The global air cargo market entered 2025 with a slower-than-expected start, experiencing a modest +2% year-on-year growth in January. This growth rate marks a significant drop from the double-digit monthly increases observed throughout the previous year, which has led to a state of uncertainty and concern. The primary cause of this underperformance is attributed to fears of escalating tariff trade wars. Industry analysts from Xeneta suggest that although it might be premature to predict the impact of these tariffs on volume and growth, the nervousness in the market is evident.
The Impact of Early Lunar New Year
Seasonal Influences on Air Cargo Demand
Niall van de Wouw, Xeneta’s Chief Airfreight Officer, attributes the unexpected drop in demand to the earlier Lunar New Year in 2025, which typically reduces volumes out of China. However, he emphasizes that this alone does not account for the significant drop observed, since comparisons were made against an abnormally high benchmark set in January 2024. The market volatility and uncertainty are further exacerbated by the new tariffs introduced by the United States, primarily targeting China, and the subsequent countermeasures. Despite these factors, van de Wouw maintains that there is no immediate reason to alter Xeneta’s +4-6% growth forecast for 2025.
The early Lunar New Year led to a unique seasonal influence that compounded the market’s reactions to the high benchmarks of the previous year. Moreover, the shift in the timing of the Lunar New Year impacted the expected shipping schedules, creating a temporary dip that might be misleading if considered in isolation. Therefore, the current slump should be evaluated in the broader context of recent trends and the geopolitical landscape, including both trade policies and the natural fluctuations of global economic activities.
Strategic Planning Amid Uncertainty
“The lower growth in air cargo demand in January is not entirely due to President Trump’s policies or the early Lunar New Year,” van de Wouw points out. He continues to explain that the air cargo market is entering a period of substantial uncertainty, complicating strategic planning for businesses. The implementation of US tariffs and reciprocal measures taken by countries such as China, Canada, and Mexico are perceived as the initial stages of a negotiation process. While there is potential for a global trade war, President Trump’s inclination to negotiate could eventually lead to more favorable outcomes.
Despite these potential negotiations, the prevailing uncertainty dampens trade confidence and investment perspectives. Businesses have always preferred stability before committing large sums of money. Thus, shippers are advised to avoid drastic moves and major plans at this stage. van de Wouw recommends a cautious, wait-and-see approach, suggesting that businesses should be prepared to adapt to the unfolding situation without reacting precipitously to the current volatility. The long-term outlook remains uncertain, but the ability to adapt will be crucial in navigating the complexities of 2025’s air cargo market.
E-Commerce: A Primary Driver of Growth
Sustainability of E-Commerce Volumes
E-commerce has been a significant focus as a primary driver of global air cargo growth since the third quarter of 2023. In 2024, a quarter of China’s cross-border e-commerce shipments were destined for the US, representing more than half of the cargo capacity from China to the US. However, the suspension of the de minimis exemption—which permits low-value goods to enter the US with minimal customs formalities—could substantially impact this dynamic by imposing higher costs and more stringent entry requirements. This change raises questions about the sustainability of e-commerce volumes under new regulatory frameworks.
Despite these regulatory challenges, van de Wouw remains optimistic about the durability of consumer demand for e-commerce. He argues that the impressive growth of China’s e-commerce sector was not driven by exploiting de minimis loopholes but by meeting consumer demand for low-cost, quick deliveries. While the removal of de minimis may slightly increase the cost of e-commerce products, they are likely to remain cheaper than their retail counterparts. However, the real risk lies in operational disruptions leading to delays in the delivery of goods, which could deter consumers and fundamentally disrupt the market’s growth trajectory.
Consumer Demand and Operational Efficiencies
Operational efficiencies are critical in sustaining the e-commerce boom. Disruptions could have long-lasting implications, not just by making deliveries slower but also by eroding consumer trust in e-commerce platforms. van de Wouw suggests that China’s e-commerce giants were likely anticipating changes to de minimis policies and have prepared accordingly. Thus, they will continue selling and shipping goods despite these new regulations. In the short term, there may not be a substantial impact on air freight rates, although operational chaos may ensue at receiving airports in the US.
Looking longer-term, e-commerce demand and air freight rates would only be significantly affected if consumers find the wait times for products too burdensome compared to the potential cost savings. Therefore, the impact on air freight relies heavily on maintaining operational efficiencies and minimizing delays. This emphasis on operational performance underscores the need for logistics companies to adapt quickly and implement robust contingency plans. Maintaining consumer satisfaction will be crucial for sustaining demand in this ever-evolving market landscape.
General Freight Sector and Market Dynamics
Stagnation in General Freight
In stark contrast to the robust e-commerce market, the general freight sector has seen stagnation in recent years and is not expected to experience substantial improvements in 2025. The lack of growth in this sector has been attributed to various factors, including a surplus of capacity and shifts in trade patterns. With general freight shippers already struggling to find momentum, the reallocation of capacity, particularly if e-commerce volumes decline, could offer some relief. This reallocation might lead to reduced rates, benefiting general freight shippers by providing more competitive pricing in a crowded market.
