As the Lunar New Year approaches, there is a heightened demand for air cargo services from Asia to Europe. This surge is attributed to the traditional pre-festive season export push, where businesses aim to fulfill orders and shipments before the holiday period. Additionally, disruptions in the Red Sea, prompting concerns and rerouting in maritime transportation, have contributed to a modal shift towards air freight, further intensifying demand and subsequently increasing air cargo rates on the Asia-Europe route.
The Baltic Air Index (BAI), focusing on departure routes from Shanghai, has recorded an 8.8% increase compared to the previous week. This upward trend is primarily driven by a surge in demand from European destinations. The data, provided by TAC, a source of pricing information for the BAI, indicates a notable rise in air freight rates for outbound flights from Shanghai, reflecting heightened demand for air cargo services, particularly to European markets.
The increase in prices corresponds with forecasts of a possible spike brought on by interruptions in Red Sea maritime commerce. Notably, sources often report an uptick in rates in the run-up to the Chinese New Year. This year’s Lunar New Year in Asia is scheduled to begin on February 10.
This week saw a rise in air freight prices to $4.02 per kilogram from China to North Europe. According to the Baltic Air Index (BAI), this is a noteworthy increase of 20% above the rates recorded in the first week of January, as well as a 13.5% increase over the previous week. The spike in rates points to increased demand and possible changes to the region’s supply chain.
Strong demand has been observed in the Asia-North Europe air cargo route, according to the Netherlands-based air cargo researcher WorldACD. The previous two weeks have seen an increase in worldwide demand of 6% year over year, despite the 2023 timeframe having an earlier Lunar New Year and the usual yearly surge in air freight traffic preceding plant closures in China. This suggests a significant increase in aviation freight traffic, especially on the route between Asia and North Europe.
The analyst did point out, though, an unanticipated rise in air freight tonnage from the Middle East of 21% as well as a 12% increase from South Asia. This suggests that due to worries about security in the Red Sea region, some cargo may move from ocean freight to air and sea-air routes. Increased air cargo volume in these locations appears to be a result of the continuous disruption in the Red Sea impacting the mode choice for certain cargoes.
Lavinia Lau, Chief Customer and Commercial Officer at Cathay Pacific, expressed that air freight volumes from Asia are expected to rise throughout January. However, she attributed this increase to a growing demand for e-commerce rather than a shift in cargo from ocean to air. According to Lau, the boost in air freight is more closely tied to the ongoing surge in demand for online retail and e-commerce services.
She Stated this week, “We expect demand to steadily pick up from the second half of the month with the e-commerce demand on the Americas and European lanes remaining solid and local demand strengthening up to the Lunar New Year holidays”.
Looking ahead, the Asia-Europe air cargo market is anticipated to maintain its upward trajectory in rates and demand, driven by the approaching Lunar New Year and ongoing disruptions in maritime shipping in the Red Sea. The convergence of these factors is expected to shape the market dynamics, with potential fluctuations in rates and heightened demand for air freight services in the coming weeks. Industry stakeholders should closely monitor these trends to navigate the evolving logistics landscape effectively.
