Xeneta: Air cargo rate growth narrows and the market outlook is ...

Air cargo freight rate improvements continued to narrow in April amid weakening demand, geopolitical tariff tensions and a drop in jet fuel prices. While global air cargo volumes grew 4% year on year in April, global air cargo spot rates rose just 3% year on year, a second consecutive month of only a single-digit increase, said Xeneta, and a continuation of a narrowing of the growth rate. Rates were up 17% in January, 10% in February and 6% in March. "This slowdown aligns with weaker demand trends. Adding to the downward pressure on rates, jet fuel prices fell -24% year-on-year in the first three weeks of April," said Xeneta. "This drop, driven by ongoing economic and geopolitical uncertainties, likely played a role in tempering overall spot rate growth." In addition to this, available capacity increased 3% compared to April 2024, and the dynamic load factor declined three percentage points month on month to 57%. The dynamic load factor is Xeneta's measurement of capacity utilisation based on volume and weight of cargo flown alongside available capacity. US tariff measures implemented on 2 April prompted shippers to engage in front-loading tactics, and there was a rush of air shipments from several Asian countries to North America. This led to double-digit increases in both volume and spot rates out of Asia. Notably, spot rates from Southeast Asia to North America jumped 13% month on month, while those from Northeast Asia rose 10%. However, these gains began reversing in the second half of April following the announcement of a 90-day tariff pause and 145% retaliatory tariffs on China. The largest monthly rate surge was observed on the North America - Northeast Asia corridor, rising 14%. This was largely driven by shippers rushing exports to China and Hong Kong amid fears of reciprocal tariffs. Spot rates elsewhere were also in flux. Spot rates between the Middle East & Central Asia and Europe remained flat month-on-month but were down compared with last year, reflecting easing supply pressures from earlier Red Sea disruptions. Transatlantic westbound rates, meanwhile, declined 7% from March, impacted by increased bellyhold capacity from summer flight schedules, as well as seasonal slowdowns during the Easter holidays and potential US tariff actions. On the Northeast Asia-Europe corridor, fronthaul rates into Europe saw a slight month-on-month increase and were up 10% year on year. However, backhaul rates into Northeast Asia fell 17% compared to April 2024, as trade imbalances persisted. Outlook Looking ahead, now that the de minimis exemption for shipments from China and Hong Kong into the US has been removed, major trade lane disruption is expected for e-commerce. "This is quite likely the calm before the storm. If the new de minimis set-up remains - and why would they change it after the investment the authorities have reportedly made - then this will undoubtedly negatively impact airfreight volumes from China to the US," said Niall van de Wouw, Xeneta's chief airfreight officer. "The traditional airfreight market will not be able to compensate for the decline in e-commerce volumes. Airlines will adjust their networks to this new reality and this, in turn, will have a beneficial impact for shippers around the world as they will see more capacity coming (back) to their market - but they still need viable trading conditions to enjoy the benefit of this opportunity." He added: "The likelihood of lower airfreight rates is better news for shippers and forwarders, but if shippers can't sell their goods because of tariffs, that's bad news for the macroeconomic picture and the need for airfreight. For most airfreight shipments, lower rates will not compensate for the tariffs that will have to be paid." Overall, van de Wouw said the macroeconomic picture will depend on how long the uncertainty lasts, but "the outlook currently looks quite daunting". "This is not about one industry being affected. This is about major trade lanes being affected, and we haven't seen anything on this scale before," he said.

