The global air cargo spot rate flattened to just $2.19 per kilogram in August, its lowest level since the onset of the pandemic as another weak summer month saw chargeable weight drop 1% lower for a fourth consecutive negative month, according to the latest weekly market analysis from CLIVE Data Services, part of Xeneta.
Of course, those low rates benefit shippers and forwarders, who are enjoying the overall decline of general air freight rates. But the sector—which is still contracted following the huge drop in pandemic travel patterns—could soon grow even more stressed from rising jet fuel prices. As one data point, the U.S. Gulf Coast jet fuel spot price recently jumped 21% month-over-month.
August saw global air cargo capacity rise 7% year-on-year, and combined with softened global demand, that extra carrying space contributed to the drop in rates. That data dampens some industry reports of a slight spike in demand in August and hopes of a rise in volumes going into the final four months of the year.
“We are picking up signals that it could take another few quarters before we see more demand on a global level,” Niall van de Wouw, chief airfreight officer at Xeneta, said in a release.
“August was very quiet, like July, and we see no meaningful signals from a qualitative or quantitative point of view of any kind of peak arising this year. There might be some early peak season charter requests floating around but they are backed up by very little demand. The (low) rates and the limited timeframe that the requestors are looking for signal that they are not too concerned at the moment about getting the required capacity when they actually need it.”
Looking forward, the ocean freight container market might shed some light on where the air cargo market is heading, given that the ocean market tends to begin its yearly peak season a few months ahead of the airfreight cycle. But so far, the global ocean container market has not shown any meaningful peak season trends, Xeneta said.
“The air cargo industry is coming to terms with the market conditions and not even the current and planned restrictions we see on container ships moving through the Panama Canal are likely to provide a noticeable uptick to airfreight volumes,” van de Wouw said. “Whichever way you choose to look at it, demand growth simply does not exist in this current moment or for the foreseeable future. Shippers will no doubt be tempted to fix more longer-term deals because the leveling of volumes and the imminent drop-off of some capacity means the market may not get any better than it is right now for capacity buyers.”