E-Commerce Activity Boosts Air Cargo Freight Rates, Brings a Fundamental Shift

E-Commerce has become ‘the way’ to shop in the last few years as customers connect with businesses from every part of the world. To top it off, air cargo has enabled next-day deliveries in many regions. As a result, in recent months, the air cargo market has experienced a significant transformation, characterized by a ‘fundamental shift’ towards e-commerce, according to Neil Wilson, a contributor to the monthly Baltic Exchange newsletter and representative of airfreight rate data provider TAC Index.

The surge in airfreight rates, as noted by Wilson, can be attributed to a combination of factors, including the influence of weather conditions, geopolitical developments, and a notable increase in e-commerce demand. Particularly, strong levels of e-commerce activity originating from southern China have played a pivotal role in shaping the market dynamics throughout the year.

Despite general softness in cargo demand, rates from Hong Kong have proven more resilient compared to the global average. TAC Index data for November reveals a 19.2% increase in the index of outbound routes from Hong Kong, up 0.5% year on year. Similarly, outbound routes from Shanghai saw a substantial gain of 25.4% over the month, with a 7.3% year-on-year increase.

Wilson highlighted additional factors influencing the market in November, such as the Israel-Hamas conflict and snowstorms impacting Anchorage, the world’s third busiest cargo hub. The prolonged period of record snowfall in Anchorage posed disruptions, leading to potential knock-on effects on air cargo operations.

Bruce Chan, Director and Senior Research Analyst at investment bank Stifel also acknowledged the positive impact of e-commerce demand on the air cargo market, while also cautioning against extrapolating this trend to signal a broader economic recovery. Chan emphasized that while Cyber Week sales in the US showed an 8% year-on-year increase, broader retail sales performance remained muted.