MIAMI BEACH, Fla. – The peak season for air cargo increasingly looks like it will be quite healthy, but without the normal bounce typical at the end of the year. Rates haven’t climbed as high as expected considering the robust demand and limited available cargo space on aircraft.
The main reason for the flat busy season is that the air cargo market has been churning along at a high level all year, without seasonal dips. One explanation is many shippers planned ahead by frontloading inventory to avoid delays and uncertainty from ongoing ocean shipping constraints and a fall dockworkers strike in the United States, as well as extremely tight air capacity from Asia caused by e-commerce platforms reserving freighter space for themselves.
The supply-demand imbalance pushed load factors up 4 points last month to 63%.
And peak season might even be stalling early. Demand in the second week of November was up 4% year over year, according to freight analytics firm Xeneta and Susquehanna Financial Group. That compares to 12% volume growth year to date through September and 11% growth in October. Global spot market prices are up 20% year over year, but the growth momentum has slowed from 25% in September. And the latest data shows rates on core Southeast Asia-North America lanes declined week over week. Hong Kong rates dipped 2%, the first decline since the start of the traditional peak season and Shanghai rates were down 6% – the second weekly decline in a row.
“The peak season is passing, more or less, with no big bang,” said Stanislas Brun, vice president of cargo, in an interview at The International Air Cargo Association’s trade show here.
Asok Kumar, executive vice president global air freight for DB Schenker, said during a panel discussion that the peak season has been busy so far, “but I would not call it exceptional.”
Management at Kuehne+Nagel, the world’s largest freight forwarder by revenue and volume, said in a late October earnings briefing that the practice of shippers pulling forward orders will result in an early conclusion to the high season. “We see a muted peak season this year in Q4, with most likely modest low-single-digit percentage volume growth on both a sequential and year-over-year basis” for air and ocean freight, in contrast with more bullish expectations at midyear, CEO Stefan Paul said.
Airlines are benefiting from consumers’ embrace of ultra-low products from China on new platforms like Temu and Shein, which offer direct shipping, amid ongoing capacity limits in ocean shipping. Freighter flights out of China and Hong Kong are completely full, according to market monitors.
Air Canada said third-quarter revenue grew 18% to $181.8 million because of higher yields and shipment volume on passenger aircraft operating in the transpacific market. Korean Air cargo revenue increased 22% year over year, while Japan Airlines said international cargo revenue increased 28.6%.
DHL Express said airfreight volumes rose by 8.5% in the third quarter, with growth primarily on trade lanes from Asia. It has deployed additional Boeing 777 cargo aircraft on key routes to Europe.
Capacity within intra-Asia routes is currently extremely limited, as airlines allocate a greater portion of first-leg allotments to long-haul shipments due to the higher revenue potential, noted Kathy Liu, vice president of global sales and marketing at Dimerco Express Group, in the company’s November freight report.
According to Cargo Facts Consulting, maindeck freighter capacity only increased one point from August to September despite strong demand. Freighter deliveries peaked last year at 258 units, but only 150 new and converted freighters are expected this year due to supply chain inefficiencies, slow regulatory certifications for new conversion designs, the Boeing strike and quality problems at a large conversion provider. Retirement of older aircraft is also accelerating because of rising maintenance costs and regulatory restrictions. Cargo Facts estimates more than 40 cargo jets will be retired this year as companies phase out aircraft like the MD-11 and Boeing 747-400.
As always, market conditions vary by region.
The worldwide average rate for immediate booking in the past couple weeks has moved above $3/kg as truncated transatlantic winter passenger schedules reduce lower-deck cargo capacity after freighter operators redeployed some aircraft from the region to the higher-yielding Asia market, resulting in a sharp rise in spot prices from Europe to the Americas.
Northern Europe-to-North America rates are up about 50% since mid-October and 27% compared to 12 months ago for the week ending Nov. 17 because of the reduction in capacity. At $2.64 per kg, the current spot rate has already exceeded the 2023 peak of $2.45/kg, which wasn’t reached until mid-December, according to data shared by Xeneta.
Meanwhile, average non-contract rates from Europe to South America have jumped 36% in the past two weeks to $5.88/kg. Much of the increase can be attributed to congestion at Sao Paulo’s Guarulhos International Airport. Rates to Brazil have increased 57% to $6.58/kg because the backlogs in Sao Paulo, where the airport imposed a five-day embargo on cargo earlier this month, reports benchmarking agency WorldACD.
Average spot rates from European origins to the world rose 10% in the past week to $2.71/kg – 23% higher than a year ago, it said.
Spot market rates from China to North America over the previous three weeks increased about 17% to nearly $7/kg.
Airline and freight forwarding executives say they expect the market strength to continue through the first quarter of 2025. The industry will be following negotiations between the U.S. East Coast port operators and the longshoremen’s union over technology provisions in a new labor contract, which if unresolved by Jan. 15 could lead to a strike and diversion of urgent shipments to air transport.
A potential constraint on continued airfreight growth is the slowdown in global manufacturing activity, which is weighing on export orders in certain countries. The Purchasing Managers’ Index for manufacturing in November dipped below the same month’s level for last year for the first time in 2024, signaling a more pronounced downturn in manufacturing activity. Also, Germany has slipped back into recession and the overall European economic growth is tepid.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
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