Air cargo on the main trade lanes out of Asia continues to be in peak season mode as disrupted ocean shipping and an ongoing e-commerce surge hold spot rates at elevated levels.
Not even widespread disruption from July’s global IT outage on Microsoft systems that caused flight delays and cancellations lasting more than a week could derail the resurgent air freight markets.
“The resulting cargo backlogs saw cargo load factors on some impacted airlines increase up to four percentage points compared to the previous week,” rate benchmarking platform Xeneta noted in a market update Thursday, adding that load factors had mostly recovered to pre-outage levels by July 28.
Air freight rates from Shanghai to North America have not fallen below $5 per kilogram since March, with the average rate in July of $5.53/kg almost 25% higher than the same month last year, according to the Baltic Air Index (BAI). Average Shanghai-North Europe rates of $3.93/kg this week were up 44% year over year.
Niall van de Wouw, chief airfreight officer at Xeneta, expects the strong year-over-year growth in air cargo demand to extend into August and September, partly due to the low base set last year.
“For the air cargo market, it’s now all eyes on late August for the first signs of a proper peak season, which would be the cherry on top of the cake for airlines after such unexpected volumes and demand growth in the first seven months of the year,” Van de Wouw said in a market update Thursday.
“Airlines might just be starting to think their tailwinds will hold out,” he added.
Air cargo volumes traditionally begin to pick up in the fourth quarter, with peak demand typically seen in the last two months of the year. But the sector has essentially been in a peak season state since last December.
Buoyant e-commerce
The tailwinds lifting air cargo tonnage and rates are being driven by buoyant e-commerce demand from consumers in the US and Europe. E-commerce has competed for space on aircraft with time- and temperature-sensitive products, while a third competitor for capacity was volume coming because of the modal shift from ocean shippers to Europe disrupted by the Red Sea diversions.
Trade routes from the Middle East and Central Asia to Europe recorded the highest growth in air cargo spot rates in July, with Xeneta data showing a 126% year-over-year increase to $3.16/kg. The rate platform attributed this to the ocean diversions around southern Africa as well as unrest in Bangladesh leading to port and airport backlogs that will take weeks to clear.
The port of Jebel Ali in the United Arab Emirates has experienced growing congestion at its container terminals, and the resultant switch by shippers to air freight has transferred the bottlenecks to air cargo, according to a customer advisory from Crane Worldwide Logistics.
It is also peak vacation season, so passenger baggage is being prioritized at Dubai airport, leading to further delays for regular cargo shipments, although perishables and higher-paid cargo is receiving priority, Crane told customers.
Rates in July from Southeast Asia to North America and Europe more than doubled compared with lanes the same month last year, reaching $5.78/kg to North America and $3.85/kg to Europe, according to Xeneta.
Outbound Northeast Asia markets, supported by strong e-commerce demand and general cargo volume recovery, raised air freight spot rates to North America ($4.39/kg) and Europe ($4.17/kg) by approximately 30% year over year last month, said Xeneta.
Source: https://www.joc.com/article/no-sign-slowdown-ongoing-air-cargo-peak-season_20240801.html
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