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Cargo Newswire

The global air cargo spot rate flattened to USD 2.19 per kg in August, the lowest level in over three years

September 8, 2023
in Logistics
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The global air cargo spot rate flattened to USD 2.19 per kg in August, its lowest level since the onset of the pandemic as another weak summer month saw a chargeable weight edge -1% lower for a fourth consecutive month, according to the latest weekly market analysis from CLIVE Data Services, part of Xeneta.

While shippers and forwarders continue to benefit from the overall decline of general air freight rates, rising jet fuel prices should concern an already contracted market, with the US Gulf Coast jet fuel spot price jumping 21% month-over-month.

August saw global air cargo capacity rise +7% year-on-year, while CLIVE’s global dynamic load factor analysis, which measures cargo load factor based on both volume and weight perspectives of cargo flown and capacity available, climbed one percentage point about the previous month to 56%.

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But it is worth noting that the August global load factor continued to fall year-on-year, down 3% from last year’s level. Softened global demand and the capacity surge were the main reasons behind this.

The data dampens some industry reports of a slight spike in demand in August, leading to hopes of a rise in volumes going into the final four months of the year.

“We are picking up signals that it could take another few quarters before we see more demand on a global level,” said Niall van de Wouw, Chief Airfreight Officer at Xeneta.

“August was very quiet, like July, and we see no meaningful signals from a qualitative or quantitative point of view of any kind of peak arising this year. There might be some early peak season charter requests floating around but they are backed up by very little demand. “The (low) rates and the limited timeframe that the requestors are looking for a signal that they are not too concerned at the moment about getting the required capacity when they actually need it.

“The market seems to have levelled out, but still holds a lot of uncertainty, and not just for airfreight. There was also no peak for the ocean market, which typically precedes the airfreight market by a couple of months. There are even blank sailings scheduled ahead of the Golden Week period.

“There is likely to be upward pressure on air freight rates in the second half of October as capacity is taken out of the market, but it’s getting late in the game to positively impact the industry’s 2023 performance, and the signals for the rest of the year are not good given the macroeconomic outlook hasn’t improved,” van de Wouw added.

Average general air freight rates in August dipped as low as USD 2.13 per kg in the first two weeks of the month, although this varies by trade corridor.

Of 10 major trade lanes assessed in the past month, only China-United States and Southeast Asia-United States recorded growth, with air cargo spot rates up 3% and 4% respectively on these corridors.

This is attributed to a more resilient US economy with strong retail sales and, to some extent, also delayed recovery of US-China passenger belly hold capacity, which is growing at a much slower pace than Europe-China.

Even so, due to capacity shortage triggered by various geopolitical issues, airfreight spot rates ex Northeast Asia to Middle East & Central Asia, Northeast Asia to Europe, China to the US and China to Europe remained highly elevated, still up by around 55% from their pre-pandemic levels.

Looking forward, the ocean freight container market might shed some light on where the air cargo market is heading, given that the ocean market tends to begin its yearly peak season a few months ahead of the airfreight cycle. So far, the global ocean container market has not shown any meaningful peak season trends.

Niall van de Wouw said, “The air cargo industry is coming to terms with the market conditions and not even the current and planned restrictions we see on container ships moving through the Panama Canal are likely to provide a noticeable uptick to airfreight volumes. “Whichever way you choose to look at it, demand growth simply does not exist in this current moment or for the foreseeable future. “Shippers will no doubt be tempted to fix more longer-term deals because the levelling of volumes and the imminent drop-off of some capacity means the market may not get any better than it is right now for capacity buyers.”

Tags: CLIVE’sload factor analysis
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Devender Grover

Devender Grover

Devender was born in the year when the Beatles Group was formed. He holds two master’s degrees in English Literature and Public Administration. He also has an Honors degree in English Literature and a post-graduate diploma in Corporate Communications and Public Relations. He was closely associated with the Indian State Transport Undertakings and Ministry of Transport in his role as Corporate Communications and PR specialist for over two decades handling domestic and international organizations. He ventured into business forming his own Media House, Profiles Media Network Private Limited which is now a twenty years old company. Excelling as an editor, Marketing, PR, Anchor, and Advertising specialist, he is now expertly navigating the world of social media. A widely traveled professional internationally, Devender has a deep understanding of the Air Cargo, Cargo Business, Cargo Airports, Freighters and Cargo Industry at large.

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