Global air cargo volumes rose by a surprise but welcomed 10% year-on-year in January as shippers' concerns over hostilities in the Red Sea and an early Lunar New Year more than compensated for an anticipated post-Christmas drop in e-commerce traffic, according to the latest weekly market analysis by Xeneta.
The ocean freight rate benchmarking and market intelligence platform said with plenty of available air cargo capacity in what is traditionally a quieter month for demand, however, fuller cargo holds are yet to translate into higher rates.
Globally, general air cargo spot rates in January declined 12% month-on-month to an average of US$2.27 per kg, consistent with the trend of the global dynamic load factor, which dropped three percentage points to 56% versus December.
Xeneta's dynamic load factor analysis measures air cargo capacity utilisation by considering both cargo volume and weight perspectives of cargo flown and capacity available.
"Overall, the year-on-year growth of the global air cargo market supply slowed down in January as much of the missing capacity was restored last year," the report said.
It added that compared to the previous year, January's global average spot rate continued to show a double-digit year-over-year decline of 21%, although at a slower pace compared to the 38% decline seen in January 2023.
"We saw a relatively strong January from a volume perspective, but the market fundamentals have not changed. This is not consumers buying more; it is likely linked to the Red Sea disruption as well as the upcoming Lunar New Year and some indicators that the general cargo market is busier than expected," said Niall van de Wouw, chief airfreight officer at Xeneta.
"We don't see this reflected in rates, but that's not surprising in January because there’s not the same pressure on capacity," he added.
van de Wouw noted that the situation in the Red Sea has brought nervousness to many supply chains and possibly encouraged some shippers to have a knee-jerk reaction, shifting to airfreight, bringing volumes forward, and securing capacity.
"However, the consensus seems to be that this will not produce a long-term positive effect on airfreight. Once the initial nerves and uncertainty subside, stability will return once shippers simply accept that ocean freight may just take two weeks longer, causing the need for airfreight to then dwindle," he said.
"I'm not hearing it is turning the airfreight market upside down like we saw, for example, during the ports strike on the US west coast," the chief airfreight officer at Xeneta added.
Whilst uncertainties due to economic anxiety and geopolitical tensions continue to linger, the air cargo market, might be more focused on what happens to e-commerce following the 'crazy' air freight volumes online sales generated in the weeks leading up to Christmas.
"The shrinking German economy, the slowdown of China's economic growth, and the still-elevated interest rates due to high inflation could also mute global air cargo demand at least in the first half of 2024," van de Wouw added.
Meanwhile, he noted that although the Red Sea crisis won't directly impact e-commerce volumes, it did contribute to some growth of air cargo demand into Europe in January as ocean shipping carriers rerouted vessels to avoid the threat of militia attacks, increasing transit time, driving up costs, and raising concerns over potential container shortages.
"With shippers needing to move goods ahead of the Lunar New Year to optimise consumer demand in Europe and boost factory production in China, some of January's higher air cargo volumes are likely due to some shippers, especially in the apparel industry and producers of manufacturing components, shifting from ocean transport to air," van de Wouw said.
Xeneta observed 'extraordinary' surges in air cargo volumes from China and Vietnam to Europe for three consecutive weeks in January, surpassing even their peak season highs.
In response to this, the market also saw an increase in some air cargo spot rates.
General cargo spot rates from Northeast Asia to Europe rebounded by 11% to US$3.42 per kg in the week ending January 28, after reaching their lowest point in the first week of January.
Northeast Asia refers to mainland China, Hong Kong, Japan, South Korea, and Taiwan, van de Wouw said.
This contrasts with the trend of freight rates from Northeast Asia to the US, where general cargo spot rates continued their downward trend since mid-December, reaching US$3.28 per kg in the week ending January 28, down 7% compared to three weeks prior.
"This suggests that the demand growth on the Northeast Asia to Europe corridor is more of a spillover from ocean transport rather than actual growth in consumer spending," van de Wouw said.
"While it may have boosted demand for capacity, the Lunar New Year did not manage to push general cargo spot rates from China to the US higher. These hovered around US$3.43 per kg in January," he added.
In comparison, general cargo spot rates from Europe to the US remained relatively stable in January at US$1.77 per kg, with a slight increase of 4% from three weeks ago.
The report said this increase was primarily due to the reduction in cargo capacity rather than a surge in demand.
"The market remains extremely difficult to predict. Let's wait and see what happens in February when we might see air and ocean volumes, as well as rates, fall back if more stability returns to the market. But January was a strong slow month and, after a difficult year, the air cargo industry will not be complaining about starting the year on a positive note," van de Wouw added.
