5. Long-term Contracts
2024 H2 Update: Shippers and freight forwarders are securing longer-term agreements due to recent market turbulence and a potential air cargo Q4 boom.
When Xeneta published the 2024 Outlook in October 2023, the continued year-on-year cargo rate decline due to the rebalance of supply and demand suggested a firmer ground for re-establishing longer-term contracts.
Air cargo stakeholders have indeed showed increased interest in longer-term contracts – but the motivations for doing so may be evolving.
For instance, over six-month contracts signed by shippers with freight forwarders increased from 41% in Q3 2023 to 54% in Q2 2024.
The longer-term contracts signed before January are likely a reflection of the anticipated calmer market. However, the increased interest in longer term contracts after early January is mostly triggered by surging cargo demand from e-commerce and Red Sea disruptions.
Far from it being a calm market, freight buyers are eager to lock in their rates for the Q4 peak season before the market escalates further amid the threat of a squeeze on available capacity.
