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Shippers regain buying power as air cargo fundamentals shift

LOW rates and increased air cargo capacity has brought benefit shippers in 2023, as carriers contend with lower demand, according to industry analysts, reports Washington, DC's Supply Chain Dive.

More businesses came to rely on air freight during the Covid scare as a way to circumvent lengthy delays caused by port congestion. But with ocean congestion clearing, demand for pricier air cargo services has declined.

"As the year continued through 2022, the demand started diminishing to a more realistic level," said Jack Burt, vice president of US cargo at charter company Air Partner.

"Ocean container services started becoming more reliable [with] more available capacity in the ocean market, making it more attractive for shippers."

Lower demand also comes as more capacity hits the market. Air cargo carriers have added freighter capacity, expanded routes and resumed passenger operations - a complete flip from previous years where capacity was strained.

That's led to a very competitive market, which is expected to provide shippers with more pricing and capacity options.

"Demand year over year is quite different. It has decreased, and that's not a bad thing," Mr Burt said. "Markets are coming out of an equilibrium, which should train users for lower cost for transportation and, hopefully, lower costs for goods, overall."

Spot rates in 2021 catapulted to among the highest in history, but prices began leveling off in 2022 with softer demand and greater availability of capacity.

Rates from China to North America, for instance, wrapped up last year at $6.76 per kilogramme, down roughly 40 per cent, according to Freightos.

"Overall capacity will continue to grow, and demand will, I think, decline," said Xeneta's chief air freight officer Niall van de Wouw. "That will have a downward pressure on load factors, and hence, rates, but I don't expect a nosedive from a rates point of view, as we see on the ocean side. I think it will be more of a gradual decline."

While the air freight industry is currently seeing a decline in growth and spot rates, the turbulent market may shift again, Mr van de Wouw said.

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Shippers regain buying power as air cargo fundamentals shift
Shippers regain buying power as air cargo fundamentals shift


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