The air cargo market from Northeast Asia to Europe is experiencing an already hot summer, which has been further heated by freight rates reaching their highest level in about a year and a half.
By the first half of August, newly contracted long-term general cargo sales prices had reached $4.42 per kilogram, up 30 percent from a year earlier, according to the latest data from Zeneta. “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 picture is similar for freight forwarders' buy rates, with only seasonal buy rates (valid for more than a month) increasing at a slower pace (up 16 percent year-over-year) compared to sell rates, the update added.
“Looking at forwarder spot buying rates (valid for up to one month), their growth is a leading market indicator and tends to precede forwarder selling rate movements in this corridor by about nine weeks. In early August, forwarder general cargo spot buying rates increased 40% year-on-year, outpacing the growth in forwarder selling rates (up 30% year-on-year). General cargo spot rate growth also outpaced the growth in global average spot rates by the same percentage. The main drivers of this growth are strong e-commerce demand and a recovery in semiconductor demand due to the high-performance computing and AI boom.
“However, there are indications that carrier spot buying rates are now peaking after volumes on this route peaked in mid-June as Europe heads into its summer holidays. This is consistent with trends in ocean container shipping, where spot rates from Northeast Asia to Europe peaked in late July before falling 2% in August.”
Airlines prepare for 'hot' peak season
Looking ahead, airlines are optimistic about the year-end peak season and seem more prepared this time around, the update added. Several airlines are adding capacity on Northeast Asia to Europe corridors, and some are even transferring cargo capacity from Latin America.
“With more than a third of freight volume still sourced by freight forwarders in the spot market (10 percentage points higher than pre-pandemic levels), shippers need to act. Shippers need to negotiate peak season structures with freight forwarders before rates become uncomfortably high.”
“However, there is one caveat: European consumer spending is weak following recent weak U.S. employment data, along with fears of a global recession. The end of 2024 could be even weaker if future cargo demand slows as shippers front-load imports during the typically slow summer months.”
Continued 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 may be enough to keep air freight rates high, the update added.
