Air cargo rates to remain firm as cargo capacity tightens

Airfreight rates remained firm in October despite demand growth not reaching the highs many had expected, meanwhile securing capacity could become more of a challenge in the future.

Writing in a monthly column, TAC Index editor Neil Wilson said that the global Baltic Air Freight Index calculated by TAC Data rose 8.1% over the four weeks to  November 4, leaving it up by 10.9% compared with a year ago.

Rate improvements were led by markets out of Asia, with the November outbound index for Hong Kong improving by 8.2% compared with October and gaining more than 10% versus last year.

“Outbound Shanghai was up more – by 12.6% month-on-month (MoM) to leave it up by an even more impressive 22.4% year on year,” said Wilson.

“Rates on other lanes out of Asia, such as from India, Vietnam and Thailand, also remain a long way ahead of 2023 levels.”

However, performance was not quite as strong as many had expected.

“As a result, October delivered another in a series of solid gains this year, especially on big export lanes out of Asia to Europe and North America,” said Wilson.

“However, it was not as spectacular as some had been expecting, especially for a period when the market enters its traditional peak season in the runup to Thanksgiving and Christmas holidays.”

Forwarders are increasingly expecting the peak season to be quite than expected earlier in year. The world’s largest air forwarder Kuehne+Nagel recently remarked that airfreight was affected by front-loading of cargo to avoid potential peak season disruption.

While 2024 was defined by soaring demand, the coming years could be defined by issues securing capacity.

Wilson pointed to production issues faced by Boeing for new freighter production and a lack of feedstock for conversions.

Sources recently told Air Cargo News that aircraft manufacturing and engine production issues meant that passenger aircraft operators are holding onto aircraft longer than they previously would have due to delays to the arrival of new aircraft. In turn, this reduces the amount of feedstock for aircraft conversion.

Wilson cited Boeing market analysis director Aaron Tayler who said at a recent event demand is projected to grow an average of 2.7% a year, significantly faster than capacity looks able to grow alongside it.

“So this year’s peak season may not be quite so strong as expected. However, with airfreight rates up while average jet fuel prices were down some -20.7% over the 12 months to November 1, according to Platt’s data, 2024 should still prove a considerably profitable year for airline carriers,” wrote Wilson.

“In addition, with capacity looking tighter again in future, the air cargo market looks potentially even stronger going forward. That is of course if there are no major geopolitical developments and big changes to global trade patterns.”

Kuehne+Nagel predicts a muted air cargo peak season