News / Soft airfreight market casts doubt over H2 peak

© Roza

Late today, as the US celebrates Independence Day, the ending of de minimis exemptions for imports from all countries to the US will be signed into law. 

Part of the ‘big beautiful bill’ passed by the Senate yesterday will see the US enjoy a $39bn tax benefit over the next decade, with the duty exemption on parcels valued at less than $800 set to end on 1 July, 2027. 

The law gives companies and carriers more time to prepare than the abrupt ending of de minimis exemptions on goods from China in May, which sparked a huge decline in freighter capacity on the Transpacific. The two-year deadline will provide more certainty to the industry and shippers, allowing time for importers to develop new ways of working, and thus a more gradual response to shifting trade flows. 

The move is likely to be followed by other governments around the world, which will likely dampen global demand for low-value ecommerce. 

The effects of the ending of the exemption for Chinese goods has already been felt in capacity terms, and provides a back story to the current weakness in airfreight. According to a report from Xeneta today, volumes had been flat through June at only 1% higher than last year, while capacity was up 2%.

“The air cargo market is losing altitude amidst so much uncertainty,” said chief airfreight officer Niall van de Wouw.  

“For consumers who were already under severe financial pressure from the rise in the everyday cost-of-living, the added cost of tariffs means they are more likely to think twice about buying many of the types of goods which are exported and imported by air.” 

According to the TAC Index, freighter capacity on the transpacific trade “appears to have stabilised [at] between 60,000 and 65,000 tonnes per week.  

“That figure is well below the March peak of 75,000 tonnes, but higher than the low point of 51,000 tonnes reached in May.” 

Global spot rates fell for a second consecutive month in June and were down 4% year on year, according to Xeneta.  

However, one Shanghai-based forwarder told The Loadstar today that he is seeing rates rise. 

“General airfreight spot rates have been rising for a few weeks since the middle of June. But it’s not because of more volumes or demand to Europe or North America. What we have seen is cargo to Middle East has a big backlog due to lots of cancelled flights due to the conflicts, so cargo was held at origins. Now there is pent-up demand, all in a rush to fly out. That has reduced the supply of capacity to Europe and North America, which has increased rates.” 

However, this is likely a temporary blip. The Baltic Air Freight Index (BAI) was also flat month over month, despite forecasts that there might be a flurry of demand before the July 9 tariff deadline. 

The BAI said Hong Kong to North America rates dropped 1.64% month on month, and overall Hong Kong outbound rates slipped slightly. 

But this does not mean it’s good news for shippers, said Mr van de Wouw. 

“It’s wrong to think falling air cargo rates on key trade corridors automatically represent a boon for shippers. With weaker consumer confidence, low rates are little comfort when underlying demand is deteriorating.” 

It’s not good news for the second half either. Mr van de Wouw told The Loadstar he thought the peak season may never fully appear. 

Xeneta noted: “The industry is preparing for a less rosy outlook for the remainder of the year given the effects of looming tariffs and curbs on US de minimis exemptions for cross-border ecommerce goods.” 

Mr van de Wouw said: “Last month we said sentiment was driving a downturn, but now market fundamentals are starting to kick-in. In this environment, at a certain moment, something’s got to give. 

“We are starting to see the longer-term effects of all this uncertainty because a lot of damage has been done. This might be the new reality for the foreseeable future as the industry is facing a much more challenging second half of the year,” he said. 

Some forwarders seem to agree that the second half could see a limited – or worse – peak. 

“I don’t see any trend which would indicate that the market is going up before the end of the year,” one senior airfreight forwarder told The Loadstar last month. 

“There is Black Friday and so on, which will shift some volume on Q4, but a peak? I doubt it. I can’t see where it would come from, especially as many volumes have already moved. I think it will be OK, but no big shift.” 

He added that what happens in ocean freight in the next few months may give some indication as to what may happen in air for Q4. 

Xeneta said forwarders were being cautious. 

“Around 46% of their procured volumes remain in the spot market, reflecting a belief that rates may yet fall further. Their wait-and-see approach favours flexibility over long-term commitments – for now.” 

Meanwhile ecommerce volumes appeared to redirect to Europe, with a surge in shipments from Asia, while other regions had also seen growth. 

The TAC Index noted: “As long-haul lanes remain uncertain, intra-Asia and Latin America are absorbing some of this capacity. Chinese carriers have introduced air-to-air routings via Hanoi and Singapore. While BAI data for Vietnam and India remains limited, anecdotal evidence suggests strong rates on select intra-Asia sectors. Latin America–North America capacity increased, while transatlantic freighter flights fell.” 

Xeneta said the uncertainty had led shippers to opt for mid-term contracts, of three to six months instead of annual agreements.