General cargo spot rates into the US from both Vietnam and China recorded impressive month-on-month gains in the week ending 24 September. Why? Is the peak season making a surprise appearance, or are we seeing nothing more than a dead cat bounce? Let’s take a dive into the data and see what we can find… 
Vietnam to the US - up, up and away…but maybe not here to stay
After sinking to a seasonal low in early August, the Vietnam to the US air cargo market rebounded in spectacular style in late September, shooting up by 30% month-on-month. In the week ending 24 September the general cargo spot rate on this trade had climbed up to USD 3.38 per kg.
The Manufacturing Purchasing Managers’ Index (PMI), a leading indicator of air cargo demand, paints a similar picture, with Vietnam’s PMI returning to above 50 in August – the first time it crossed this threshold in six months. It edged up to 50.5, with above 50 indicating an expansion in the country’s manufacturing activities from the previous month.
However, it’s worth noting that this eye-catching 30% growth was partly due to the rate rising from such a low base. This year has seen the spot rate from Vietnam to the US returning to its pre-pandemic levels and, despite the growth, the rate in the week ending 24 September is actually 2% below the average 2018-2019 spot rate for the same period.
This is also reflected in the weakening demand in the US, which ranks as Vietnam’s largest export market, with Vietnamese exports to the US falling by 21% year-on-year for the first seven months of 2023 (source: Vietnam General Statistics Office).
It’ll be worth keeping a close eye on this trade’s rate development in upcoming months, especially as market fundamentals remain weak. Vietnam’s new export orders, a subindex of the manufacturing PMI, remained fragile in August, although the subindex did record some growth following a five-month run of decline.
China to the US - modest gain belies weakening demand
Staying in the ‘neighborhood’, it’s also noteworthy that the China to US general cargo spot rate rose 7% from a month ago, reaching USD 3.48 per kg in the week ending 24 September.
This is mainly driven by the pre-Golden Week rush, with shippers keen to shift cargoes before the holiday shut down. Interestingly, this marks the first time in a long time that the market exhibits some pre-pandemic ‘normalized’ seasonal trends, which were seemingly forgotten with the onset of the pandemic and the associated dramatic freight rate movements.
Comparing the two export origins, it’s clear the general cargo spot rate from China to the US did not pick up as much as the Vietnam to the US trade. This is partially due to the still-elevated air cargo rate on the outbound China trade. In the week ending 24 September the general cargo spot rate remained 23% above the average 2018-2019 level for the same period. Therefore, despite the more modest increase, this market is climbing from a much stronger starting point.
Taking the current market/macro situation into account, some volatility should be expected, with upwards movements limited on the China to US trade. Although the China Caixin manufacturing PMI was at 51.0 in August, showing an expansion in manufacturing activities, the main driver was increased domestic, rather than international, demand. In fact, new export orders continued to decline, albeit at a slower pace than the previous month.
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