Therefore, India-to-Europe air cargo rates are likely to remain elevated in the near term, the ocean and air freight rate benchmarking and market analytics platform said.

The volume surge this year has been largely due to demand in apparel exports from India and Sri Lanka coinciding with disruptions to ocean freight services in the Red Sea region, which saw shippers switch transportation mode to air for some of their cargo.

These increased general air cargo volumes drove overall air cargo demand in the week ending February 25 to sit 40 per cent higher than the 2019 weekly average. While volumes have dipped slightly since then; in the week ending March 24, they remained 24 per cent above the 2019 weekly average.

With cargo capacity remaining relatively stable, the dynamic load factor from India to Europe climbed to 87 per cent in the week ending March 24, which is its highest level since April 2022.

Xeneta’s dynamic load factor analyses both the volume and weight of cargo flown alongside available capacity.

This increasing load factor has also distorted the usual relationship between weight breaks. Traditionally, larger cargo volumes (more weight) is charged at a cheaper per kg price than smaller volumes (less weight).

However, in the week ending March 24, the general cargo spot rate for more than 1,000 kg reached $3.50 per kg, above the spot rate for more than 500 kg, which stood at $3.46 per kg.

The last time Xeneta observed this market condition was during the onset of the COVID-19 pandemic when the air cargo market encountered a capacity squeeze.

India to Europe air freight is a seller’s market at present, which can be seen in the rates sold by airlines (airline-sell).

As airline-sell rates increased, air shipper rates from India to Europe also faced upward pressure, but not to the same extent, noted Xeneta, with its headquarters in Oslo.

Ocean containerised spot rates between India and North Europe increased dramatically following the outbreak of conflict in the Red Sea in mid-December last year and reached a crisis peak in early February this year.

Although ocean spot rates have fallen back by around 12 per cent since then, on March 27, they still remained up by 310 per cent compared to their pre-Red Sea crisis level.

The slight dip in air cargo demand since the end of February (when it hit 40 per cent above 2019 levels) could be due ocean freight shippers now building longer transit times into their supply chains.

“While a sense of normality has now returned to ocean freight, the situation is far from fully resolved and we may see some shippers continue to use air freight services for urgent cargo. Given the huge volumes involved in ocean freight shipping, even a small percentage shift in transport mode will likely keep air cargo demand and rates elevated,” Xeneta said.

In addition to the switch from ocean to air transport due to the situation in the Red Sea, recent economic indicators may suggest evidence of an underlying demand growth.

In February, India’s production growth reached its highest level in five months. In particular, this related to new export orders, with HSBC reporting anecdotal evidence of demand increases from Europe. If so, this could add further upward pressure on the air cargo market, Xeneta added.

Fibre2Fashion News Desk (DS)