Rate increase slows as Middle East capacity further rebuilds
The steep rise in average global air cargo rates since the US and Israel began their war against Iran appears to be slowing, with the ceasefire broadly holding and allowing capacity to and from the region to further rebuild.
According to the latest weekly figures from WorldACD Market Data, average worldwide spot rates in week 16 (13 to 19 April) rose by just +1% week on week (WoW) to US$3.73 per kilo, taking them +46% higher than this time last year and more than +40% up compared with their level at the end of February, when the Iran war started.
But that rise of only +1% is the smallest week-on-week increase in average worldwide spot rates since the start of the war, based on the more than 500,000 weekly transactions covered by WorldACD’s data. That small average global increase in week 16 was driven by a +3% WoW rise in spot rates from Asia Pacific origins to $5.14 per kilo, +41% higher than the equivalent week last year, while spot rates from the Middle East & South Asia (MESA) region dropped by -2%, WoW, to $4.74 per kilo, which is +67% higher year on year (YoY).
Although the ceasefire, in place since 8 April, remains fragile – especially for ships in the Strait of Hormuz – it has brought some limited stability back to aviation markets within the region, which have been in extreme turmoil since the military campaign against Iran was launched on 28 February.
Capacity returning to MESA markets
On a worldwide basis, total air cargo capacity in week 16 was flat, WoW, with a small increase in freighter capacity more or less cancelled out by reductions in bellyhold space – partly due to industrial action in Germany and some flight cancellations linked to jet fuel shortages and rising costs. But from MESA origins, air cargo capacity rebounded in week 16 by around +7%, WoW, reducing the capacity gap compared with its pre-war levels from a deficit of -35% in week 15 to just -30% in week 16.
That narrowing in week 16 of the MESA capacity gap is mainly explained by further capacity returning to Gulf markets, where the deficit narrowed in week 16 from -53% to -46%, while capacity has also been returning to the Levant (where the capacity deficit narrowed from -29% in week 15 to -20% in week 16). Air cargo capacity to and from South Asia, meanwhile, has almost returned to pre-war levels (-4%) – as has overall global capacity (-6%)
But MESA tonnages fall
Despite the further return in week 16 of capacity to and from Gulf and other MESA markets, tonnages from MESA origins dropped by -6%, WoW – contributing to the overall fall in spot rates from the region (-2%). Examining specific markets, MESA to Europe tonnages fell, WoW, by -3%. Tonnages dropped, WoW, from India (-4%) and Sri Lanka (-14%), whereas from Dubai they increased by +8%. Spot rates from MESA to Europe also dropped, WoW (-5%), driven by declines from South Asia, but are still +82%, YoY.
Meanwhile, from MESA to the US, chargeable weight dipped slightly (-1%, WoW), with a fall in volumes from South Asia almost fully compensated by a WoW rise in tonnages from Dubai. Spot rates on this trade lane fell by -4%, WoW, to arrive at +64%, YoY, with WoW drops from most South Asia origins except Bangladesh, while rate rises from Dubai were not enough to compensate.
Worldwide tonnages rebound after Easter
On a worldwide basis, tonnages in week 16 rebounded with a +3% WoW increase, driven by a post-Easter recovery from Europe (+11%, WoW) and Central & South America (CSA, +9%) origins, and to a lesser extent from North America (+3%). Along with the WoW declines in tonnages from MESA (-6%), already highlighted, volumes from Africa also fell (-4%) in week 16, also due in part to challenges linked to the Iran war.
Examining more closely trends from Asia Pacific origins, the main contributor to overall worldwide spot rates rising at all in week 16 (+3%, WoW), reveals a mixed picture. From Asia Pacific origins to Europe, spot rates edged up by just +1%, WoW, in week 16, driven by increases from South Korea and Thailand, while tonnages from Asia Pacific origins to Europe fell by -3%, WoW. And for Asia Pacific to the US, average spot rates were stable in week 16, with rate rises from Northeast Asia to the US cancelled out by drops in pricing from Southeast Asia origins. Tonnages, meanwhile, were up +1%, WoW, with falling volumes to the US from South Korea, Vietnam and Thailand partially cancelling out increases in tonnages from several other Asia Pacific origins to the US.
