MESA air cargo rates surge throughout May

Air cargo rates from Middle East & South Asia (MESA) have continued to surge throughout May, according to data from World ACD. It noted spot rates from MESA to Europe averaging more than twofold year-on-year (YoY), with tonnages and rates from Asia Pacific well above May 2023. With disruptions to ocean freight services caused by Red Sea attacks on shipping containers, air cargo continues to see a strong demand. Air cargo rates from MESA were up 47% YoY to $2.78 per kilo. Tonnages were 17% up YoY from MESA. In addition, air cargo from MESA to Europe had an average spot rate of around $3.35 per kilo, up more than double than May 2023 at a 128% YoY increase. A HSBC report said the Red Sea disruptions were a black swan event and are continuing to tighten shipping capacity, as well as providing temporary tightness in demand-supply in the year. The report added that the disruptions are ""supporting spot container freight rates ahead of peak seasons."" World ACD said the rates are being driven by ""highly elevated spot prices"" from India to Europe at a rate of $3.78 per kilo, up 160% YoY and from Bangladesh to Europe at $4.38 per kilo, up 189% YoY in week 22 of the year. The HSBC report added that India's ""rising domestic competition on pricing could be a valuation overhang, but the long-term growth runway should remain intact."" It added that India's e-commerce logistic growth ""may become less relevant for the sector in mid-2024"". Spot rates from Sri Lanka and Dubai have also been on an upwards trajectory for most of May, standing at $2.95 and $2.28 per kilo respectively in week 22 of the year. World ACD said in its report: ""Despite falling rates from other regions, this strength in Asia Pacific and MESA origin traffic helped keep overall average global rates steady in week 22 at a worldwide average of $2.51 a kilo."" The average global rate was up 7% YoY and significantly above pre-Covid levels at a 42% increase compared to May 2019. Analysis by Xeneta added that the global air cargo market was on the pathway for double digit growth in capacity as demand over the past six months has been ""quite extraordinary"". Xeneta chief airfreight officer Niall van de Wouw added: ""In the world of air cargo, there's an undeniable pattern emerging. We can't use the word 'surprising' anymore. When we take a mid-term view of the market, with these kinds of numbers, we might be on track for double-digit growth for the year."" Though, a major shift of volume from ocean to air is unlikely, Xeneta added. It said: ""Compared to the onset of the Red Sea crisis or the COVID pandemic, cost spikes this around are most likely triggered by shippers frontloading imports ahead of the ocean peak season to eliminate impacts from increased supply chain disruptions."" “At the end of 2023 we saw the dramatic impact China’s e-commerce behemoths had on the air cargo market,"" said van de Wouw. ""Everyone is now waiting anxiously to see what happens in the upcoming peak season. But if the potential rising costs and increasing transit times of e-commerce ex-China leads US consumers to procure less and less, that can have a ripple effect globally."" With China's cargo market to North America continued gains from US economy resilience, it remains to be seen the outcome of the US' crackdown on e-commerce shipments from China.