Global air cargo market demand rose 11% year on year for a third consecutive month in March and it was no surprise that e-commerce and Red Sea shipping disruption helped propel volumes.
Releasing its latest analysis, Xeneta said that the higher volumes seen in the first quarter of the year have outpaced capacity growth, which increased by 8% year on year.
This then produced a jump in the global dynamic load factor, which is Xeneta’s measurement of cargo capacity utilization based on volume and weight of cargo flown alongside capacity available.
Load factor in the opening three months of 2024 rose two percentage points year on year to 59%, and March performance has shown similar growth, with load factor climbing to 61%, said Xeneta.
“While this latest monthly data should be balanced against the lower base recorded in the corresponding month of 2023, when we saw weakened global manufacturing activities, Q1 2024 has still seen a surprisingly busy airfreight market. The level of demand in the first quarter doesn’t indicate a market which is running out of steam so far,” said Niall van de Wouw, Xeneta’s chief airfreight officer.
“The question is, should we be surprised by it, or should we get used to it? Although the market didn’t benefit immediately, the Red Sea disruption was clearly a factor in these latest figures. Airfreight growth was primarily driven by increased volumes from the Middle East and South Asia as shippers shifted services from ocean to air to avoid Red Sea delays. We also cannot underestimate the importance of e-commerce growth, which shows no sign of abating on its most prominent lanes.”
Source: Xeneta
Xeneta noted the average global airfreight spot rate in March increased 7% from the previous month to $2.43 per kg.
The Middle East and South Asia to Europe market continued to lead the growth of air cargo rates in March as the influx of air cargo demand caused by Red Sea concerns squeezed capacity on these lanes. The average spot rate on this corridor was up 71% year on year.
The Middle East and South Asia to US air cargo market had an average spot rate of $4.03 per kg in March, up 51% year on year.
In comparison, the air cargo spot rate from Europe to US was less impacted by the Red Sea, increasing marginally month on month.
Meanwhile, the China outbound market experienced a decline in its spot rate versus February 2024 as the market cooled down after the Lunar New Year.
But the March China to Europe spot rate increased 5% over the previous year, boosted primarily by e-commerce demand and the modal shift away from the Red Sea.
Plus, growing e-commerce demand and delayed recovery of belly capacity contributed to a 15% average jump in spot freight rates year on year for the China to US market.
The South America outbound market registered the largest decline among the top global air cargo corridors, said Xeneta. As floral market demand eased, the South America to US air cargo spot rate dropped 7% year on year. The South America to Europe market experienced a similar trend, with a fall of 11% year on year in spot rates.
Xeneta also identified two trends related to spot rates. March data shows freight forwarders continued to purchase a larger share of volumes on the spot market as they kept their options open pending an anticipated cooling down of the Red Sea disruption and to benefit from the traditionally more imbalanced demand/supply ratio caused by the influx of airline belly capacity at the start of summer schedules.
In the first quarter of 2024, the share of volumes in the spot market accounted for 43% of the total market – compared to 31% in the corresponding pre-pandemic era – as expectations of a ‘normalization’ of the cargo market prompted freight forwarders to take short-term risks in the spot market in the hope of longer-term gains.
Source: Xeneta
In addition to this, more shippers moved away from longer term global air cargo contracts to short-term capacity commitments in the first quarter. Three-month contracts accounted for 41% of all newly negotiated contracts in this quarter, up 18 percentage points from the previous quarter. The preference for six-month contracts declined 23 percentage points versus the previous quarter, pointed out Xeneta.
“The air cargo market has clearly enjoyed a stronger-than-anticipated start to the year, but there’s a different quarter coming along and more capacity coming in, so we do expect an overall downward pressure on load factor and rates, aside from selected corridors where the continuing rise of e-commerce and the residue of the Red Sea uncertainty will continue to boost rate levels,” said van de Wouw.
“But this is now six months in-a-row that the air cargo market has been stronger than we expected. When is it going to slow down? Only time will tell but, right now, airfreight demand is surprisingly resilient.”
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