Air Cargo Demand Remains Strong Despite Normalization Fears
As the air cargo industry enters the new year, analysts predict that demand growth may slow down significantly, potentially by up to two-thirds, as the market normalizes and trade conditions become less favorable. However, even a 4% growth rate, which is on the lower end of projections, would be considered a solid year by most industry stakeholders.
Post-Holiday Slump Eases, Volumes Rebuild
Global volume and rates have eased in the first two weeks of January, reflecting the typical post-holiday seasonal decline since the end of peak shipping activity in early December. Despite this, 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 recovering from a prolonged downturn.
Rates Soften, But Remain Strong Year Over Year
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 China-North America trade corridor have fallen slightly less than typical from their traditional December peak.
Inventory Stockpiling Boosts Demand
Logistics companies attribute 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. This has led to a significant uptick in cargo volumes, particularly for consumer electronics.
Peak Season Extends into Late January
Taiwan-based freight forwarder Dimerco Express Group sees the market in similar terms, with the peak season expected to extend all the way to late January, just ahead of Chinese New Year. This unusual trend may indicate a new approach to optimizing capacity and costs.
Air Cargo Yield Increases
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 strong market included the effective cutoff of the Red Sea by Houthi rebel attacks on merchant shipping, air space restrictions around Russia, and the surge in e-commerce exports from China.
E-Commerce Drives Volume Growth
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, influencing the upward move in yields.
Contract Rates Increase
For 2025, airlines have announced a 10% increase in contract rates. 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.
Downside Risks Ahead
Multiple analysts project volume growth will cool down to 4% to 6% this year. Downside risks include the resumption of shipping through the Suez Canal, 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.
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