Air cargo enters 2024 with cautious optimism: Xeneta

2024 may herald the start of a new economic growth cycle for the global air cargo industry after last year ended with a nine percent year-on-year rise in demand and the general air cargo spot rate reached its highest level in nine months, according to the latest weekly market data analysis by Xeneta.

"While the geopolitical environment and cost of living pressures continue to present significant hurdles to global trade, the predictability of air cargo means the industry stands to benefit from escalating international disruption, albeit producing only modest gains in volumes," says Niall van de Wouw, Chief Airfreight Officer, Xeneta.

“To say 2024 is a new dawn is perhaps a little too optimistic but I certainly think it’s the start of a new cycle for airlines and forwarders. Shippers are likely to also appreciate the stability returning to the market so they can more accurately predict the transportation costs for the products they are selling.”

Weekly market data for December shows the global average air cargo spot rate peaking at $2.60 per kg, up six percent from its November level, boosted by a nine percent annual growth in demand, the update added. "The general air cargo spot rate, however, continued to record a double-digit year-on-year fall of 18 percent. This compares to a growth ratio of -25 percent in November compared to the previous year."

Niall van de Wouw adds: “December 2023 data shows the market was slightly busier than anticipated but we shouldn’t be tempted to draw too many conclusions from what happens in the final month of the year because the Christmas and New Year holidays make it an odd month.

“We also need to factor in that December 2022 provided a low comparison base given the very muted demand seen 12 months ago. This latest data appears to reflect stronger but temporary local market performance on key lanes as opposed to signalling a global economy that is doing much better. Our market outlook forecast for 2024 remains unchanged with an anticipated one-two percent growth in demand, and a two-four percent rise in supply,” he said.

Prime regional lanes performed strongly in the final month of 2023, the update added. "The general air cargo spot rate from Europe to the U.S. stood at $2.42 per kg in December, up 21 percent month-over-month. The reduction in capacity helped to push up rates on this lane. Similarly, corresponding spot rates from China and Southeast Asia to Europe rose nine percent to $4.49 per kg and $2.91 per kg, respectively."

The crisis impacting ocean container shipping in the Red Sea and disruption through the Suez Canal has yet to influence air cargo rates as the surge of air cargo demand for the holiday season was close to its end by the start of these events, the update added.

"The China to the U.S. corridor was the only lane among those referenced to see its December air cargo spot rate climb above its December 2022 level, up 13 percent. Similar to other corridors, the air cargo spot rate on this corridor mostly peaked in early December. By the week ending December 31, the China to the U.S. spot rate fell by 20 percent to $4.54 per kg from its peak three weeks earlier."

Niall van de Wouw says: “There’s still a lot of friction in the global supply chain market and that means there will be opportunities for some sectors. If big ocean carriers are not going through the Red Sea, it might delay a million or more containers with all the knock-on effects. And the fact that you don’t know how long this situation will continue means some shippers will pay for the predictability of air cargo to lessen the impact of the current ocean freight disruption.

“In contrast, air cargo seems to be in a more ‘steady state’. It is important for airlines and forwarders to focus on the elements they can control, such as cost and reliability, and to be ready for when the opportunities arrive.”