The air cargo market has matured enough to enable airlines and forwarders to keep rates reasonable against a backdrop of strong demand exacerbated by supply disruptions.
While a thriving air cargo market usually results in shippers facing rocketing spot rates during the fourth quarter peak, this year lessons have been learnt and more stable relationships are in place, said Xeneta.
The analyst earlier this year urged shippers and forwarders to secure capacity deals well ahead of the fourth quarter, and this month shippers were urged to take stock of the market and delay their 2025 tenders until after the fourth quarter peak.
“There is a maturity in the market which stems from airlines being better prepared this year as well as there being clearer rules in place between shippers and forwarders, and forwarders and airlines,” said Niall van de Wouw, Xeneta’s chief airfreight officer.
“This is good for relationships – and good for consumers. Rates are still elevated versus a year ago, but despite strong demand, rising load factor, and only a modest increase in supply, they are not going crazy. Lessons have been learned and people are looking for healthy, reasonable rates on both sides.”
He stressed: “We see more emphasis on maintaining relationships than squeezing every last dime of revenue.”
Xeneta’s market data showed volumes were up 11% in October and spot rates increased 19% year on year, reflecting the growing maturity and balance among buyers and sellers of air cargo capacity, said the analyst. In comparison, average spot rates in August and September were up 25% year on year.
However, while October’s global air cargo spot rate remained elevated – averaging $2.68 per kg and just a few cents below 2023’s peak season high – the growth momentum slowed down from 25% in September, due mostly to a high comparison base in October 2023.
In terms of the month-on-month trend, October’s spot rate was relatively flat compared to September, found Xeneta.
The elevated year-on-year growth spot rate was supported by continued double-digit growth (11%) in global demand, measured in chargeable weight. In comparison, global cargo capacity supply increased only 2% year on year.
This supply and demand imbalance pushed the dynamic load factor up four percentage points to 63% in October. Dynamic load factor is Xeneta’s measurement of capacity utilisation based on volume and weight of cargo flown alongside available capacity.
Bearing in mind a growth forecast as per October 2023 of 1-2% for the full 2024 and that this year itself has seen constant, unexpected disruptions outside of the industry’s control, the industry is now firmly on course for double-digit air cargo demand growth in 2024, even if November and December fall flat, said Xeneta.
Looking at trade lanes, Europe to North America saw the largest month-on-month volume increase of 11%. The return leg also saw a 10% month-on-month increase as shippers and forwarders took precautionary measures to lessen the impact of the three-day strike by dockworkers at US East Coast and Gulf Coast ports.
A quicker-than-expected resolution to this industrial action, however, saw the positive impact of the strike on air cargo volumes ebb away after reaching a peak in the week ending October 20.
Nonetheless, the rise in this corridor’s air cargo rates is likely to continue after airlines reduced cargo capacity at the end of the month to mark the start of winter schedules, noted Xeneta.
Capacity traditionally shifts to corridors generating higher revenues, which leads to a more balanced air cargo supply and demand, explained Xeneta. As a result, spot rates from Northeast Asia to North America, a top front-haul corridor, stayed relatively flat month on month – in part due to a cooling down after a September boost caused by extreme weather disruptions and China’s Golden Week holidays.
Similarly, the Northeast Asia to Europe market stayed flat compared to a month ago. Despite several cancelled passenger flights between Europe and China due to uncompetitive routings, the corridor’s air cargo capacity still rose due to increased freighter capacity. This influx of capacity contributed to a decline in backhaul spot rates both month on month and year on year.
Shifting capacity to Asia from the Americas market also triggered freight rate increases in secondary corridors. Spot rates ex South America to Europe and its return leg rose by high single digits or double-digits month on month.
Middle East & Central Asia to Europe spot rates were down 3% month on month. Contributing factors included the easing of civil unrest in Bangladesh and subsiding weather disruptions.
The next level of market maturity, van de Wouw said, will be indexing between shippers and forwarders using a neutral third-party source to adjust rates through the duration of their contracts.
“Indexing will benefit all parties and create confidence to enter long-term contracts. It is a natural next step in a market that is clearly seeing greater balance from better preparedness,” van de Wouw stated.
Source: https://www.aircargonews.net/data/xeneta-market-maturity-harnesses-air-cargo-rates/
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