The quasi-blockade of Red Sea shipping and the ongoing growth in bookings by Chinese e-commerce platforms, combined with the resurgent demand and rising rates for air cargo during a normally slow shipping period, are driving up expectations among air carriers for peak season and causing logistics providers to become anxious about securing adequate capacity.
Demand for air cargo has increased by double digits for the past four months, despite a steady increase in prices since the end of February. Industry observers have been taken aback by the depth of the market's recovery following a protracted decline that peaked in August of last year. However, not all areas are benefiting equally from the rebound, which may be partially explained by a weak 2023 that improves the comparison.
Poor ocean transportation reliability, Chinese e-commerce giants such as fast fashion juggernaut Shein, and online marketplaces Temu and Alibaba snatching up outbound capacity from China are the main causes propelling development in air cargo. Taiwan-based logistics firm Dimerco Express has warned in a market update that capacity commitments for aircraft operating from China and Hong Kong to U.S. and European destinations are already sold out this year due to the ever-increasing demand for airlift by those B2C enterprises. As a result, freight forwarders can find it more challenging to reserve reliable space for their goods.
According to rate benchmarking website Xeneta, the amount of freight grew by 11% in March compared to the previous year. According to Xeneta statistics, growth has been impressively steady, with growth of 11% in both January and February. Supporting Xeneta's results, the International Air Transport Association reported that demand rose 11.9% in February.
According to analysis by BMO Capital Markets, the first positive rise in two years—a 6.2% gain in freight jet aircraft activity during the first quarter of 2024—underlines the better-than-expected start to the year. March saw a 6.8% rise in flight activity for the worldwide air freight industry compared to 2023.
The average worldwide airfreight spot rate rose 7% in March compared to February as airfreight from new sources outpaced the flood of capacity. A year ago, when the pandemic wave subsided, freight charges plummeted by almost 40%. Additionally, the worldwide average spot rate has risen for seven straight weeks, rising 6% from the same time in 2023 and 9% from a month ago. Now that the worldwide shipping price (about $2.55/kg) is 40% higher than pre-COVID levels, the year-over-year rate difference has all but vanished. Rates were 15% cheaper a month ago than they were at this time last year.