Shippers of Asia-Europe air cargo are being hit with a double whammy of rapidly rising freight rates and soaring fuel surcharges as Middle East cargo gets rerouted, China picks up production after Lunar New Year and jet fuel prices double.
An estimated 30% of Asia-Europe air cargo is routed via the Middle East, and with options through the region severely constrained by the ongoing US-Iran war, a rush for Asia-Europe air cargo capacity is pushing up rates with hefty fuel surcharges rolled out on top.
While data from Freightos shows spot rates on China-Europe are up about 13% compared with last week, the rates from South Asia to Europe have increased 82% since before the war started. The Baltic Air Index had Singapore outbound rates up 47.6% last week compared with the previous week as Middle East airspace closures drove diversions from Gulf hubs to Asian gateways, tightening capacity.
Judah Levine, head of research at Freightos, said rates climbed sharply following the outbreak of war and the airspace closures, but in the last few days prices have leveled off on many lanes.
“That may reflect some capacity recovery by Emirates, as well as Etihad, or the addition of direct Asia-Europe capacity by European airlines and carriers from the Far East,” he said.
Several freighter operators and integrators have repositioned capacity to serve growing demand on Asia-Europe markets, but a protracted regional conflict could see rates climb even higher.
“If this continues, we will see increases of 100% to 200% on the short-term market,” Van de Wouw noted. “In fact, I am picking up anecdotal evidence that this is already happening in selected markets.”
Fuel surcharges on the rise
Airlines are reviewing their fuel surcharges weekly instead of every month as the war-driven spike in prices piles additional cost on top of what is already a significant portion of a carrier’s expenses.
Cathay Pacific’s cargo fuel surcharge will increase from HK$3.20 ($0.41)/kg on March 19 to HK$12.9 ($1.65)/kg from March 20. Lufthansa Cargo raised its air freight surcharge from €0.85 ($0.97)/kg to €1.20 ($1.27)/kg, effective March 16, while IAG Cargo has hedged more than 60% of its fuel for 2026 and has not announced any new fuel surcharge.
Jet fuel typically accounts for 20% to 30% of an airline’s total cost base, and with international carriers forced to fly longer distances to avoid Middle East conflict zones with reduced payloads, those costs are mounting fast.
Maersk told customers in an advisory Friday that its fuel surcharges will be reviewed on a weekly basis and adjusted in line with developments in aviation fuel prices, based on established market indexes. For contract renewals where no fuel surcharge mechanism is in place, Maersk has proposed that 15% of the rate is allocated to fuel.
Demand is also growing for multimodal alternatives, with road freight being used to move cargo from Asia to Europe and between transport hubs in the Middle East as an alternative to air.
Details please refer to the JOC news.
Source: JOC