• WorldACD Market Data reports that global air cargo tonnages were stable in week 12 but remain down by 6 percent YoY, while both spot and full-market rates surged due to restricted capacity, operational disruptions, and rising jet fuel costs.
• Middle East & South Asia (MESA) spot rates continue to spike, with year-on-year increases of 70 percent for the region, driven by capacity reductions following recent attacks on Iran, operational restrictions, and backlogs; South Asia capacity has partially recovered.
• Asia Pacific demand remains strong, pushing spot rates 26 percent YoY to Europe; despite modest capacity rebounds, supply constraints, fuel shortages, and Gulf airspace restrictions suggest rates are likely to rise further in the near term.

The latest weekly figures from WorldACD Market Data indicate that worldwide tonnages were relatively stable in week 12 (16 to 22 March) compared with the previous week, dipping by 1 percent, although they are down by 6 percent compared with week 12 last year amid the continuing constraints on air cargo capacity to and from key markets. But spot rates and average full-market rates rose again from all of the world’s main origin regions, as carriers, freight forwarders, and cargo owners adjusted to disrupted and volatile markets, restricted capacity, demand backlogs, and higher jet fuel prices.

With several of the world’s biggest air cargo carriers still facing major capacity and operational disruptions, average global full-market air cargo rates rose by a further 7 percent, week on week (WoW), in week 12 to US$2.84 per kilo after surging 10 percent the previous week and 8 percent in week 10. It was a similar picture for spot rates, which rose by a further 6 percent in week 12 to US$3.38 per kilo, driven by further 8 percent WoW increases from Middle East & South Asia (MESA) and Asia Pacific markets. That takes average worldwide spot rates 26 percent higher than in week 12 last year, with MESA spot prices 70 percent up, year on year (YoY). But with major disruptions still affecting the capacity, networks and services of many of the big Gulf carriers and airports, spot rates from Africa (41 percent), Europe (23 percent), North America (23 percent), and Asia-Pacific (18 percent) also remain significantly elevated compared with the equivalent week last year.

Limited capacity increases in Gulf while South Asia recovers

Following the attacks on Iran since 28 February, capacity from the MESA region dropped sharply in weeks 8, 9, and 10, although it has stabilised and seen some modest increases in weeks 11 (6 percent WoW) and 12 (2 percent). Nevertheless, capacity from MESA in weeks 11 and 12 combined was down by 37 percent compared with the equivalent two weeks last year. Capacity specifically from the Gulf area also saw some increases in weeks 11 (6 percent WoW) and 12 (3 percent), although it was around 20 percent down compared with its levels in week 7, prior to the attacks on Iran. From South Asia, capacity has recovered close to its levels prior to the war following increases in week 11 (7 percent WoW) and week 12 (1 percent).

Middle East & South Asia spot rates surge

After very big rises in spot rates from MESA origins in the previous three weeks, including a 22 percent WoW rise in week 11, the further 8 percent WoW increases from the region in week 12 were relatively modest. The biggest increases in spot rates from the region were to Africa (18 percent WoW, to US$4.76 per kilo) and to other countries within the region (13 percent), based on the more than 500,000 weekly transactions covered by WorldACD’s data. From the Gulf area, spot rates rose by a further 11 percent WoW, including a 24 percent rise to Africa and a 12 percent increase to destinations in the MESA region. Operational restrictions mean most European and North American carriers are not currently operating to and from Gulf markets.

Average spot rates from MESA origins to Europe rose by a further 7 percent WoW in week 12, after already almost doubling in the previous two weeks. Spot rates from India (US$4.44), Bangladesh (US$4.82), and Sri Lanka (US$4.85) to Europe all averaged around twice their level a month ago, prior to the start of the conflict in Iran, with forwarders reporting backlogs and capacity constraints driving up rates amid robust demand. Restrictions on jet fuel availability are reportedly also adding to the restrictions on capacity for some carriers, and demand is set to rise following the end of Ramadan and Eid.

Asia Pacific demand and rates keep rising

Spot rates from Asia Pacific origins to Europe saw a further 8 percent WoW rise in week 12 to an average of above US$5 per kilo, taking them 26 percent higher YoY, with demand rising and space extremely tight from most of the region’s big air cargo origin markets.

These average worldwide spot rate rises come despite a slight further WoW rebound in capacity in week 12 (3 percent WoW), boosted by rises in freighter capacity on many important lanes, as forwarders and carriers attempt to plug gaps in key markets. But as airlines approach the start of their summer season on 29 March, the capacity situation remains extremely complex and fluid, not only due to the ongoing airspace and airport restrictions in Gulf countries, but also due to rising jet fuel costs and shortages in some countries, particularly in parts of Asia, leading to further flight and capacity restrictions for some carriers.

Continuing strong demand for capacity, combined with these supply issues and rising costs, looks likely to lead to further increases in spot rates in the coming period – even if there is no further escalation of the conflict in the Gulf area, and assuming there is no swift resolution.

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