Air Freight Market Update

Europe-to-us Air Cargo Rates Set To Slacken Further Before Regaining Ground During The Year-end Peak Season

• Since reaching a high in December 2022, the air freight spot rate from Europe to the US has fallen by 65% this year. In June (or until 18 June) the rate stood at USD 1.96 per kg, 29% higher than the same period in 2019, but still lower than global rates.

• Downward pressure on the Europe-US corridor will likely continue in the third quarter, mainly due to higher cargo-carrying capacity, which is closely related to passenger seasonality (leisure travel during summer holidays in the Northern Hemisphere).

• Xeneta expects the Europe-US rate to experience only a slight uptick, but to remain above 2019 levels. This is due to both muted cargo demand and lower jet fuel prices compared to 2022, which are unlikely to provide enough thrust to boost the current air freight rate. Ongoing pressure from labor shortages and rising labor costs is also likely to drag on. However, year-end cargo capacity adjustments resulting from airlines’ winter season starting from the end of October should pull some overcapacity out of the market and limit the potential for further rate falls.

(% changes to the same month in 2019)

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Ocean Freight Market Update

NVO Share Of US Imports From Asia Growing In Post-covid Ocean Market

There is a growing percentage of Asia import trade handled by non-vessel-operating common carriers (NVOs) versus moved under direct shipper-carrier contracts. In May, NVOs handled 53.9% of US imports from Asia, excluding less-than-containerload volume, according to PIERS. The NVO share was 46.2% in late 2021 (Fig.1)
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Meanwhile, the U.S. domestic intermodal providers have lowered contract rates through the end of the year for smaller shippers as they look to attract business to rail amid a weak demand environment (Fig.2). Union Pacific Railroad (UP) and COFC Logistics, a wholesaler for BNSF Railway, have updated contractual rates for low-volume shippers. UP slashed rates 3.5% across more than 200 lanes in the US for the balance of 2023, while COFC cut rates 5% on average across 32 lanes. The cuts implemented by UP and COFC are an attempt to address pricing pressure, which is one reason domestic container volume has fallen 6.9% yoy through May.

Fig 1 - Carrier direct vs NVO control of Asia imports (PIERS)

Fig 2 - Contract rates, intermodal and truckload (on 120 US lanes)

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Source: JOC-1, JOC-2