‘Cautious optimism’ for 2024 airfreight market

Analysts are cautiously optimistic that 2024 may be the beginning of an economic growth cycle for the air cargo industry after 2023 ended with a 9% year-over-year rise in demand and the general air cargo spot rate reached its highest level in nine months. The global average air cargo spot rate in December peaked at $2.60 per kilogram, up 6% from November, according to market data analysis released Jan. 3 by ocean and airfreight rate analytics platform Xeneta . Nevertheless, the general air cargo spot rate showed an 18% YoY decline, an improvement from November’s 25% YoY decline. “To say 2024 is a ‘ new dawn’ is perhaps a little too optimistic, but I certainly think it’s the start of a new cycle for airlines and forwarders, and shippers are likely to also appreciate the stability returning to the market so they can more accurately predict the transportation costs for the products they are selling,” Xeneta Chief Airfreight Officer Niall van de Wouw said in the release. While geopolitical tension and cost-of-living pressures remain hurdles for global trade, air cargo’s predictability “stands to benefit from escalating international disruption, albeit producing only modest gains in volumes,” he said. Slight bump in December The December airfreight market was busier than anticipated but van de Wouw cautions against drawing too many conclusions from this since the Christmas and New Year holidays make December “an odd month.” “We also need to factor in that December 2022 provided a low comparison base given the very muted demand seen 12 months ago,” he said. “This latest data appears to reflect stronger but temporary local market performance on key lanes as opposed to signaling a global economy that is doing much better. Our market outlook forecast for 2024 remains unchanged with an anticipated 1% to 2% growth in demand, and a 2% to 4% rise in supply.” In response to cost-of-living increases, consumers opted for more discounted e-commerce shopping to fulfill Christmas needs, adding to export volumes, especially from Asia, Xeneta noted. [caption id="attachment_57139712" align="alignnone" width="1024"] (Courtesy/Xeneta)[/caption] December air cargo capacity was in line with the few months prior but grew 6% YoY. The global dynamic load factor, Xeneta’s market performance indicator which measures air cargo capacity utilization by considering cargo volume and weight perspectives of cargo flown and capacity available, dropped to 59% in December, 1 percentage point lower than its November level, but 3 percentage points higher YoY. The air cargo spot rate from Europe to the United States was $2.42 per kilogram in December, up 21% month over month, caused by a reduction in capacity, according to Xeneta. Spot rates from China and Southeast Asia to Europe both rose 9% MoM to $4.49 per kilogram and $2.91 per kilogram, respectively. The China-to-U.S. air spot rate rose 6% MoM in December to $5.12 per kilogram, triggered by strong e-commerce demand, according to Xeneta. The airfreight spot rate from Southeast Asia to the U.S. rose 14% MoM to $4.50 per kilogram. Long-term contracts on the rise As the market continues to normalize, shippers increasingly committed to longer-term, fixed-rate contracts in the final quarter of 2023, Xeneta noted. Contracts for seven months or more accounted for 45% of the total contracts signed, up 5 percentage points from the previous quarter. Six-month contracts accounted for 28% of the total market. “This was in stark contrast to the pandemic era when most shippers had to manage rates valid for up-to-one-month only,” the Xeneta report noted. One-month contracts accounted for 38% of all contracts signed in Q2 2021, the largest percentage. By the fourth quarter of 2023, the share of up-to-one-month rates was only 14%. [caption id="attachment_57139713" align="alignnone" width="1024"] (Courtesy/Xeneta)[/caption] Sea vs. air amid geopolitical tensions “The crisis impacting ocean container shipping in the Red Sea and disruption through the Suez Canal has yet to influence air cargo rates as the surge of air cargo demand for the holiday season was close to its end by the start of these events,” the Xeneta report stated. The longer Houthi attacks on vessels in the Red Sea continue, forcing some ships to take longer routes through the Suez Canal, the more likely it is for air cargo to see a boost from it. “Air cargo seems to be in a more steady state. It is important for airlines and forwarders to focus on the elements they can control, such as cost and reliability, and to be ready for when the opportunities arrive,” van de Wouw said.

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