Market update

Freight Market Update: January 9, 2025

Shared by Elizabeth • January 09, 2025

AIR FREIGHT

Growth in air cargo demand to decelerate in 2025, IATA says

Air cargo volumes are predicted by IATA to rise by 5.8% year on year to reach 72.5 million tons in 2025, supported by e-commerce and demand related to the Red Sea. While demand is expected to grow, average yields are predicted to decline slightly by 0.7%, remaining well above pre-pandemic levels. This slight decrease in yield is expected to be stable in 2025. Cargo revenues are projected to reach $157 billion, accounting for 15.6% of total airline revenues.

Continued geopolitical uncertainty, particularly regarding sea shipments routed through the Suez Canal, along with booming e-commerce from Asia, are favorable trends for air cargo in 2025. However, the increased competitiveness of air freight may diminish once major shipping routes stabilize or if significant new vessel capacity is introduced.

Despite lower fuel prices, staffing costs have risen, and unresolved supply chain issues pose a capacity challenge. Political risks, particularly changes to tariffs and trade under the incoming Trump administration, are also concerns.

IATA reported robust performance for air cargo in 2024, with demand expected to increase by 11.8% year on year, following two years of declining volumes after the pandemic peak. The strongest growth has been observed among airlines in the Middle East and Asia Pacific, benefiting from robust e-commerce and disruptions in ocean shipping. Overall, while capacity is expected to continue growing, it will do so at a gradually decelerating rate, warranting cautious optimism for the air cargo sector in 2025.

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Asia-US container spot rates spiking to year-end highs

Container spot rates from Asia to the United States are experiencing significant increases, reaching levels not seen since December 2020, primarily due to surging imports ahead of a potential strike by the International Longshoremen’s Association and an early Lunar New Year on January 29.

The spot rate for West Coast shipments has risen dramatically from $2,500 per FEU to the mid-$4,000s, following the GRIs of nearly $2,000 per FEU. Meanwhile, East Coast rates have jumped from approximately $4,367 to the mid-$5,000s to low $6,000s, reflecting GRIs of about $1,500 to $1,600.

Historically, December is a slow month for trans-Pacific trade, but this year’s conditions have prompted retailers to front-load merchandise due to concerns over a potential strike, coupled with the imminent Lunar New Year and looming tariffs on imports from key trading partners. Vessel space is tight, with some carriers overbooked, leading to the formation of container roll pools at Asian ports for shipments unable to embark on their scheduled voyages.

Despite the challenges, demand for shipping to the East Coast remains surprisingly high. Retailers are weighing the costs of shipping directly to the East Coast against potential delays and increased land transportation expenses. This situation has also led some importers to divert shipments to the West Coast, exacerbating rail congestion in California.

Platts container rate North Asia to US Coasts USD per FEU