An already-hot summer on the Northeast Asia to Europe air freight market is heating up further as rates hit the highest level in nearly a year-and-a-half.
By the first half of August, newly-contracted long-term general cargo sell rates hit $4.42 per kg, up 30 percent year-on-year, according to the latest update from Xeneta. “The peak season surcharges introduced in May and June have now been removed but the increasing base rates were clearly enough to elevate the market.”
It was a similar scenario for freight forwarder buy rates with only the seasonal buy rate (valid for more than one month) growing at a slower pace (+16 percent year-on-year) compared to the sell rates, the update added.
“Looking at forwarder buy spot rates (valid for up to one month), its growth is a leading indicator for the market as it tends to precede movement in forwarder sell rates on this corridor by around nine weeks. In early August, the forwarder buy general cargo spot rate grew 40 percent year-on-year, outpacing the growth in the forwarder sell rate (+30 percent year-on-year). The general cargo spot rate growth also exceeded the global average spot rate growth by the same ratio. Key drivers for this growth are strong e-commerce demand and a revival in semiconductor demand due to high-performance computing and the AI boom.
“But as Europe goes on summer vacations, there are signs that forwarder buy spot rates are now peaking after cargo volume on this corridor peaked in mid-June. This aligns with developments in ocean container shipping where spot rates from Northeast Asia to Europe ticked down two percent in August after peaking in late July.”
Airlines prepare for a ‘hot’ peak seasonLooking ahead, airlines remain optimistic about the year-end peak season and they seem to be more prepared this time, the update added. Several airlines are adding capacity to the Northeast Asia to Europe corridor, with some even shifting their freighter capacity away from Latin America.
“With more than a third of cargo volumes still procured by freight forwarders in the spot market (10 percentage points above pre-pandemic levels), shippers need to take action. They should align with freight forwarders on peak season mechanisms before freight rates get uncomfortably high.
“There is one caveat. Europe’s consumer spending remains muted along with fears of a global recession following a recent weak US jobs report. If upcoming cargo demand loses steam due to shippers frontloading imports during the usually slacker summer season, there could be a more muted end to 2024.”
Continued geopolitical unrest in the Middle East and Ukraine, strong low-value e-commerce demand and an early Chinese New Year in 2025 might perhaps be enough to keep air cargo rates high, the update added.
