Growing demand could drive up air freight costs for shippers by 2025

Growing air freight demand driven by e-commerce and semiconductor production is expected to lead to an undersupplied air freight market by 2025, leaving shippers facing the possibility of further increases in shipping costs.

In Xeneta’s aviation market outlook, Niall van de Vouw, director of aviation, and Wenwen Zhang, analyst, forecast air freight demand to grow by 4-6% next year, while capacity will only grow by 3-4%.

The surge in air freight demand is driven by e-commerce, which is expected to grow 14% annually through 2026.

However, the authors warn that increased regulatory scrutiny of e-commerce from the United States, the European Union, and Indonesia could slow demand growth.

Meanwhile, the traditional air freight market will return to growth on trade routes originating in Asia.

“A rebound of the traditional airfreight market will be supported by demand for semiconductors related to generative AI and advanced computer processing,” the authors say.

They point out that silicon wafer volumes – a key material in the manufacture of semiconductors and related electronics – are expected to grow by around 10% in 2025, after falling by 2% in 2024.

Zhang cautions that while these trends are largely concentrated in trade lanes from Asia, carriers may shift capacity from other regions to take advantage of market conditions, which could put pressure on other markets.

On the other hand, the surge in air cargo volumes linked to the Red Sea crisis has leveled off and could even decline slightly next year – although this comes with the potential for further disruptions due to the current geopolitical situation.

The threat of strikes at US East and Gulf coast container ports in January could also create congestion, reduce schedule reliability and lead to a shift of cargo from sea to air.

The report said that while volume growth will slow from 11% this year, demand will still grow faster than supply.

“It is unlikely that the tight airfreight market of 2024 will ease in 2025. It would be wise to manage the expectations of your internal stakeholders that your transportation spend might be higher next year,” Zhang said.

“We are entering an area with unpredictable turbulence. The best approach to a period of high uncertainty is to be alert to quantitative signals from the marketplace as it could avoid shippers over-reacting and creating a vicious circle of escalating rates,” the report added.

As demand grows faster than supply, air freight rates are expected to remain high in 2025, although they will vary by trade lane.

“Demand and supply growth will not be spread evenly across the world’s air cargo corridors – quite the opposite.”

“If you are a shipper using an ex-Asia corridor you will have to consider very different supply/demand balance shifts compared to a business shipping goods out of South America.” 

Last week, IATA forecast air cargo volumes to grow 5.8% next year.

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Source: Phaata.com (via AirCargoNews)

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