AIR FREIGHT
The air freight sector has showcased remarkable resilience and growth throughout 2024, defying earlier predictions of a lackluster year. Driven by the booming e-commerce industry, air cargo has recorded consistent gains, with global full-market rates reaching their highest levels of the year. As of December 1, rates increased by 2% week-on-week, climbing to $2.84 per kg. Notably, key Asian markets like China, Japan, South Korea, and Vietnam saw significant rate increases, with year-on-year growth exceeding 30% in several regions. Taiwan, for instance, witnessed a 46% surge compared to the same period last year. Despite temporary congestion at major airports and the busy freighter capacity, the current peak period has been managed far more efficiently than in previous years, reflecting a more mature and structured industry approach.
E-commerce now accounts for up to two-thirds of airfreight volumes coming out of China, driving sustained demand on routes to Europe and the US. However, a temporary dip is expected during Christmas, with rates expected to rise again as businesses prepare for the Chinese New Year at the end of January 2025. Adding to the current pressure, freighter operators have proposed significant increases in contract rates for the upcoming year. In some contracts, rates are climbing by over $1.40/kg compared to 2024—a record high in recent years. Meanwhile, geopolitical developments and anticipated tariffs on Chinese imports in early 2025 are prompting businesses to stockpile goods. This is further intensifying demand for air cargo and straining capacity networks.
Despite these challenges, the industry has displayed high adaptability to demand fluctuations. Lessons from past disruptions, such as erratic capacity spikes and skyrocketing rates, have led to better coordination between shippers, forwarders, and airlines. This structured collaboration has allowed the market to stabilize even under peak pressure. However, the road ahead still remains uncertain. A potential port strike along the US east and Gulf coasts in early 2025 and the ongoing shift of manufacturing operations from China to Southeast Asia could change load projections and pricing strategies. These shifts will require continued vigilance from all stakeholders.
As the sector enters 2025, the focus will likely be on addressing capacity constraints, mitigating the effects of geopolitical shifts, and capitalizing on value-added services to sustain growth. While the challenges are significant, the air freight industry’s demonstrated resilience in 2024 offers a solid foundation for navigating the complexities of the year ahead.
ROAD FREIGHT
Europe’s road freight industry remains mired in a worsening driver shortage crisis, with approximately 12% of all positions unfilled—equating to around half a million vacancies. Despite stagnant economic activity keeping this percentage steady over the past year, the situation is expected to deteriorate further in 2025 as economic growth in Europe is forecast to reach 1.5%, intensifying freight activity and pushing driver shortages to an estimated 15%.
The aging workforce is one of the primary drivers of this crisis, with 36% of European truck drivers aged over 55 and a significant proportion nearing retirement. This trend suggests that nearly half a million drivers could retire in the next five years, exacerbating an already challenging labor gap. Simultaneously, only 4% of drivers are under 25, further underscoring the industry’s struggle to attract younger talent.
Recruiting female drivers is another avenue for addressing this shortage. Women represent only 4% of truck drivers in Europe, compared to 47% of the transport workforce. Yet, job satisfaction surveys indicate that female drivers are more likely than male counterparts to recommend the profession, suggesting a significant untapped resource.
Europe’s reliance on non-European nationals remains limited, with only 6% of drivers outside the EU. While recruiting international drivers could offer relief, current work regulations complicate the process. In response, the European Commission-backed Steer2EU initiative aims to harmonize driving standards with non-EU countries such as Tunisia, Morocco, Egypt, Bangladesh, and Pakistan. Rather than poaching drivers, this program focuses on developing professional skills to meet EU standards, bridging the legal and operational gaps for potential recruits.
SEA FREIGHT
The sea freight sector continues to steer dynamic transitions amid shifting trade patterns, regulatory developments, and operational challenges. One of the key highlights this year has been the impact of cascading containership deployments in response to the Red Sea crisis. Ships on the Asia-Europe route were rerouted via the Cape of Good Hope to avoid disruptions, resulting in longer sailing distances and increased vessel demand. Deployment of ships in the 12,000-17,000 TEU range, which had surged by 18% in 2023, saw further redistribution in 2024. While transpacific lanes initially absorbed much of this capacity, vessels were increasingly redirected to Far East-Europe and Far East-South America routes to meet rising demand. These adjustments illustrate the ongoing ripple effects of geopolitical disruptions on global shipping patterns.
Demand remains robust on the Far East-Mexico/South America trade lanes, mainly as shippers aim to expedite goods ahead of impending tariffs and the early Chinese New Year in January. South Korean exports to Central and South America jumped 35% year-on-year in October, driven mainly by shipments to Mexico, which saw a 29% volume increase. Freight rates on these routes, while slightly corrected, remain elevated. For instance, the Shanghai-Santos rate stood at $5,346/FEU last week, while the Korea Composite Container Index recorded rates to the Latin America East Coast averaging $6,021/FEU. Analysts note that while Far East-South America volumes have grown exponentially, the trade remains volatile, with frequent rate peaks reflecting its relative immaturity compared to established lanes like the China-US West Coast.
Meanwhile, the UK’s emissions trading scheme (ETS) for maritime shipping is set to expand, potentially closing a loophole allowing carriers to reduce ETS charges by making port calls in the UK before proceeding to EU ports. This workaround, employed by carriers like MSC and Hapag-Lloyd, has raised concerns about increased port congestion and inflated freight rates. UK authorities are now considering aligning their ETS with EU provisions to address the risk of carbon leakage and ensure fuel prices better reflect their environmental impact. While the loophole currently allows for cost savings, experts predict it may not last long, as the EU plans to review its ETS policies by 2026.
RAIL FREIGHT
Rail freight in Europe and its neighboring regions is undergoing significant shifts driven by structural changes, regulatory developments, and geopolitical challenges. In France, the creation of Hexafret and Technis, born out of the breakup of Fret SNCF, marks a major development. Hexafret, focusing on groupage and single-wagon transport across France and borders, aims to tackle the complex and volatile rail freight market. While challenges such as dependency on state subsidies and potential industrial action remain, optimism surrounds the new entities. French shippers’ association AUTF has expressed cautious optimism, emphasizing the need for reliability and stability in Hexafret’s operations to foster trust in rail freight. With Hexafret’s estimated €700 million turnover by 2025, its success hinges on maintaining smooth labor relations and ensuring service quality amidst competitive pressures.
Russia also has an uphill battle due to war-induced sanctions and declining locomotive service capacity. Russian Railways (RZD) has announced a 13.8% tariff hike starting in December to offset the heavy investments needed for 500 new locomotives and operational sustainability. Additionally, container rates are set to rise by 5% next year, adding to the burden on shippers. However, RZD continues to lose market share to alternative routes such as the trans-Caspian corridor, which has seen a staggering 1,400% year-on-year increase in China-Europe traffic. Kazakhstan, capitalizing on this shift, has partnered with Azerbaijan to build a new intermodal terminal at the port of Alyat, aimed at bolstering container traffic on the China-Europe-China route. This project is set to reduce delivery times and costs, presenting a compelling alternative to RZD’s strained network.
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