Global trade uncertainty is prompting air cargo shippers and freight forwarders to favor short-term contracts over longer-term agreements, as highlighted in a recent Xeneta report. This shift, driven by escalating tariffs and the uncertain future of the de minimis exemption, is reshaping the dynamics of the air cargo market.
Key Findings from Xeneta’s April 3 Report
Short-term contracts dominate: In the first quarter of this year, 79% of shipper contracts were short-term agreements of three months or fewer, reflecting a nearly 20 percentage point increase year-over-year.
Spot market reliance: Freight forwarders are keeping approximately 45% of volumes on the spot market to mitigate risks associated with long-term commitments.
“With overall rate growth slowing, we would typically expect shippers to make longer capacity commitments for competitive rates. However, this environment has made such strategies a gamble, particularly with the anticipated impact of tariffs,” stated Niall van de Wouw, Xeneta’s Chief Airfreight Officer.
Dive Insight: Trade Tensions Ripple Through Supply Chains
The tariff-heavy trade policies under the Trump administration have introduced significant volatility into global supply chains. The air cargo market has been particularly impacted, especially for shipments on the China-U.S. trade lane.
Recent developments include:
Tariff hikes: The U.S. increased tariffs on Chinese imports to 125%, potentially raising duty burdens to as high as 245%. In response, China imposed reciprocal tariffs of 125% on U.S. goods, further escalating trade tensions.
Risk aversion: Shippers and freight forwarders are reluctant to lock in fixed rates for a year, even with escape clauses in contracts. “A yearly plan agreed upon now could become significantly more expensive in the long run,” van de Wouw explained.
Market Metrics: March Snapshot
Global air cargo volume: Increased by 5% year-over-year.
Average spot rate: $4.17 per kilogram on the Northeast Asia to North America route, reflecting a 9% year-over-year rise.
Dynamic load factor: Stood at 60%, measuring the relationship between cargo volume, weight, and available capacity.
De Minimis Exemption Ban Adds to Uncertainty
The planned reinstatement of the de minimis exemption ban for imports from China and Hong Kong, effective May, is set to disrupt the air cargo market further.
E-commerce shipments at risk: E-commerce goods reliant on the de minimis provision make up approximately half of the China-U.S. trade lane’s air cargo capacity and 6% of global air freight demand.
Market recovery in March: A temporary lifting of the de minimis ban led to a partial recovery in Transpacific e-commerce demand. However, this is expected to reverse when the ban returns.
Looking Ahead: Expectations of Further Market Disruption
Industry leaders remain cautious about the future.
“Everyone is closely watching how the removal of the de minimis threshold and the array of announced tariffs will affect trade,” van de Wouw noted. “As demand declines, we anticipate a corresponding reduction in airfreight volumes. While much remains speculative, it is likely the situation will deteriorate before it improves.”
March marked the third consecutive month of modest single-digit growth in global air cargo demand. However, with significant disruptions looming, the air cargo industry must brace for further challenges in the months ahead.
𝐀𝐋𝐒 – 𝐓𝐡𝐞 𝐋𝐞𝐚𝐝𝐢𝐧𝐠 𝐨𝐟 𝐀𝐯𝐢𝐚𝐭𝐢𝐨𝐧 𝐋𝐨𝐠𝐢𝐬𝐭𝐢𝐜𝐬
At the inaugural Global Air Cargo Summit, held in Antalya, Türkiye, the International Civil Aviation Organization (ICAO) forecasted that air freight volumes will grow by an...
The imposition of new U.S. tariffs on foreign-made vehicles and components is causing significant disruptions in the global automotive supply chain. Airfreight, often a linchpin...
U.S. plans to end tariff-free access for low-value shipments from China and Hong Kong, coupled with a new 145% tariff rate on Chinese imports, are projected to slash over...
Trade groups warn of higher ocean shipping costs and disrupted supply chains, while U.S. officials argue the policy aims to strengthen domestic shipbuilding and enhance economic...
Since January, the Trump Administration has announced and delayed multiple tariffs on imports from Canada and Mexico, further destabilizing the cross-border freight market....
As global supply chains adjust to post-pandemic realities and shifting trade dynamics, the air cargo industry in the Asia-Pacific (APAC) region finds itself at a pivotal crossroads.
Global tonnage improved +3% in week 15 (April 7-13) after the previous week’s drop of -7% as markets that had closed for the Eid-al-Fitr holiday came back on stream, but comparison...
E-commerce continues to be a key growth driver for air cargo, fueled by rising consumer demand and the rapid expansion of emerging markets, even as regulatory barriers increase.
The International Air Transport Association (IATA) has maintained a positive outlook for air cargo, emphasizing that the majority of global trade remains unaffected by the...
ALS