Air Cargo

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Ocean disruption modal shift puts air cargo on course for solid 2024

By Greg Knowler

Volumes and rates on the main air cargo trades out of Asia and the subcontinent rose sharply in May from already inflated levels as months of container shipping disruption continues to support the modal shift from ocean .

Cargo owners battling to find space on ships filled by an unseasonal demand surge are driving up demand for air freight out of Asia , the Middle East and India , pushing some analysts to already predict that global air cargo is on course for a solid year .

“ 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 ,” Niall van de Wouw , chief air freight officer at rate benchmarking platform Xeneta , said in a market update in early June .

While reasons for the unexpected ocean demand vary from restocking to an early peak season to frontloading ahead of potential US tariffs on China , the increasing volumes have forced shippers of urgent or time-sensitive cargo into the air , and huge increases are being recorded in rates and volume . The average air cargo spot rate from the Middle East / Central Asia to Europe of $ 3.21 per kilogram in May was up 110 % compared with the same month last year , according to Xeneta . Southeast Asia – North America rates rose 65 % year over year to $ 4.64 per kg , while China – North America rates were up 43 % at $ 4.88 per kg . China – Europe spot rates for May were up 34 % from May 2023 at $ 4.14 per kg .

Data from Netherlands-based air cargo analyst World- ACD is also reflecting surging demand and rates from origins across Asia , South Asia and the Middle East . Spot

Sustained demand driving up ex-Shanghai air cargo rates

Outbound Shanghai air cargo spot rate index , with year-over-year change

Level of Index

7,500 7,000 6,500 6,000 10,000 5,500 5,000 4,500 4,000 3,500 3,000

LJul Oct Jan 2023 Apr Jul Oct Jan 2024 Apr Shanghai Year-over-year % change

Source : Baltic Air Freight Indices powered by TAC

40 %

20 %

0 % -100% -20%

-40 %

-60 %

-80 %

Year-over-year % change

© 2024 S & P Global prices from India to Europe of $ 3.78 per kg were up 160 % in May , while Bangladesh to Europe rates rose 189 % to $ 4.38 per kg . Rates from Dubai to Europe of $ 2.28 per kg are almost double those recorded in May last year .

When contracted air freight rates were included , overall average rates in May from Middle East and South Asia origins to Europe were up 77 % year over year . Volumes from Asia-Pacific origins were up 21 % year over year in May , with spot rates 12 % higher .

Potential turbulence

Van de Wouw said the air cargo market from China to North America continued to gain from the resilient US economy and strong e-commerce demand , but he pointed to the US crackdown on e-commerce shipments out of China as a worrying sign for the industry .

The US de minimis rule allows for the import of one package per day worth $ 800 or less without filing a formal customs entry with Customs and Border Protection ( CBP ) and — perhaps more importantly — without paying duties or tariffs . But scrutiny of the de minimis rule , also

“ With these kinds of numbers , we might be on track for doubledigit growth for the year .”

known as Section 321 , has risen over the past year , largely due to the extensive use of the program by China-based e-commerce giants Temu and Shein .

In late May , CBP suspended access for several customs brokers to its Type 86 program , a voluntary initiative aimed at facilitating low-value import shipments such as e-commerce .

“ At the end of 2023 , we saw the dramatic impact China ’ s e-commerce behemoths had on the air cargo market ,” van de Wouw said . “ 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 .”

Financial tailwinds

For now , though , the global airline industry is in solid recovery mode . Air cargo demand and fast-growing passenger travel numbers saw the International Air Transport Association ( IATA ) upgrade its 2024 industry profitability expectations .

“ The airline industry is on the path to sustainable profits , but there is a big gap still to cover ,” IATA Director General Willie Walsh said in a statement June 3 . “ To improve profitability , resolving supply chain issues is of critical importance so we can deploy fleets efficiently to meet demand .”

Total airline revenue in 2024 is expected to reach $ 996 billion ; that would be a 9.7 % year-over-year increase and a record high for the industry . IATA also upgraded its net profit expectations from $ 25.7 billion to $ 30.5 billion . Total

28 Journal of Commerce | July 1 , 2024 www . joc . com