The current state of the general freight market indicates a stabilized scenario where demand and supply are in relative equilibrium. However, the outlook for significant improvement remains bleak unless there are considerable shifts in global economic activities or trade agreements that may boost general freight demand. The continued reliance on e-commerce as a primary growth driver suggests that any fluctuations in this sector could trickle down to impact general freight in a cascading effect, underscoring the interconnected nature of the air cargo industry.
Chargeable Weight and Capacity Growth
January’s air cargo data reveals modest growth in terms of both chargeable weight and capacity, each showing an increase of +2% year-on-year. This relatively modest growth was influenced by reduced ocean shipping disruptions, which have historically diverted cargo to air transportation as a reliable alternative. The dynamic load factor, representing capacity utilization, remained stable at 57% compared to the previous year, indicating a balanced use of the available capacity despite the broader market uncertainties.
While the slow start to 2025 may seem discouraging, these figures are a reminder of the air cargo market’s resilience amid various challenges. The stability in capacity utilization suggests that the industry is managing its resources effectively, even as it braces for external shocks and regulatory changes. The importance of maintaining this equilibrium is crucial for navigating the uncertain waters ahead, with companies needing to remain agile and responsive to both short-term fluctuations and long-term trends.
Geopolitical Influences and Spot Rates
Elevated Global Air Cargo Spot Rates
Despite modest growth in chargeable weight and capacity, global air cargo spot rates remain elevated, with January’s rates standing +17% higher than the previous year and +56% above pre-pandemic levels. This elevated rate is predominantly due to the e-commerce boom, limited air cargo capacity resulting from slow aircraft production, rerouting of flights due to Russian airspace closures, and freight rate adjustments that often lag behind shifts in supply and demand. These factors have converged to create a market where spot rates remain high, even as other indicators suggest stability.
Moreover, the elevated spot rates are symptomatic of broader supply chain disruptions and adjustments that the air cargo industry must navigate. The convergence of limited capacity with high demand underscores the necessity for strategic planning and agility in responding to market changes. Companies that can effectively adjust their supply chain strategies to accommodate these unpredictable shifts are likely to fare better amid the high spot rates and ongoing geopolitical complexities.
Corridor-Specific Trends
The month-on-month decline in global air cargo spot rates was -11%, a more gradual reduction compared to a -13% drop during the same period in the previous year. Corridor-specific trends varied considerably, with trade routes from the Middle East and Central Asia to Europe showing the most significant increase of +63% year-on-year. This exceptional uptick is largely attributed to disruptions in the Red Sea region, affecting trade flows and driving rates higher on those routes. On the Europe to North America corridor, spot rates also saw a notable rise, up +24% year-on-year, suggesting divergent trends across different trade lanes.
The rise in rates from the Middle East and Central Asia to Europe highlights the regional specificities that can influence spot rates. In contrast, the Europe to North America corridor reflects broader market dynamics, including robust trade flows and relatively stable economic conditions between these regions. These variations underscore the complexity of global air cargo market dynamics and the importance of monitoring corridor-specific developments to make informed strategic decisions.
Strategic Shifts and Trade Imbalances
Asia-Related Trades and Spot Rates
A discernible strategic shift towards Asia-related trades has led to moderate growth in spot rates from North East Asia, with rates rising +19% to Europe and +14% to North America. This growth can be attributed to increasing trade activities with Asia, which continues to be a significant market for global commerce. However, backhaul trades on these corridors experienced spot rate declines due to growing trade imbalances. For instance, the North America to North East Asia corridor saw a -22% drop in spot rates, while the North America to Europe corridor experienced a smaller -2% decrease.
The imbalances between these trade routes reveal the complexities and interconnectedness of global air cargo markets. Demand fluctuations and supply chain adjustments contribute to the uneven distribution of trade activities, impacting spot rates in varying degrees. The industry’s ability to adapt to these imbalances will be crucial for maintaining competitive advantage, emphasizing the need for continuous monitoring and strategic responses to the rapidly changing trade dynamics.
Sustaining Growth Amid Challenges
The global air cargo market began 2025 with a slower-than-expected start, recording only a modest 2% year-on-year growth in January. This growth rate represents a sharp decline from the double-digit increases seen each month throughout the previous year. This abrupt slowdown has led to a state of uncertainty and concern within the industry. The primary reason for this lackluster performance is attributed to fears of escalating tariff trade wars. Industry analysts from Xeneta note that while it might be too soon to predict the full impact of these tariffs on volume and growth, the market’s nervousness is clearly palpable. In addition to trade concerns, other factors such as fluctuating fuel prices and shifting global economic conditions are contributing to the anxiety. With these complexities in play, companies in the air cargo sector are finding it challenging to prepare for the months ahead, adding another layer of uncertainty and reinforcing the need for adaptive strategies and contingency planning.
