News #116 - Air Cargo Outlook Strengthens

Global air cargo demand continues to rebound, buoyed by seasonal trends, front-loaded shipments, and shifting trade flows. However, market conditions remain unpredictable, shaped by fluctuating capacity, regional dynamics, and persistent uncertainty.

Steady Growth in Demand

Demand for air cargo, measured in Cargo Tonne-Kilometres (CTKs), rose by nearly 6% year-over-year in April. This growth was fueled by seasonal peaks in fashion and consumer goods, proactive shipping ahead of anticipated U.S. tariff adjustments, and declining jet fuel prices. Month-on-month, demand increased 2.3%, continuing the robust performance seen in March and building further into May.

Freighter Capacity Expands on Key Routes

Freighter capacity is gradually returning, particularly on trans-Pacific routes, as airlines cautiously reintroduce wide-body aircraft to meet rising demand. During the first week of June, freighter supply expanded by 11% on Asia–Europe and Middle East–Asia routes and by 8% on Asia Pacific–North America lanes.

While new U.S. tariff regulations caused a temporary drop in e-commerce volumes, capacity is beginning to recover on China–U.S. routes. Indirect routings are also playing a critical role in bolstering freighter operations. Chinese carriers, for instance, have introduced air-to-air connections via Hanoi to support growing Vietnam–U.S. demand, while South Korean capacity is tightening due to increased shipments of high-tech goods and perishables.

Volatile Tariff Changes and Rate Trends

The Baltic Air Freight Index reported a 1.2% month-on-month increase in May but remained 5% lower compared to the same period in 2024. Early May saw a softening of spot rates from China, followed by a sharp rebound later in the month. For example, the Hong Kong spot rate index rose 1% from April but declined 6.3% year-on-year.

U.S. tariff adjustments created significant market turbulence in May. The removal of the de minimis exemption on low-value shipments on May 2 led to disruptions in e-commerce volumes, which accounted for 50% of China–U.S. air freight in 2024. Subsequent tariff reductions—from 145% to 120%, then 54%, with a flat $100 postal fee—briefly eased pressures but triggered irregular shipment flows.

Carriers warn of potential disruptions if shippers delay securing capacity, especially with the current 90-day tariff truce set to expire in mid-August. Late-quarter demand spikes and compliance challenges may exacerbate bottlenecks, particularly on high-traffic routes like China–U.S. and intra-Asia.

Regional Trends and Trade Lane Shifts

Demand and rate trends vary significantly by region. Intra-Asia traffic remains robust, driven by high-tech and perishables, while South Korea–U.S. routes require advance bookings of up to two weeks. Japan–Europe rates are rising, despite reduced capacity from hubs like Guangzhou. Conversely, outbound rates from Vietnam and India remain below last year’s levels.

In the Americas, rates for U.S.–South America routes are significantly higher than a year ago, though some analysts caution about emerging overcapacity. Rates from Europe exhibit mixed trends, influenced by seasonal factors like fruit exports, which are beginning to shape flows and capacity allocation.

Jet Fuel Prices Offer Relief

Jet fuel continues to be a bright spot for the industry. Prices in May were 21% lower year-over-year and 4% down month-on-month, providing much-needed margin support even as yields soften.

Source: https://metro.global/news/air-cargo-outlook-strengthens/

𝐀𝐋𝐒 – 𝐓𝐡𝐞 𝐋𝐞𝐚𝐝𝐢𝐧𝐠 𝐨𝐟 𝐀𝐯𝐢𝐚𝐭𝐢𝐨𝐧 𝐋𝐨𝐠𝐢𝐬𝐭𝐢𝐜𝐬

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