The global air cargo supply and demand gap continued into July. According to Clive Data Services data, in the past year, the available capacity growth exceeded the monthly tonnage carried. In July, the capacity increased by 7% year-on-year, while global demand fell by 2%.

The capacity glut has put downward price pressure on all trade routes covered by the rate benchmark platform Xeneta, but declining rate levels have given air cargo shippers the upper hand as they enter the winter rate negotiation period.

Amid weak demand, the increase in capacity led to a 41% decline in air cargo spot prices in July from a year earlier, reducing the global average air cargo spot price to $2.20 per kilogram. That compares with $2.31 a kilo in June. The exchange rate from Northeast Asia, including China, to the United States fell by more than 60% year-on-year, while the spot exchange rate from China to Europe fell by more than 55%. Compared to a year ago, South America to the United States and Europe to the Middle East and Central Asia had the smallest declines, at 19% and 27%, respectively.

Xeneta Chief Air Cargo Officer Niall van de Wouw said shippers are seeking 12-month flat rates to reduce costs and re-engage their logistics service providers in contract negotiations.

Interest rates "bottomed out"

the exchange rate from Northeast Asia, including China, to the United States fell by more than 60% year-on-year, while the spot exchange rate from China to Europe fell by more than 55%. According to data generated by the Baltic Air Index (BAI) using TAC, global air freight rates improved slightly at the end of July, with air freight prices on routes from China to North America and Northern Europe remaining unchanged.

TAC pointed out in its July market update report that this year is more like a normal peak season, and the latest data favor interest rates to bottom before September. Bruce Chan, senior research analyst at investment bank Stifel, also believes air freight rates have bottomed out.

Although the PMI fell slightly to 49.2 in July, a reading below 50 would mean contraction, as weak demand caused manufacturers to cut production for the first time since January and new export business contracted at the fastest pace since September 2022. Chan noted that things are unlikely to get worse from a demand perspective, and that one of the key factors behind this year's volatility is the level of confidence retailers have in consumer demand and whether they are being prudent in rebuilding inventories.

freight forwarding network