Air cargo heading for double-digit growth in 2024

The latest figures from supply chain data firm Xeneta show that air cargo demand in May increased by 12% year on year – the fifth month in a row of double-digit increases.

Meanwhile, capacity was up 4% year on year meaning the dynamic load factor for the month increased by three percentage points to 58%.

Rates at a global level increased compared with a year ago for the second month in a row – jumping 9% year on year to $2.58 per kg – although this is compared with a low level in 2023.

Xeneta chief airfreight officer Niall van de Wouw said that the latest demand increase meant it was looking more likely the industry could report double-digit percentage demand growth for the full year.

“We can’t use the word ‘surprising’ anymore,” he said. “When we take a mid-term view of the market, with these kinds of numbers, we might be on track for double-digit growth for the year. It is now a possible scenario.”

Peak outlook

He said a “bright” fourth quarter outlook could be further boosted by higher ocean shipping prices from the Far East to Europe and west coast North America due to port congestion and the Red Sea shipping crisis which have narrowed the price differential between the two modes.

However, this was not expected to result in a major modal shift as shippers were moving peak season inventory early and there are some geopolitical developments that could negatively impact the market.

“The big question for the air cargo industry is what happens following the US crackdown on e-commerce shipments out of China?”、Xeneta questioned.

Van de Wouw explained: “At the end of 2023 we saw the dramatic impact China’s e-commerce behemoths had on the air cargo market. Everyone is now waiting anxiously to see what happens in the upcoming peak season.

“But if the potential rising costs and increasing transit times of e-commerce ex-China leads US consumers to procure less and less, that can have a ripple effect globally.

“If fewer freighters are required to carry e-commerce, [the freighters] will enter the general airfreight market (again) and produce a noticeable supply impact, putting downward pressure on rates. This possibility cannot go unnoticed.”

Regional variations

Van de Wouw added that there were regional variations in the market performance registered this year.

Xeneta said that the highest year-on-year spot rate increase in rates for May was a 110% rise on the Middle East & Central Asia to Europe corridor to $3.21 per kg due to continuing Red Sea disruption.

“Southeast Asia and China to North America spot rates rose 65% and 43% to $4.64 per kg and $4.88 per kg respectively, while China-Europe spot rate also recorded double-digit growth, up 34% year on year to $4.14 per kg.”

On the other hand: “Spot rates from North America and Europe to China fell 32% and 23% year on year respectively in May to $1.61 and $1.65 per kg.

“The Transatlantic market also suffered with the corridor experiencing freight rate declines in both the front and backhaul lanes. Increased belly capacity due to summer passenger travel led to drops in air cargo spot rates.

“Europe-North America spot rate declined 21% to $1.77 per kg in May versus the previous year, while, eastbound, the North America-Europe corridor spot rate was  down 16% lower at $1.08 per kg.”