Air Freight Market Update

Industry confidence in the passenger outlook exceeds cargo

• The latest IATA survey points to a positive outlook for both passenger traffic and cargo volumes over the year ahead. 86% of respondents expect passenger demand to expand over the course of the next 12 months, and 52% of respondents expect higher cargo volumes. For cargo, an additional 28% expect volumes to be largely unchanged a year from now, leaving 20% of respondents expecting lower volumes.

• Cargo load factors on major route areas outperform industry average. With 26.5% of total CTKs in 2022, the Asia Pacific – North America route area was the busiest market, followed by the Asia Pacific – Europe route area, with 19.0% of total CTKs in 2022, before its recent decline early this year. The fact that the two largest markets sport these elevated and steady CLFs reflects the strategic capacity adjustments airlines made when air cargo demand experienced significant year-on-year declines following Russia’s invasion of Ukraine early in 2022.

• Air cargo capacity increased in Apr as carriers launched summer flight schedules, further driving down spot rates. Overall capacity jumped 7% YoY in Apr, largely driven by additional summer belly space with the increase in passenger flights. Capacity in the Europe to North America tradelane was up 26% compared to March 2023, according to Clive Data Services.

Quarterly Forward Business Expectations (12 months ahead)

Source: IATA-1, IATA-2, Supply Chain Dive

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Ocean Freight Market Update

Continuing US inventory problem

• Global decline in container demand abated sharply in March 2023 on most major trade lanes, with a major exception: US imports from Asia, which have now continually dropped at a pace fluctuating around -20% Y/Y. This has often been explained by US inventory correction. However, from the point of view of sales, data from the US Census Bureau clearly shows that the process of clearing inventories is not progressing rapidly.

• Since inflation impacts both sales and inventories, an inventory to sales ratio is not impacted by inflation. The data shows that for manufacturers, the size of inventories have stagnated and certainly not decreasing. Both retailers and wholesalers on the other hand are seeing an increasing trend. This means that the size of inventories relative to sales continues to increase, and if any underlying inventory correction is going on, it is clearly insufficient.

• Retail sales rebounded in April. Overall retail sales in April were up 0.4% from March and up 1.6% year over year. Retailers have already placed holiday orders this year, said Jack Kleinhenz, chief economist for the NRF. We expect things to be normal in the second half of the year.

• The American Association of Port Authorities earlier this month called out demand risks in general retail merchandise and household durable goods, which account for more than half of U.S. ocean imports.

Net Domestic Production + Import (USD) vs TEU Import Y/Y change

Source: Yahoo, NRF, Sea Intelligence