in the short to medium term. ... It will be more pronounced in the longer term.”

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