Fuel rises, rates fall – the contradictions shaping air cargo’s next move

Air cargo in new balancing act as rates ease and fuel costs climb Air cargo carriers are facing an increasingly challenging market, with spot rates beginning to cool, ... AAPL: SUPPLY CHAIN RISKAAPL: SUPPLY CHAIN FLEXIBILITYKNIN: TENSION IN KOREAAMZN: SUPPLY CHAIN INFLATION AMZN: REFUNDS UPDATEDHL: UNSTOPPABLECHRW: HEALTHY CORRECTION CHRW: A WEEK TO FORGETTSLA: CHINA DEALINGS ATTRACT HEADLINESXPO: STRONG DELIVERYWTC: RALLY MODE ONODFL: EARNINGS BEAT BUTCHRW: GOOD DELIVERY BUT NOT ENOUGH MAERSK: TECH PUSHDHL: VINTAGE OPPORTUNITYDSV: BOTTOM FISHING AS CEO LEADS BY EXAMPLE AAPL: SUPPLY CHAIN RISKAAPL: SUPPLY CHAIN FLEXIBILITYKNIN: TENSION IN KOREAAMZN: SUPPLY CHAIN INFLATION AMZN: REFUNDS UPDATEDHL: UNSTOPPABLECHRW: HEALTHY CORRECTION CHRW: A WEEK TO FORGETTSLA: CHINA DEALINGS ATTRACT HEADLINESXPO: STRONG DELIVERYWTC: RALLY MODE ONODFL: EARNINGS BEAT BUTCHRW: GOOD DELIVERY BUT NOT ENOUGH MAERSK: TECH PUSHDHL: VINTAGE OPPORTUNITYDSV: BOTTOM FISHING AS CEO LEADS BY EXAMPLE Air freight rates are continuing to edge lower, despite renewed conflict in the Middle East, leaving the market caught between weakening demand on some trades, rising fuel costs, and a stream of carrier network changes. The latest Freightos Air Index shows global rates easing to around $2.82 per kg, down from May’s peak of around $3.35/kg, but still well above levels seen at the start of the year. At the same time, airlines continue to announce new routes, additional frequencies and freighter investments. DHL Express this week expanded its commitment for Mammoth Freighters-converted 777-200LRFs from nine to 13 aircraft, while Qatar Airways Cargo added seasonal London freighter services alongside extra capacity to Dallas, Brussels, Tokyo, Dhaka, and Entebbe. Saudia Cargo launched a new Melbourne freighter route and signed an interline agreement with Riyadh Cargo, while Royal Air Maroc unveiled four new European destinations, adding further bellyhold capacity into its Casablanca hub. Rotate’s data shows that while freighter capacity has stayed flat week on week to 30 July, it is increasingly moving towards stronger-performing tradelanes. Routes such as Leipzig-Dubai, Hong Kong-Dubai, and Muscat-Dubai all recorded significant gains week on week, while Pacific lanes including Shanghai-Los Angeles and Los Angeles-Incheon also strengthened. Conversely, several Europe-linked and traditional ecommerce corridors weakened following the introduction of the EU parcel fee. That picture broadly matches WorldACD’s latest weekly analysis, which showed Hong Kong-Europe volumes down 24% year on year, while China-Europe traffic fell 10%. In contrast, China-US volumes were up 19% year on year and Asia Pacific-US spot rates remained 36% higher than a year earlier. David Kerr, founder of JTD Advisory, argues that the market is sending conflicting signals. “The rate indices and the physical market are pointing in different directions,” he wrote in his latest market note, highlighting that jet fuel costs were running almost 66% above year-ago levels, while the Baltic Air Freight Index had declined for four consecutive weeks. He argued the increase in fuel costs had “not yet fed through” to freight rates, partly because of pricing lags, and partly because weaker Asia-Europe ecommerce demand was masking tighter underlying supply. His view also reflects a broader structural shift under way in Europe. Drawing on Aevean capacity data, Mr Kerr noted APAC and Middle East freighter capacity into Europe fell 14% this month compared with June, equivalent to 18 fewer daily widebody freighter flights, while airports heavily exposed to ecommerce traffic, such as Budapest, Madrid, and Luxembourg, suffered the sharpest reductions. He argued operators were not abandoning aircraft, but redeploying them towards markets offering stronger economics. There are also early indications that fuel costs may again begin influencing pricing. Cathay Cargo, which reviews its Hong Kong export fuel surcharge every fortnight, has reversed several months of reductions by increasing surcharges for the first half of August, following the latest rise in jet fuel prices. The move comes as several container shipping lines, including CMA CGM, MSC, Maersk, and ONE, also announced fresh emergency fuel surcharges linked to renewed Middle East hostilities. However, the market remains surprisingly resilient. Rates have softened from their May highs, but have not collapsed, with freighter capacity falling 1% from June to July, while Europe saw weaker inbound ecommerce demand. For uninterrupted access, sign in or sign up to The Daily News, Premium or The Loadstar Enterprise Plan. Comment on this article