Shippers are opting for shorter-term contracts to maintain flexibility in response to disruptions and an anticipated increase in summer capacity. 

In March, the average air cargo spot rate rose by 7% month over month to $2.43 per kilogram, as reported by Xeneta. The uptick in volumes was fueled in part by e-commerce demand and modal shifts from ocean to air resulting from the Red Sea conflict.

The main ideas are summarized

According to an emailed report from Xeneta on April 4th, ongoing conflicts in the Red Sea and increased e-commerce volumes have propelled March air cargo demand up by 11% year over year, marking the third consecutive month of such growth. 

Niall van de Wouw, Xeneta’s chief airfreight officer, stated that the surge in air freight was primarily fueled by a rise in volumes from the Middle East and South Asia as shippers transitioned from ocean to air transport to circumvent Red Sea delays and uphold operational resilience. 

He further commented, "The question is, should we be surprised by it, or should we get used to it? Although the market didn’t benefit immediately, the Red Sea disruption was clearly a factor in these latest figures."

Expert insight and perspective

March data indicates that forwarders have continued to acquire a larger portion of spot market volumes to maintain flexibility and readiness for potential easing of disruptions in the Red Sea and the anticipated increase in summer belly capacity.

Consequently, more shippers have chosen to move away from longer-term global air cargo contracts in favor of short-term capacity commitments, as per Xeneta. In the first quarter, three-month contracts represented 41% of all newly negotiated contracts, marking an 18-percentage-point increase from the previous quarter.

Niall van de Wouw stated, "The air cargo market has clearly enjoyed a stronger-than-anticipated start to the year, but there’s a different quarter coming along and more capacity coming in, so we do expect an overall downward pressure on load factor and rates, aside from selected corridors where the continuing rise of e-commerce and the residue of the Red Sea uncertainty will continue to boost rate levels."

Despite historically weaker months in the first quarter, demand surpassed the growth in available capacity, according to Xeneta.

Van de Wouw commented further, "While this latest monthly data should be balanced against the lower base recorded in the corresponding month of 2023, when we saw weakened global manufacturing activities, Q1 2024 has still seen a surprisingly busy airfreight market."

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The numbers don't lie: MARCH AIR FREIGHT ACTIVITY

• Global air cargo demand saw a +11% year-over-year percentage increase.
• The average spot rate per kilogram in March rose to $2.43, marking a +7% increase from the previous month.
• Spot rates from China to the U.S. decreased by -2% month over month, reaching $4.06 per kilogram. However, year over year, rates were up by +15%, partly due to increasing e-commerce demand.
• Spot rates from Europe to the U.S. increased by +3% month over month to $2.12 per kilogram. This slight rise is attributed to reduced impact from the Red Sea conflict.
• Spot rates from South Asia and the Middle East to the U.S. surged by +35% month over month, reaching $4.03 per kilogram.
• The global dynamic load factor, which measures volume and the weight of cargo flown, as well as available capacity, stood at 61%.

Van de Wouw noted that the air cargo market has exceeded expectations for six consecutive months. "When is it going to slow down?" he questioned. "Only time will tell, but at present, airfreight demand remains remarkably resilient."