Air freight rates on the Asia to Europe market appeared to bottom out during September, meaning forwarders turned their attention to longer-term agreements. This led to spot rate volumes accounting for 43% of total volumes on this trade during September – down four percentage points from a year ago.
While it is true spot rates fell in September, this should be viewed in the context of them still being up by 56% compared to the same month in 2019. In terms of volume share, the spot market is up on the pre-pandemic era by eight percentage points.
Variances across the Asia regions
When we take a closer look at Xeneta data we can see variations across the numerous Asia to Europe corridors which must be kept in mind.
For example, Mainland China – Europe’s largest import country – had 51% of its volumes agreed in the spot market, up by 14 percentage points from its pre-pandemic level. The spot rate itself stood at USD 3.20 per kg in September, a stark 68% above the same month in 2019.
Securing capacity is therefore not much of a concern on this corridor at the moment with over half of volumes continuing to trade in the spot market. This follows general market sentiments on this trade with few signs of upward pressure on rates owing to subdued demand in Europe and continued recovery of passenger belly capacity.
The Japan to Europe market is following a similar pattern with 55% of total volume during September negotiated on the spot market. This is more than 20% higher than the same month in 2019. Again, there are no surprises in discovering September’s spot rate on this corridor stood at USD 2.98 per kg, up 40% from the same month in 2019.
As the world's busiest cargo airport, outbound Hong Kong volumes are, however, mostly driven by longer-term contracts. In September 2019 only 15% of the total volumes handled by carriers were from the spot market. While this increased to 28% in September this year, it is still significantly below Mainland China and Japan. In terms of the spot rate itself, this now stands at USD 4.19 per kg, which is 54% higher than the same month in 2019.
The fact the spot share sits much lower than Mainland China and Japan indicates limited available capacity. If there is a sudden increase in volumes we could see spot rates spike significantly.
Finally, let us look to the south east and specifically the Vietnam to Europe market, which historically has a large exposure to the spot market, making up 63% of total volumes. However, as spot rates fell below pre-pandemic levels in the first half of this year, more freight forwarders in the outbound Vietnam market fixed longer-term rates. This saw spot share fall eight percentage points below pre-pandemic levels in September 2023.
However, the recent month-on-month surge of 54% in spot rates in September to USD 3.00 per kg has dissuaded freight forwarders from fixing rates at higher levels. The result of this is the spot market increasing its share of volume by eight percentage points on the previous month.
Drill down into the detail to avoid unexpected surprises
The Asia to Europe air cargo market is undergoing a transition and freight buyers will continue to face challenges with some markets still facing above pre-pandemic spot rates.
With the tender season approaching, shippers and forwarders should not just look at the headline stats for Asia to Europe – they must drill down into the detail and understand the variances in spot share and capacity availability across the various regions. Only then is it possible to tailor your strategy to the market and avoid any unexpected outcomes when securing longer-term contracts.
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