Air cargo market heads towards hotly anticipated Q4 peak

The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year growth of +24 percent, according to the latest weekly analysis by Xeneta.

“Global average air cargo spot rates of $2.68 per kg in August were boosted by continuing supply and demand imbalance. August’s global cargo supply increased at its slowest ratio in 2024 to-date at two percent year-on-year while demand continued its double- digit growth, rising +11 percent. The increase was further supported by ocean-to-air shift due to Red Sea disruptions and e-commerce demand.”

E-commerce continued to show strong growth as the air cargo market continued to cruise towards its hotly anticipated peak season, the update added. E-commerce and low-value goods exports from China in the first seven months of 2024 increased +30 percent year-on-year. Notably, shipments to Europe and the US showed +38% and +30% growth, respectively, according to Trade and Transport Group.

“Typically, air cargo market performance in August tends to follow the July trend,” says Niall van de Wouw, Chief Airfreight Officer, Xeneta. “But another month of double-digit demand growth and the rate strongest increase of the year means there was definitely no summer slack season in 2024.

“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4. It will be interesting to see what will happen and if all the anticipation of a red hot peak season materializes.”

In terms of dynamic load factor – Xeneta’s measurement of capacity utilization based on volume and weight of cargo flown alongside available capacity, the supply/demand imbalance led to the global load factor increasing four percentage points year-on-year to 58 percent in August.

Looking at month-on-month developments, the global air cargo market saw spot rates soften (down one percent month-on-month) in August, likely reflecting a slight cooling of ocean-to-air shift due to ocean shipping frontloading of imports .

“Zooming into the corridor level, inbound North America air cargo rates, among selected global corridors, registered the largest increases from a month ago during what is usually considered to be the industry’s traditional slack season. Europe to North America air spot rates rose seven percent from a month ago to $1.77 per kg in August.”

For the inbound Europe air cargo market from Asia and the Middle East, summer breaks and respite from Red Sea disruptions led to softened air cargo rates, down one-two percent month-on-month, the update added.

September will be a good indicator of what Q4 will bring, says van de Wouw. “Let’s see if the peak surcharges some carriers plan to implement will hold. Freight forwarders are more prepared this year, and, based on what we hear, are spending a lot of time with shippers on how to manage the unpredictable nature of these market conditions. We see financial and operational de-risking going on but if the heat is on, let’s see what happens with all the contracts that are being negotiated.

“We’ve seen rates increasing throughout the summer, which is not typically the case. Q4 will be busy in terms of volumes but how busy? E-commerce demand will play a big role and with +30 percent growth already this year ex-China, and a reported 37 million new downloads of just the Temu app in July, the indicators already suggest strong demand for capacity and this will impact the entire market on major corridors. I said to a shipper last week if you are not already a little bit nervous, I would recommend you get a little bit nervous for Q4 when you look at all the signals out there.

“Especially out of Asia, we should not be surprised if the market really heats up again in Q4. We expect to see a seller’s market out of Asia and across the Atlantic due to the latter’s reduction in winter capacity. We’ve had a hot summer, and we may have an even hotter autumn ahead.”