News / Geopolitical tension tempers airfreight optimism as spot rates fall

Geopolitical tensions and slower-than-recent-average growth in December tempered the optimism of an airfreight sector that otherwise “cruised” into 2025 following 2024’s booming global rate gains.

Xeneta’s end-of-year market report noted that 2024 ended with the 14th consecutive month of double-digit demand growth, December recording an 11% year-on-year uptick in volumes, driving spot rates 15% higher than 12 months prior.

With end-of-year spot rates at a global average of $2.99 per kg, Xeneta’s chief airfreight officer, Niall van de Wouw, said: “We can put a ribbon around 2024; it was quite some year for air cargo.”

However, in its Week 1 report for 2025, WorldACD noted that the year ended on its lowest year-on-year full-month growth, claiming that compared to December 2023 global tonnages were just 6% higher, with average market rates up 7% year on year.

This, WorldACD noted, was “health of the growth reported in September,” adding that with tonnages up 8% in November, there had been a softening of growth “possibly indicating the beginning of a new more moderate growth trend”.

Mr van de Wouw also warned that airfreight had become a market “increasingly reliant on ecommerce volumes” and remained “susceptible to geopolitical tensions” at a point where the manufacturing outlook was looking “subdued” in “an increasingly volatile world”.

And, noting “concerning” signals coming out of European manufacturing, he added that early January saw a 25% drop in average spot rates to $2.56 per kg.

If one was looking for early signs that concerns around the geopolitical arena may have been overplayed following Donald Trump’s re-election, he has done little to help with his threats to annex Panama, Greeland and possibly even Canada.

For shippers, however, this week’s news that a new master contract had been agreed between dockers and employers at ports on the US east and Gulf coasts likely prompted some relief.

And for air, the numbers in the closing weeks of 2024 indicated there had been no sudden spike in demand for capacity from shippers looking to get ahead of prospective port strikes, with Mr van de Wouw noting concerns “failed to produce a meaningful mode shift to air”.

Similarly, concerning signals in the early weeks of the year have been seen on the China-to-US corridor, with where rates have fallen 9% from mid-December’s peak of $5.61 per kg.

Despite the signals, Xeneta believes there’s still room for optimism that the sector will see further growth this year, albeit of around 4%-6%, outpacing supply growth of 3%-4%.

“The signals from the manufacturing industry, particularly in Europe, are concerning, but ecommerce continues to take up this slack and is projected to grow at 14% annually to 2026,” continued Mr van de Wouw.

“But with reports of countries aiming to crack down on the Chinese ecommerce platforms, for example, if this was to happen it would have a sizeable impact on markets around the world.”

The numbers from WorldACD paint a rosier picture for the start of the year, at least as far as global spots rate averages are concerned, stating that spots were 22% up on equivalent levels a year ago.

This, the index put down to a 23% year-on-year bump in Asia-pacific cargoes and a 59% spike from Middle East and South Asia origins, noting that the “relative strength of demand and pricing from those regions last year looks set to continue into 2025”.

Airlines are projecting shades of both hope and concern, with Tiaca head Glyn Hughes pointing out that cautious optimism comes with recognition that “what really jumps out at me is the fact that as an industry we’re very limited to really control” the growth drivers.

All of this comes as things head toward the airfreight tender season, Xeneta noting that last year saw growing shipper preference for longer-term (one-year-plus) contracts.

“These contracts accounted for 63% of all agreements valid in Q4 24, marking a 16-percentage point increase compared with the same period in 2023,” the index said, even as forwarders seemed content to negotiate nearly half their volumes on the spot market,

Mr Van de Wouw added: “The lesson these market conditions are forcing stakeholders to learn is that they cannot rely solely on historical trends as a foundation for purchasing decisions.”