Air cargo demand stabilises despite trade tensions

Concerns that air freight market conditions could be affected by new US tariffs on China, the deferred de minimis ban, and the seasonal Lunar New Year slowdown have been allayed, with average spot rate and contract rates (as measured by the Baltic Air freight Index) climbing 1.7% week on week, to sit 12.8% higher than the same period in 2024.

While concerns over new tariffs and potential trade conflicts have sparked uncertainty, air cargo volumes only dipped slightly in January, with analysts suggesting that while trade policies can influence long-term strategies, they have yet to trigger major shifts in airfreight demand.

The 2% decline in demand in January contrasted sharply with the double-digit monthly growth seen throughout 2024. However, this is mainly due to the earlier Lunar New Year and industry experts maintain their forecast of 4-6% growth for global air cargo in 2025, citing a strong underlying demand for international shipments.

Although new tariffs introduced by the US and retaliatory measures from trading partners have created a challenging environment, there is no immediate indication that this will derail market expansion. The prospect of a prolonged trade dispute remains a concern, but experienced traders acknowledge that negotiations will likely shape final policies.

Cross-border eCommerce continues to drive volumes

Since late 2023, eCommerce demand has significantly contributed to increased airfreight volumes, and while policy shifts, such as the end of the de minimis exemption, may introduce operational challenges, they are unlikely to dampen overall consumer demand, due to the relatively low value of most purchases.

Removing the de minimis exemption could create bottlenecks by adding customs requirements, and extending processing times. However, industry leaders expect the sector to adapt, as major eCommerce platforms anticipated these regulatory changes and have contingency plans in place.

Even if compliance measures increase costs, eCommerce goods are expected to remain competitively priced compared to domestic retail options. Instead of pricing, delays in delivery due to customs processing could have a greater impact on consumer sentiment. Nevertheless, eCommerce companies are likely to find alternative shipping solutions to sustain demand and minimise disruptions.

Global air cargo rates remain elevated

While demand growth was modest in January, global air cargo rates remained significantly higher than pre-pandemic levels. Spot rates in January stood 17% above the previous year’s levels, largely driven by continued eCommerce demand, constrained aircraft production, and ongoing route disruptions caused by airspace restrictions.

On key trade corridors, air cargo spot rates varied. The highest increase was recorded on the Middle East and Central Asia to Europe route, where rates surged by over 60%, largely due to ongoing shipping disruptions in the Red Sea. Europe to North America also saw double-digit rate increases, reflecting sustained demand.

In contrast, backhaul routes experienced a decline in spot rates due to growing trade imbalances. The largest drop was observed in North America to North East Asia, where rates fell by more than 20%. Meanwhile, rates between Europe and Latin America showed stability, recording growth in both directions.

Freight capacity shifts towards Asia

Strategic realignment of freighter capacity is supporting Asia-related trades, contributing to moderate rate increases in these markets. While airfreight demand for general cargo has shown little sustained growth in recent years, the reallocation of capacity could benefit shippers in other regions by putting downward pressure on rates.

Looking ahead, while the broader air cargo market remains unpredictable, with the full impact of regulatory changes, particularly in cross-border eCommerce, taking time to materialise.

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