Air cargo demand growth has maintained momentum on the heels of a robust 2024, but could be cut by up to two-thirds as the market normalizes and trade conditions turn less favorable, analysts say. But even 4% growth, on the low-end of projections, would be considered a solid year by most industry stakeholders.
Global volume and rates have eased in the first two weeks of January, reflecting the post-holiday seasonal decline since the end of peak shipping activity in early December. But industry professionals say the year has started strong compared to historical trends.
Demand is down about 3% halfway through the month versus a year ago, when air cargo networks were still in the early stages of recovering from a prolonged downturn, according to freight analytics firm Xeneta. Rates softened 3.7% on a sequential basis in the first week of January, according to the Baltic Air Freight Index, but were still up 26% year over year.
As of early January, airfreight rates on the all-important China-North America trade corridor have fallen slightly less than typical from their traditional December peak. Prices out of Shanghai and Hong Kong are down about 20.5% compared to an average historical decline of 26%, a report by Bascome Majors of Susquehanna Financial Group showed.
Logistics companies say volumes are rebuilding after a short slump at the tail end of December.
Analysts attributed the improved seasonal economics to businesses stockpiling inventory to protect against China tariffs threatened by President Donald Trump and an earlier Lunar New Year, which starts Jan. 29. Businesses often move shipments forward to avoid delays in anticipation of factories and warehouses in China gradually reducing production and then closing for the holiday, which can result in operations being halted for up to a month.
“The end of 2024 was exceptionally strong. While we traditionally see a dip in the second half of December, this year was different. Week 51 experienced only a minimal decline, and Week 52 outperformed expectations, delivering the strongest load factors we’ve seen for this period in years,” Leonard Rodrigues, director of revenue management and network planning at Etihad Cargo, the cargo subsidiary of Etihad Airways, said by email. “The consensus suggests this strength will carry into January, leading up to Chinese New Year. While some geographies are performing below historical levels, others are outperforming, which has balanced the overall market performance.”
Taiwan-based freight forwarder Dimerco Express Group sees the market in similar terms.
“Starting mid-December, we’ve seen a significant uptick in cargo volumes, particularly for consumer electronics. This is unusual, as the market typically slows down after Dec. 5,” said Kathy Liu, vice president global sales in marketing, in the company’s monthly market update. “However, this year, the peak is expected to extend all the way to late January, just ahead of Chinese New Year. What’s interesting is how general cargo has avoided the usual October-November e-commerce rush to better optimize capacity and costs. This could indicate a new trend going into 2025.”
Demand for the entire month of December increased 11% year over year against a 2% bump in capacity (consulting firm Rotate showed capacity at plus 8% versus 2023), helping global spot rates increase 15% to nearly $3/kg, Xeneta said in a monthly report. It marked the fourteenth consecutive month of double-digit growth and meant 2024 volumes increased 12%. Demand growth slowed to 10.5% between September and December from about 13% earlier in the year, largely because of more difficult year-over-year comparisons as the market’s recovery took off in 2023. With less volatility, spot rate growth for the final four months decelerated to 11% from 21%.
Rates for immediate transport increased the most last month on the Europe-to-North America corridor, rising 21% to $3.27/kg, its highest level in more than two years. The spike is likely due to reduced cargo capacity as passenger airlines reduce winter flying schedules and all-cargo operators relocate freighters to Asia, Xeneta said.
Meanwhile, air cargo yield increased 7.8% in November – 52% higher than in 2019, according to the latest statistics from the International Air Transport Association.
The ingredients for last year’s stout market included the effective cutoff of the Red Sea by Houthi rebel attacks on merchant shipping that led companies to divert some time-sensitive shipments to air, air space restrictions around Russia that forced Western airlines into longer routes and effectively reduced capacity, and the surge in e-commerce exports from China.
It was a banner fourth quarter for airlines. United Airlines on Tuesday reported cargo revenue jumped 30% to $521 million, while full-year revenue was up 16.6% to $1.7 billion. Delta Airlines said cargo revenue increased 32% to $249 million. Revenue grew 14% to $822 million in 2024. American Airlines’ cargo division didn’t perform as well, with revenue growth of 10% to $220 million. Cargo revenue actually declined 1% for the entire year to $804 million – a surprising outcome considering the strong market conditions.
E-commerce is expected to continue being the primary catalyst for air cargo volume growth this year. Experts attribute more than 50% of air cargo volumes out of Asia last year to e-commerce. The influx of large online marketplaces reserving huge allotments of container space has limited capacity for traditional freight like apparel, electronics and automotive parts, and influenced the upward move in yields.
More cargo owners last year shifted to longer-term airfreight contracts with durations of one year or more to lock in better rates. Those contracts accounted for 63% of all transactions executed in the fourth quarter, a 16 point increase compared to the same period in 2023, according to Xeneta. At the same time, freight forwarders negotiated nearly half of their volumes in the more volatile spot market, which undercut margins as airlines raised selling rates. For 2025, airlines have announced a 10% increase in contract rates, Taiwan-based logistics provider Dimerco Express said in a recent market update.
Caution flags
Economic recoveries don’t last forever, though. Multiple analysts, including Cargo Facts Consulting, project volume growth will cool down to 4% to 6% this year. Downside risks include the resumption of shipping through the Suez Canal if the Israel-Hamas cease-fire holds, a soft manufacturing outlook, rising protectionism, continued geopolitical tensions and U.S. plans to restrict Chinese e-commerce sellers from leveraging a duty-free, expedited clearance program that enables their direct-to-consumer logistics business. Those e-commerce shipments almost entirely rely on air transport.
Also, a potential strike at many U.S. ports was averted this month when dockworkers and marine terminal operators agreed on a six-year contract, eliminating the need for shippers to rebook urgent cargo with air carriers.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
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