The global air cargo market is experiencing a significant upward trend, with data analysis indicating potential for double-digit volume growth in 2024. This positive outlook comes after a +12% year-on-year increase in demand observed in May, exceeding initial conservative forecasts made at the end of 2023 which predicted low single-digit growth.
This optimistic revision is attributed to six consecutive months of sustained regional demand for air cargo capacity. As a consequence, the global air cargo spot rate in May witnessed its second consecutive monthly increase, rising +9% year-on-year to $2.58 per kilogram. This represents a +5% point increase compared to the previous month.
It is important to note that the overall spot rate increase needs to be considered in the context of a lower baseline in May 2023. However, the market's ability to absorb the +5% increase in airline summer capacity this year signifies a positive adjustment.
Regionally, the growth pattern varies. The Middle East & Central Asia to Europe corridor experienced the most significant year-on-year increase, with spot rates rising +110% to $3.21 per kilogram. This surge is likely a consequence of ongoing disruptions in the Red Sea. Similarly, Southeast Asia and China to North America witnessed substantial increases of +65% and +43% respectively, with spot rates reaching $4.64 and $4.88 per kilogram. China to Europe also saw double-digit growth, with a +34% year-on-year increase to $4.14 per kilogram.
However, the picture is not entirely uniform. Companies operating in specific regions may face different market conditions. Notably, spot rates originating from North America and Europe to China declined significantly year-on-year in May, falling -32% and -23% respectively to $1.61 and $1.65 per kilogram. The Transatlantic market also experienced a downturn, with freight rate declines observed in both directions. This can be attributed to increased belly capacity due to a rise in summer passenger travel, leading to a decrease in air cargo spot rates. Europe-North America spot rates dropped -21% year-on-year to $1.77 per kilogram, while the North America-Europe corridor saw a -16% year-on-year decline to $1.08 per kilogram.
Looking ahead, the air cargo market is poised for a potentially strong second half, with a possibility of replicating the high volumes witnessed in the closing months of 2023. This optimism is further bolstered by a threefold increase in ocean container shipping spot rates from the Far East to North Europe and the US West Coast compared to the previous year. These ocean freight increases are likely a result of port congestion and disruptions stemming from the Red Sea conflict, potentially narrowing the cost gap between air and ocean freight for shippers and forwarders, and potentially leading to a modal shift towards air cargo.
In contrast to previous disruptions like the Red Sea crisis or the Covid pandemic, the current cost spikes are more likely driven by a proactive approach from shippers who are frontloading imports in anticipation of the ocean peak season to mitigate potential supply chain disruptions. This trend suggests a degree of cautious optimism within the industry, with a focus on mitigating potential risks.
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