Iran peace deal announcement greeted with caution

Figure of the week

Demand in the US for AI-related infrastructure from Asia is filling the equivalent of 46 freighter aircraft a day on the trans-Pacific trade. High-yielding data center components have become an important factor on the eastbound trade lane, driving up volumes and partially replacing falling e-commerce freight.

Quote of the week

“In total, supply chain failures cost airlines at least $11 billion in 2025. Today’s higher fuel prices will only make that worse.” IATA director general Willie Walsh said supply chain disruptions in the delivery of new aircraft had forced airlines to operate older aircraft for longer than planned. This has led to higher fuel consumption, increased maintenance expenses and additional aircraft leasing costs.

Iran peace deal announcement greeted with caution

Air freight shippers face long term capacity crunch

Air freight pricing surges triggered by the Middle East conflict may soon be easing as the US and Iran appear on the brink of a deal . However, the air cargo market is unlikely to return to business as usual very quickly and may look quite different to how it was earlier this year when the crisis recedes. “We are on record saying rates wouldn’t come down as fast as they went up,” said Xeneta chief air freight officer Niall van de Wouw. “It takes a while for rates to adjust to the market situation, but I would not be surprised to see year-on-year spot rate comparisons decline in June.” Volatility in the market means air cargo buyers have, in some cases, been reluctant to sign fresh service contracts. Instead, they have preferred short-term extensions, hoping that elevated rates would come down. Over the longer term, there is another factor that could weaken shippers’ hand in the market. Air cargo is facing an increasing capacity crunch due to ongoing supply chain disruptions. Executives attending the TIACA conference in Warsaw last week heard that air freight demand overall is growing, both from e-commerce and from other segments such as equipment for data centers. However, while aircraft production is increasing, it is not doing so quickly enough to meet that demand. So far, airlines have been able to balance supply and demand through operational and commercial adjustments, but this may become more difficult in the future. IATA director general Willie Walsh recently warned that geopolitical disruptions afflicting supply chains could hamper airlines’ ability to ensure supply meets demand. For now, rates over the last week from China to the US have continued to increase, especially out of southern China. Despite an improving situation in the Middle East, flight schedules remain unstable and can change at short notice .

Early surge may prove longer-lived than expected

US import volumes considerably exceeded expectations in May and the early peak may prove to have more staying power than was initially forecast . Imports from Asia jumped to 1.68 million TEUs. This represented a 13% rise from April and was almost 20% higher year on year, according to PIERS data. The strong demand, evidently representing an early peak season, has been accompanied by rising spot rates. As of mid-April, West Coast trans-Pacific rates were up 10% week on week, according to Platts. East Coast rates were up 7% in the same period. Carriers’ disciplined capacity management has helped their latest GRIs stick. Analysts expect a new round set for July 1 to enjoy at least partial success. A large part of the surging volumes appears to be due to front-loading based on fears that more tariffs could be introduced later this year and that fuel surcharges could rise. But if the apparent peace deal between the US and Iran holds, rising fuel surcharges could be avoided. Other analysts attribute the rise in volumes from Asia to the Supreme Court striking down a major part of the Trump administration’s tariff agenda. The big question for many shippers is how long this early peak season will last . Up till now analysts have generally expected it to be short-lived but that might be changing. The NRF said when it released its data last week that it expected imports to start falling in July. Now, some carrier executives are now anticipating that front-loading could continue throughout July and even into August. Shippers should prepare for a volatile summer with price spikes, strong demand and delays .

🤔 Did you know ?

Shippers have been advised to expect potential delays at Asian ports as a result of a shortage of empty containers. Ocean carriers are reportedly looking at leasing boxes to mitigate a deficit in containers caused by the closure of the Strait of Hormuz and resulting congestion at several global ports.

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