Air Freight Market Update

How will shifts in the global economy wreak havoc on your air freight?  

• Global air cargo volume YoY continued to drop in January 2023, freight buyers witnessed a recovery of more than 10% in the total global capacity compared to the last year mainly due to the return of the belly flights since March 2022. As inflation negatively impacts consumer savings, we continue to see downward pressure on air cargo rates and volume.

• January US inflation continues to trend downward since July 2022, the impact of inflation persists in which the retail sales in US slow down since then and pushing the November inventory-to-sales ratio to its highest level. The inbound US air cargo volume registered its first negative growth year in May 2022 and continued its negative trend for five out of the seven remaining months of the last year. In January 2023, the air cargo volume continued to fall 2% from a year ago.

• Look into EU inbound air cargo volume, it has already been falling for 13 consecutive months. Due to higher cost of living, European consumers have less to spend, which is reflected in lower retail sales YoY. As a result, we see lesser air cargo volumes into Europe. In comparison, the air freight market into the US is slightly less affected by the trends.

US inflation rate, retail sales and inbound cargo volume

EU inflation rate, retails sales and inbound cargo volume

Source: xeneta

Ocean Freight Market Update

Container shipping costs plunge as consumer spending declines

• Demand has plunged as inflation surged, triggering a severe cost of living crisis in several economies and leading central banks to attempt to restrict spending with higher interest rates. The reopening of bars and restaurants and other facilities closed during the pandemic has led to more spending on services too. In the US, spending on goods is now 5.4% down from the March 2021 peak. In the UK, sales volumes are back below pre-pandemic levels.

• The short-term shipping costs for 40ft container from east Asia to US west coast have already sunk back to pre-pandemic levels while long term contracts has proven less volatile to remain above the level in 2019. Despite this, many carriers ploughed money into new ships as the demand soared during the pandemic. The drop-off in shipping volumes leaves companies with a looming overcapacity problem also leads to the rate decline. According to the analyst, the total cargo capacity of vessels on order in Jan was equivalent to 30% of the active global fleet, compares with 13% same period in 2019.

• On the inventory level, some companies predicted inventories would be down by the end of Q1 and yet warehouses are still near 100% capacity. The National storage pricing is up 1.4% month over month which reflects there is full warehouses across the nation and eventually the costs are passed onto the consumer, which will stroke further inflation.

Shipping capacity on order as a percentage of the active fleet (in 20ft equivalent units)

Source: FinancialTimes, freightwaves