News #124 - July airfreight volumes up 5% due to frontloading and modal shift

Global air cargo volumes increased by 5% year-on-year in July, defying typical seasonal patterns as shippers accelerated deliveries and shifted modes to air transport in a bid to avoid looming tariff impacts.

According to Xeneta’s July market analysis, this unexpected surge contrasts sharply with IATA’s June report, which recorded a modest 0.8% year-on-year increase amid trade softening driven by tariff concerns. Xeneta emphasized that the July growth is not a signal of trade recovery, but rather the result of strategic adjustments by companies seeking to mitigate additional tariff-related costs.

“This unexpected boost, bucking seasonal patterns, appears driven in part by tariff-related frontloading, mode shift, and persistent uncertainty, prompting businesses to expedite shipments,” Xeneta stated.

Air Cargo “Piggybacking” on Tariff Disruptions

Niall van de Wouw, Chief Airfreight Officer at Xeneta, noted:

“As we said earlier in the year, air cargo is piggybacking on the chaos being caused by tariffs. While the growth in July will come as a pleasant surprise to many, this growth is not a consequence of increased trade. It is a sign of the creative ways companies are trying to circumvent the higher costs of tariffs.”

Shippers, he explained, are willing to absorb higher airfreight costs now rather than face potentially steep tariff bills later. Air transport, with its speed advantage, is becoming the preferred mode for businesses seeking to avoid lengthy 30-day ocean transits during periods of policy uncertainty.

“It’s a game of ‘cat and mouse’ between the U.S. administration and companies,” van de Wouw added, highlighting the agility and adaptability required in current trade conditions.

Capacity and Load Factor Recovery

July’s cargo capacity increased by 3% year-on-year, trailing behind the 5% volume growth. This imbalance helped lift the dynamic load factor—Xeneta’s measure of utilization based on both cargo weight and available capacity—back to 58%, matching last year’s level and recovering from a two-percentage-point dip in June.

Despite the operational improvement, market sentiment remains cautious, as U.S. tariff discussions continue with a new decision deadline of 7 August affecting a wide range of trading partners.

Tariff Uncertainty and De Minimis Changes

Beyond tariffs, the industry is preparing for the U.S. withdrawal of the de minimis exemption for all countries by the end of August. The change is expected to have the greatest impact on Canada, the UK, and Mexico.

The earlier removal of the exemption for mainland China and Hong Kong in May led to a 50% decline in low-value and e-commerce exports from China to the U.S. in June, according to China Customs data.

Rate Performance: A Third Consecutive Monthly Decline

Despite volume growth, global air cargo spot rates fell for the third straight month in July, down 2% year-on-year to USD $2.55/kg. Xeneta noted, however, that the rate of decline has slowed due to a modest re-emergence of demand-supply imbalances.

Key pricing trends included:

Transpacific Corridor:

• Southeast Asia → North America: -16% YoY to $4.87/kg, as capacity constraints eased.
• Northeast Asia → North America: Largely flat at $4.81/kg, supported by strong Taiwanese demand, where spot rates rose 9% YoY to $6.85/kg on the back of AI and semiconductor shipments.
• Mainland China → U.S.: Down 11% YoY to $4.26/kg, pressured by the de minimis removal, heightened tariffs, and market uncertainty.

Asia–Europe Corridor:

• Northeast Asia → Europe: Stable at $4.16/kg, bolstered by freighter redeployments from Pacific routes to absorb an ~90% surge in China–Europe e-commerce volumes.
• Southeast Asia → Europe: Weaker, with rates down 22% YoY to $3.02/kg.

Transatlantic Corridor:

• Westbound: $1.91/kg
• Eastbound: $1.15/kg

Gains driven by frontloading activity and reduced bellyhold capacity from passenger services.

Short-Term Benefits, Long-Term Questions

Van de Wouw acknowledged that tariff-related uncertainty is one of the few factors currently sustaining air cargo demand:

“Hardly anything has been finalised in relation to tariffs. In the meantime, air cargo stands to benefit.”

However, he warned that this effect will be temporary:

“Economists agree this climate is not good for anyone. Sooner or later, something must give, and demand will fall. How long it will be before reality kicks in is hard to assess because this is one massive political dance.”

Source: https://www.aircargonews.net/data-news/july-airfreight-volumes-up-5-due-to-frontloading-and-modal-shift/1080488.article

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