Xeneta Chief Airfreight Officer Niall van de Wouw has attributed the spike in air freight rates to supply issues rather than fuel volatility. Air cargo spot rates surged 30% in April, but the return of air cargo capacity signals freight pricing relief as market fundamentals are anticipated to tame costs. Van de Wouw noted that lower rates will be welcome news for shippers who have stalled third and fourth quarter tenders with freight forwarders in anticipation of a more normalized market.
Van de Wouw emphasized the need to dispel the myth that rising jet fuel automatically drives up airfreight prices. While fuel costs have increased dramatically, rates are starting to decline in specific markets. The shift in Transatlantic spot prices, which dropped 17% year-over-year to $2.57 per kilogram from Europe to North America, directly demonstrates this trend. Xeneta reported that carriers have begun flooding the market with summer passenger capacity, and air freight pricing responds to supply and demand rather than costs.
Fuel supply volatility continues to impact logistics markets as the Strait of Hormuz, a major sea passage for transporting oil, has remained blockaded since the start of the Iran war in February. Although spot fuel prices peaked in early April, the reportedly growing jet fuel shortage has yet to impact long-haul intercontinental routes at scale, according to van de Wouw. While some carriers are considering reducing flight frequencies due to fuel shortages, van de Wouw does not expect the reduction to dramatically impact air cargo.
To secure needed capacity for the second half of the year at a fair and equitable price, van de Wouw advises shippers to gain a clearer understanding of how freight forwarders are transporting goods and to be cautious of the feast of surcharges from carriers looking to curb higher jet fuel prices. Shippers can learn more about how forwarders are acquiring capacity to limit rising costs. Otherwise, they will be more vulnerable to market disruptions and face a weaker starting point when negotiating potential surcharges in contracts.
Despite signs of possible relief, challenges still linger on the horizon. E-commerce growth appears to be plateauing as volumes from China continue to drop. In March, e-commerce shipments out of China were down 9% year-over-year, marking a four-month sustained decline. Van de Wouw said that while global air freight rates have likely peaked and are expected to decline on more lanes, recent experience suggests underlying concern about future trade disruption will persist.
Key Takeaways:
1. Air cargo spot rates surged 30% in April, driven by supply issues rather than jet fuel volatility according to Xeneta analysis.
2. Transatlantic spot prices dropped 17% year-over-year to $2.57 per kilogram from Europe to North America.
3. The Strait of Hormuz blockade since February has created jet fuel supply volatility, though impact on long-haul routes remains limited.
4. E-commerce shipments from China declined 9% year-over-year in March, marking a four-month sustained decline.
5. Xeneta advises shippers to exclude fuel charges from pricing mechanisms and understand forwarders' capacity acquisition strategies to limit rising costs.
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