Storm Brewing in the Air Freight Market: Key Factors and Impacts

Recent strikes at U.S. East Coast and Gulf Coast ports have introduced new challenges for the already volatile global air freight market. As airlines and freight forwarders navigate these complexities, the need for robust air cargo tracking solutions has never been more crucial. The disruptions caused by these strikes, combined with existing supply chain challenges, highlight the importance of real-time visibility in air cargo operations.

Current State of the Air Cargo Market

In September, the global air cargo market reported a year-on-year demand increase of +9%. However, this marked a departure from previous months, as it was the first month in 2024 not to experience double-digit growth. The increase was influenced by several factors, including high e-commerce demand and disruptions in ocean freight, which prompted a shift from sea to air transport. This shift is particularly significant given the ongoing strikes, which may lead to delays of four to six weeks in supply chain recovery​.

Effects of Port Strikes on Air Freight Dynamics

The ongoing strikes have forced businesses to consider air freight as a more reliable alternative to ocean shipping. Niall van de Wouw, Xeneta’s Chief Airfreight Officer, noted that the current environment is a "fine balancing act" between protecting customer relationships and seizing short-term revenue opportunities. He highlighted that fear of missing out (FOMO) could lead to rapid rate increases as air cargo capacity diminishes due to the strikes and other global events, including conflicts in the Middle East that could disrupt ocean freight​.

Key Factors Influencing Air Freight Capacity

1. E-commerce Demand: The explosive growth of e-commerce, especially in sectors like fast fashion and electronics, is absorbing much of the available air freight capacity. This trend limits the space for ocean freight, which may need to be redirected due to port strikes.
2. Holiday Season: The annual peak holiday shipping season typically increases demand for air cargo, creating additional strain on capacity and driving up freight rates.
3. High-Value Products: The surge in demand for semiconductors and AI-driven technologies is leading to a rise in high-value shipments via air freight, further tightening capacity.

Recent insights from Xeneta indicate that air freight rates along the Northeast Asia to Europe corridor experienced a 30% year-on-year increase in August 2024, reaching $4.42 per kilogram. Should port strikes compel more cargo to shift to air freight, rates could escalate even further, potentially resulting in a capacity crisis that extends into 2025.

Trends in Air Cargo Rates

The air cargo sector is facing upward pressure on rates as the average global spot rate increased +26% year-on-year in September. Key trade corridors, such as Asia to North America and Europe, saw significant rate hikes, with the Middle East and Central Asia to Europe route experiencing a +112% year-on-year increase​. Wilson reported that overall airfreight rates remained relatively stable last month, with the global Baltic Air Freight Index (BAI00) rising by 1.8% over the four weeks leading up to September 30, putting it 7.5% ahead of the same month last year.

The index for outbound routes from Hong Kong (BAI30) – the world's largest airport for cargo volume – increased by 0.3% over the month, reflecting a 16.8% year-on-year increase. Meanwhile, the index for outbound Shanghai (BAI80) rose 2.7% month-on-month, showing a 20.4% year-on-year growth​. If the strikes persist, rates are likely to rise even more dramatically, with estimates suggesting they could triple for urgent shipments​.

The Importance of Air Cargo Tracking

In light of these disruptions, effective air cargo tracking solutions are vital. Tracking systems provide real-time visibility into shipments, enabling businesses to:

1. Manage Delays: With port strikes causing potential shipping delays, tracking tools allow shippers to anticipate issues and reroute shipments when necessary.
2. Enhance Customer Communication: Real-time updates can help maintain transparency with customers, building trust even during challenging times.
3. Optimize Routes: As market dynamics shift, businesses can adjust their logistics strategies based on up-to-date information about cargo availability and capacity.
4. Improve Decision-Making: Accurate tracking data can inform strategic decisions regarding pricing, capacity allocation, and partnership adjustments in response to market volatility.

Conclusion

As the air cargo market grapples with the ramifications of U.S. port strikes, the importance of robust cargo tracking solutions becomes increasingly evident. Companies must invest in technologies that offer real-time visibility to navigate these challenges effectively. In a landscape where customer expectations are high, and market conditions are unpredictable, air cargo tracking can provide a competitive edge that enhances operational efficiency and strengthens customer relationships.