‘Fear of missing out’ drives air cargo spot rates to plummet 41% YoY in June

‘Fear of missing out’ drives air cargo spot rates to plummet 41% YoY in June

July 15, 2023

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Dive Brief:

  • Air freight volume declines slowed last month, leading general air cargo spot rates to drop 41% year over year in June, according to a July 6 emailed update from Xeneta’s Clive Data Services.
  • In June, the global average air freight spot rate stood at $2.31 per kilogram, Clive reported. Spot rates from Northeast Asia to the U.S. rose 3% from a month earlier and 49% YoY to $4.19 per kilogram, while rates from Europe to the U.S. were down 14% MoM and 45% YoY to $1.92 per kilogram.
  • “Airlines and forwarders are getting jumpy because of falling rates, not so much the volumes. It’s the fear-of-missing-out that is driving the aggressive drop in cargo rates because no one wants to lose volumes, and they also want to get more of the cargo that’s in the market. We can see forwarders taking big risks,” said Niall van de Wouw, Chief Airfreight Officer at Xeneta.

Dive Insight:

June showcases the “jumpiness in the market,” according to van de Wouw. As the decline in available capacity eased in June, up 8% YoY, and freighter demand continues to normalize due to recovering summer capacity, many carriers are reviewing routes and capacity strategies.

“The surprise in June is the difference between the sentiment in the market and what the actual data is showing us,” van de Wouw said. “It is getting pretty nasty out there and stress levels among airlines and forwarders are clearly rising, but we see a clear distinction between market sentiment and market fundamentals and sentiment is more negative right now.”

Currently, air cargo rates from China to North America are at $3.94 per kilogram, up slightly week over week, according to a July 11 emailed update from Freightos. Meanwhile, transAtlantic prices were reported at $1.81 per kilogram, down 5% WoW.

After years of elevated, pandemic-driven demand, the air cargo market has slowed, leading stakeholders to readjust their growth strategies. In Q1, the market was showing signs of stabalizing as shippers opted for longer-term contracts, but now freight forwarders remain locked into block space agreements and are feeling pressure from shippers to renegotiate prices to reflect current market value, according to Clive.

“The big question now for carriers is do they go for margin or volume? No one wants to be flying empty, and even the most respected airlines seem to be recognizing they have to join the game because if they keep their rates at a high level, they just won’t get the volume,” van de Wouw shared. “Two years ago, airlines were asking ‘what am I going to do with my belly aircraft’ and now it’s a case of ‘what am I going to do with my freighters?’”

“It’s going to be a long summer for airline cargo departments, and it looks as though it will take a few quarters for the market to move away from the current irrational pricing environment,” he added.

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