News / Air freight rates hold steady, but demand growth is 'on the decline'

ID 267904586 © Cagkan Sayin

Air freight rates are holding firm, thanks to capacity management by carriers, but the downward trend in demand could trigger a drop in prices.  

One outlier, according to the Freightos Air Index, was China to US rates which rebounded by an impressive 11%, to $5.16 per kg last week –but this remains below the average of $5.30 per kg since mid-June and the $5.80 per kg this time last year.  

Judah Levine, head of research at Freightos, explained that tariff deadlines “may have contributed to the moderate increase in global air cargo volumes in July”. 

China to Europe prices were “stable” last week, reported Freightos, dropping just 1% to about $3.68per kg, compared with $3.80 per kg in the same week last year. 

And, after dipping to some $2.60 per kg in mid-July, South-east Asia to Europe rates climbed to $3.68 per kg last week, and are about level year on year. North Europe to North America also remained fairly flat, improving just 1%, to $1.76 per kg.

Mr Levine said stable rates could be an indication of shrewd capacity management from airlines.  

“Capacity shifts away from lanes with easing demand on to trades with increasing volumes have kept rates stable overall, but lower compared to last year,” he said. 

Logistics data company Upply noted that “airlines are adapting to the new commercial situation by redeploying their capacity on certain routes”, but it warned that this is “without any guarantee for the future”. 

In its analysis of IATA data, Upply said there was a risk of a significant slowdown in air cargo activity in the coming months, and while there was 2.8% global volume growth seen in H1, “the trend is clearly towards a decline”. 

It added: “As in May, the evolution of global air freight is strongly influenced by the new US tariff policy. The effect of forward purchasing to avoid future customs duties is fading… We are already seeing a weakening of global trade, which is disrupting traditional air freight flows.

“More generally, the resumption of the trade war is destabilising economic fundamentals and therefore raising concerns about the evolution of demand in the second half of the year,” it added.  

But, as CEO of Trade and Transport Group Frederic Horst told The Loadstar, the whole airfreight business was “at a crossroads” as it awaited firm tariff levels and the impending end of de minimis exemptions in the US.  

And while air freight activity is expected to be therefore somewhat muted post-29 August, Mr Levine noted that the US-China tariff extension could mean some air cargo front-loading happening in late October and early November, before peak season, if no agreement is in place by 1the tariff deadline of 10 November. 

He added that the expected US tariff decisions on semiconductors and pharmaceuticals “could have implications for air cargo volume timing and levels for these sectors, depending on the details”.