The air cargo market from Northeast Asia to Europe is booming, with air freight rates sold by freight forwarders reaching their highest level in nearly a year and a half, according to Xeneta.
By the first half of August, selling prices for newly contracted long-term general cargo reached $4.42 per kg, up 30 percent from a year ago. Peak season surcharges introduced in May and June have now been removed, but the increase in base rates was clearly enough to boost the market.
The air cargo market from Northeast Asia to Europe is getting more active as air freight rates sold by freight forwarders hit their highest levels in about a year and a half, according to Zeneta. Airlines are optimistic about the year-end peak season. Continued geopolitical uncertainty and strong demand for low-cost e-commerce may be enough to keep air freight rates high, the company noted.
The picture was similar for freight forwarders’ buying rates, with only seasonal buying rates (valid for one month or more) growing at a slower pace (16% year-on-year) compared to selling rates.
However, there are signs that forwarders' spot buying rates are now peaking after cargo volumes on this route peaked in mid-June as Europe headed into its summer holidays.
This is in line with trends in ocean container shipping, where spot freight rates from Northeast Asia to Europe peaked in late July before falling 2 percent in August, according to a report by a Norway-based ocean and air freight rate benchmarking and market analysis platform.
Airlines are optimistic about the busy end-of-year season and seem more prepared this time around, with some airlines increasing capacity on routes from Northeast Asia to Europe and some even shifting cargo capacity from Latin America.
Currently, there is a large imbalance between fronthaul and backhaul traffic on the route: the Dynamic Load Factor, a measure of Xeneta's capacity utilisation based on the volume and weight of cargo carried in parallel with available capacity, was nearly full (90%) on the fronthaul from Northeast Asia to Europe.
In contrast, return load factor was just 43%, down 18 percentage points from 2019 levels. At transit hubs from the Middle East to Northeast Asia, load factor fell to 27%. So it's not surprising that fronthaul cargo spot rates are three times higher than backhaul rates, Zeneta noted.
The company said that even taking into account the imbalance between fronthaul and backhaul, routes from Northeast Asia to Europe are still more profitable than routes from Europe to Latin America, and therefore airlines are choosing to reallocate capacity to boost revenue.
Flight times on the two corridors are roughly the same (taking into account rerouting to avoid Russian airspace for the former), but average load factors from Northeast Asia are roughly 20 percent higher than from Europe to Latin American markets, and spot cargo rates are more than 20 percent higher.
Moreover, spot rates for imports into Latin American markets have remained relatively stable compared to last year and show no signs of significant increases, Zeneta noted.
The company added that continuing geopolitical unrest in the Middle East and Ukraine, strong demand for low-cost e-commerce and the early arrival of the Chinese New Year in 2025 could be enough to keep air freight rates high.
Fibre2Fashion News Desk (DS)
