Air Freight & Cargo Updates on the Red Sea Crisis: Rates, Data & More

 

In the fast-paced world of logistics, staying ahead of market trends is crucial for businesses to adapt and thrive. Judah Levine, Head of Research at Freightos, offers a comprehensive overview of current air cargo market dynamics and strategic responses, tapping into air cargo data from WebCargo Terminal. 

 

Let’s Talk Economics.

Demand Trends in the US Economy

The hard data tells a story of potential consumer pullback. Retail sales fell 0.8% MoM in January 2024, while projections were for an increase, which could indicate consumer pull back due to high interest rates.With inflation easing, some were hopeful the Fed would start cutting interest rates as early as March, but rate cuts will now come midyear at the earliest. This means that if high interest rates are indeed a factor in terms of consumer spending, we could expect a continued slowdown or moderate pullback, although the economy is still expected to grow in general. 

 

Demand Trends in Europe

Jumping over to the other side of the Atlantic, the Eurozone saw inflation cool in February to 2.6%, which is down from a high of 11.6%. back in October of 2022.Interest rates are still at a record high, with the Central Bank insisting they won’t reduce them until June at the earliest.However, growth projections are slightly more bleak than the US, with economies like the UK and Germany in the midst of a mild recession. The ECB projections are 0.6% GDP growth for the Eurozone this year compared to their forecast in December, which was for 0.8%. All in all, the Eurozone economy remains weak, as consumers and manufacturing are both holding back even as wages increase, which could hinder inflation reduction efforts. 

Watch Judah’s full report here

 

The Air Cargo Market In Plain English

Despite mixed signals, the US economy displayed resilience, with moderate growth projections. In Europe, however, challenges loomed with inflation cooling but growth prospects dimming, amidst a mild recession.

 

Impacts of the Red Sea Crisis on Ocean and Air Cargo

Which brings us to freight.

The escalation of hostilities in the Red Sea has had ripple effects on both ocean and air cargo operations, dating back to earlier this year. While disruptions initially led to concerns about capacity and delays, the industry adapted swiftly to new norms. Ocean operations, in particular, saw adjustments in schedules and network configurations, leading to a newfound stability. 

As for air cargo rates and booking, there was a slight increase in demand due to ocean disruptions and resulting modal switches, with reports of congestion in early March, and even suspension of bookings at some terminals in Bangkok and Dubai, on top of significant increases in demand out of India. 

Overall, however, a return to seasonality and the gradual recovery of global economies played the most pivotal roles in shaping air cargo volumes, with demand improving since 2023 and international air cargo volumes increasing by 4% since January 2019, driven in part by the rise of e-commerce shipments.

 

Volatility As the Catalyst for Digital Adoption

Technology has taken on a pivotal role in navigating market disruptions. Volatility – with rapidly changing capacity, demand and pricing –  has reliably served as a catalyst for digital adoption, prompting companies to invest in tools for pricing intelligence, visibility, and operational efficiency. Specifically, according to Manel Galindo, founder of WebCargo, COVID saw far more airlines leverage eBooking to meet faster-changing customer demand.

WebCargo, a leading player in Digital Air Cargo bookings, exemplified this trend, facilitating seamless transactions amidst evolving market conditions, as well as providing bespoke data and insights through WebCargo Terminal via the FAX (Freightos Air Index). The FAX is by far the most comprehensive and reliable, transaction-backed air cargo rate index covering more than sixty major airports and dozens of tradelanes.

Shippers and forwarders are increasingly relying on the FAX for freight intelligence to defend prices, costs and budgets as the basis for negotiations with logistics providers and for operational decision-making. 

Freight data allows logistics stakeholders to remain competitive in an ever-fluctuating marketplace. It provides the ability to be able to understand on a week by week and month by month basis where a company is trending at, and how to make the best routing decisions that ensure they are paying the most competitive prices. 

 

Clear Skies Ahead?

While challenges like the Red Sea crisis have underscored the fragility of global supply chains, they have also highlighted the resilience and adaptability of industry players. By leveraging data-driven insights and proactively embracing digital solutions, companies can navigate uncertainties and emerge stronger in the face of adversity. 

While it is unclear when the Red Sea crisis will subside, what is clear, is that businesses must continue to evolve and adapt…and as they do, innovation will remain a key driver of success.