The role of freight forwarders in air cargo is becoming more complex as ongoing capacity constraints and high demand challenges their ability to access space out of Asia, especially on spot market-heavy trade lanes such as Asia-Europe.
As the supply-demand imbalance drives rates to levels not seen in two years, forwarders are trying to balance the contractual requirements of their airline partners while securing capacity at reasonable rates for their cargo-owning customers.
With no sign of a slowdown in demand heading into 2025, shippers already taxed by soaring prices should be prepared to pay even more for their air freight next year, according to Niall van de Wouw, chief air freight officer at rate benchmarking platform Xeneta.
“If I was a shipper, I would start managing expectations of the CFO that the spend on air will be higher in 2025 than it was in 2024,” van de Wouw said during an industry outlook webinar this week.
Also on the Xeneta-organized webinar was Glyn Hughes, director-general of The International Air Cargo Association (Tiaca). Hughes said the scenario now playing out was the opposite of what was seen in 2023 when the excess capacity in the market meant forwarders could get access to space at good prices.
“For the past 13 months, the capacity gap between what has been pre-booked, pre-sold [or] secured for a block space agreement and what is available on the spot market has become smaller,” Hughes said. “But as load factors get even higher, it will be challenging for forwarders to access short term rates at reasonable levels versus the longer-term commitment with the shippers.”
That was reflected globally in the contractual agreements between forwarders and airlines, with the global load factor of 63% in November at a two-year high, according to Xeneta. The analyst’s data shows shorter-term deals of three months or less fell from 29% of the market in the first quarter to 19% in the fourth quarter, while contracts with 12-month validity increased from 37% of the market in the first quarter to 50% in the fourth quarter.
Rates at two-year high
Air freight demand rose 10% year over year in November, fueled by the continued boom in e-commerce, while capacity increased by a marginal 2%. That pushed spot rates in November to their highest level in almost two years, Xeneta noted.
The average Shanghai-North Europe spot rate in the first three weeks of December was $5.2 per kilogram, a level that has not been seen since late 2022, according to the Baltic Air Index (BAI).
Kathy Liu, vice president of global sales and marketing at Taiwan-based Dimerco Express Group, said there was no sign of a slowdown in the solid growth in volume out of Asia as the end of the year neared.
“Starting mid-December, we’ve seen a significant uptick in cargo volumes, particularly for consumer electronics,” she wrote in an air freight outlook. “This is unusual, as the market typically slows down after Dec. 5. However, this year, the peak is expected to extend all the way to late January, just ahead of Chinese New Year.”
One of the Asia-based airlines benefiting from high demand is Cathay Pacific, which has the added advantage of being based at Hong Kong, the world’s largest air freight airport. In November, Cathay Cargo carried 142,601 kilograms, a 15% increase in volume compared with the same month last year, with the 11-month volume of 1.4 million kilograms up 11% year over year.
Several Asian airlines have announced a 10% increase in 2025 contract rates for both long-haul and intra-Asia routes, according to Dimerco.
Tariff-driven bonus for Asian airlines
While no slowdown is expected in the e-commerce-driven boom on trade lanes out of Asia, another air freight-friendly factor for airlines in 2025 will be the tariffs the incoming Trump administration has promised to impose on Chinese imports.
Liu noted that many shippers were rushing to move stock via air freight from China to the US, hoping to beat potential tariff increases before Jan. 20 when Donald Trump takes office. She predicted this would lead to significant growth on the China-Taiwan trade lane as more semiconductors and consumer electronics are shipped from China to Taiwan for assembly, then on to the US to avoid potential tariffs.
Hughes also highlighted the potential upside for air cargo from an increase in US tariffs on products made in China.
“If President Trump is putting in 60% or 70% tariffs on a lot more Chinese products, two things will happen. We might see retaliatory measures, which would have an inflationary impact, but we also may see an acceleration of the China-plus-one manufacturing strategy,” Hughes told the webinar.
“If Chinese manufacturers shift more of their final assembly to Vietnam, Malaysia or other parts of Southeast Asia, that could create even more air cargo volumes as production sites are proliferated across Asia,” he added.
Source: https://www.joc.com/article/tight-capacity-high-demand-expected-to-push-air-cargo-costs-higher-in-2025-5909563
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