Air cargo braces as US ends China's de minimis exemption

The US de minimis exemption for packages from China and Hong Kong ends today, with air cargo waiting to see how much of an impact it will have on the market. The end of the exemption means that from 2 May, packages from China and Hong Kong worth less than $800 will no longer be able to enter the US duty-free and with minimal customs scrutiny. They will now have to pay a 120% tariff rate or a flat fee of $100, due to rise to $200 at the start of June. Last year, as many as 4m packages a day were entering the US under the de minimis exemption, up from 2.8m per day in 2023. Online retailers such as Shein and Temu have been exploiting the loophole to sell goods cheaply to US consumers. According to data firm Xeneta, approximately 50% of air cargo shipments on the China-US route is e-commerce, accounting for around 6% of global volumes. "A sharp drop in demand is likely to challenge carriers' capacity planning, with early signs already pointing to freighter flight cancellations and potential redeployments to other trade lanes," it said. "This is a double-edged sword. A decrease in demand on one of the key airfreight lanes between Asia Pacific and North America will have a big impact, but so too will the redeployment of capacity on a global level," said Xeneta head of airfreight Niall van de Wouw. "This may be a year when we grow weary of seeing the word 'unprecedented' in market performance statements. The macroeconomic picture will depend on how long the uncertainty lasts and what will be at the end of it, but the outlook currently looks quite daunting. "This is not about one industry being affected. This is about major trade lanes being affected, and we haven't seen anything on this scale before," van de Wouw added. Overall, he said it was too early to predict how large of an impact the development will have. The picture will be clearer when demand figures for May are released. Forwaders have also warned of the administrative burden of processing the shipments. "Customs duties aside, all shipments will, as of 2 May, be subject to a standard customs clearance process, with this in itself presenting an administrative nightmare," Scan Global Logistics said in a market update. "With elevated tariffs of 145% currently in place for China, the elimination of the de minimis exemption will significantly influence pricing strategies for e-commerce platforms and consumer purchasing behaviour" the forwarder added. "Companies such as Shein and Temu, which previously leveraged the de minimis threshold to offer low-cost goods, have already announced price increases." Ahead of the end of the exemption, the move already seemed to be having an impact on the market, although the US has also implemented tariffs of 145% on Chinese imports - other than some other tech products that have been exempt - making it hard to distinguish how much of an impact each of the two developments are having. Figures released today by data provider WorldACD show that in the week running to 17 April, cargo volumes from China and Hong Kong to the US were down by around 15% year on year. Meanwhile, sources indicate that spot market rates from Hong Kong to the US have fallen by just under $1 per kg since the end of April to around $4.40 per kg today. At the start of this week, freight forwarder Dimerco reported that from the end of April, several freighter charters have been cancelled, while further cancellations are expected in the coming weeks. "Overall, e-commerce shipment volume has dropped by approximately 50% since mid-April compared to the same period last year," Dimerco said. The company said major Chinese carriers were also considering cancelling services, although a final decision is still pending. "If these cancellations go through, the already limited capacity from China to the US will be further reduced," Dimerco said. There are also concerns that any capacity withdrawn from China-US services could end up in other markets, risking pulling down rates on those trades if supply outstrips demand. Indeed, Dimerco Express vice president, global sales and marketing Kathy Liu said that much of the freighter capacity from China/Hong Kong removed in recent weeks has been shifted to destinations like Nuevo Laredo in Mexico and other parts of Latin America, where demand has actually gone up, especially out of Mexico. Demand out of Southeast Asia and Taiwan has stayed relatively stable - that's likely due to the 90-day tariff exemption granted by the US government, which is giving some breathing room to shippers in those regions. The US had tried to end the exemption in February, but customs did not have the systems in place to handle the number of packages being brought into the country and had to backtrack on its decision within a couple of days. Last year, around 1bn packages were transported into the US under the exemption, with around 800m of these shipments arriving through international mail; express courier services such as UPS, DHL, and FedEx; or were transported as cargo on commercial airline flights. Washington argues that criminals are using the exemption to smuggle illegal items, such as illicit drugs and weapons, or evade paying duties.

Emirates and Philippine Airlines explore enhanced cargo partnership

Emirates and Philippine Airlines are considering expanding their existing cargo partnership to boost airfreight business. Dubai-based Emirates said in a press release on 29 April that it had discussed the possibility of expanding its cargo interline partnership with Philippine Airlines at the Arabian Travel Market in Dubai. "Both carriers will also explore opportunities to enhance their cargo interline cooperation; exchange best practices in ground handling, catering, maintenance and technical training; and organise joint familiarisation trips for key media and trade stakeholders," said Emirates. The airlines are also considering expanding their passenger partnership with a reciprocal code-sharing agreement on flights between the Philippines and Dubai, and on select routes beyond the gateways of each partner airline. Emirates SkyCargo has steadily expanded its partnerships in recent years as it continues to strengthen its global network. Emirates SkyCargo and Teleport, exclusive cargo partner of AirAsia, recently signed a Memorandum of Understanding (MoU) to create a preferred partnership that will support trade and e-commerce flows. In February, Emirates SkyCargo and Kenya-based freighter operator Astral Aviation also signed an MoU that will examine how to boost connectivity to Africa.