Pricier summer on Northeast Asia-to-Europe air cargo market: Xeneta

By the first half of August, newly-contracted long-term general cargo sell rates hit $4.42 per kg, up by 30 per cent year on year (YoY). The peak season surcharges introduced in May and June have now been removed, but the increasing base rates were clearly enough to elevate the market.

It was a similar scenario for freight forwarder buy rates, with only the seasonal buy rate (valid for more than a month) growing at a slower pace (16 per cent YoY) compared to the sell rates.

But as Europe goes on summer vacations, there are signs that forwarder buy spot rates are now peaking after cargo volume on this corridor peaked in mid-June.

This aligns with developments in ocean container shipping where spot rates from Northeast Asia-to-Europe ticked down by 2 per cent in August after peaking in late July, the Norway-based ocean and air freight rate benchmarking and market analytics platform said in a release.

Airlines remain optimistic about the year-end peak season and they seem to be more prepared this time. Several airlines are adding capacity to the Northeast Asia to Europe corridor, with some even shifting their freighter capacity away from Latin America, it said.

There is a large imbalance now between fronthaul and backhaul volumes on this corridor. The dynamic load factor, Xeneta’s measure of capacity utilization based on volume and weight of cargo flown alongside available capacity, was nearly full (at 90 per cent) on the Northeast Asia-to-Europe fronthaul.

In contrast, the backhaul load factor was only 43 per cent—down by 18 percentage points from 2019 levels. From transit hubs in the Middle East-to-Northeast Asia, the load factor was as low as 27 per cent. Therefore, it is not surprising that fronthaul cargo spot rates are three times higher than backhaul rates, Xeneta noted.

Even allowing for the imbalance across fronthaul and backhaul, the Northeast Asia-to-Europe air corridor is still more profitable than Europe-to-Latin America—hence carriers opting to redeploy capacity to drive revenue, it said.

The flight times for the two corridors are similar (considering rerouting to avoid Russian airspace for the former). However, the average load factor from Northeast Asia is about 20 percentage points higher than the Europe-to-Latin America market, with spot cargo rates over 20 per cent higher.

Additionally, the spot rates for the inbound Latin America market show no sign of a major increase, as the rates have remained relatively flat compared to last year, Xeneta noted.

Perhaps continued geopolitical unrest in the Middle East and Ukraine, strong low-value e-commerce demand and an early Chinese New Year in 2025 might be enough to keep air cargo rates high, it added.

Fibre2Fashion News Desk (DS)