Market update

Freight Market Update: October 13, 2022

Shared by Tiffany • June 08, 2023

Air Freight Market Update

August air cargo demand was 5% down on a year earlier, a more modest decline than the 8% and 9% drop-offs registered for June and July respectively, signaling a better-than-expected end to the year, according to CLIVE Data Services.

With a slowdown in global economies expected in the near term, airlines are reporting reductions in their winter schedules, analysts expected to seeing a continued capacity constraints on popular air cargo trade lanes, such as outbound Asia to Europe and North America, and Europe to North America.

Staff shortages, the war in Ukraine, natural disasters, record US inventories, inflation and Covid lockdowns in China as all having the potential to bring “more air cargo market volatility over the rest of the year.

For the giants of maritime commerce, big ships are no longer enough; they also need planes. Years of disruption to global supply chains have pushed many customers to opt for more expensive and more reliable air travel, industry players said. Auto parts suppliers, apparel makers and tech companies, all of which typically rely on ocean freight to move their goods, had started to go airborne amid fears Covid-related rumbles at ports could disrupt business.

August 2022 global air cargo volumes, capacity load factor and rate developments

(week 31-34 of 2022 compared to similar weeks in 2021 and 2019)

The chargeable weight gap with last year is the smallest since March

Spot rates ex China have been falling steadily since the Shanghai Containerized Freight Index (SCFI) reached a historical high of 5,110 points at the beginning of this year (Jan 7). The pressure on spot rates significantly increased in early Sep with the index published by the Shanghai Shipping Exchange dropping no less than 18.8% between Aug 26 and Sep 9.

The main reason for the drop in spot freight rates is the weak cargo demand. The phenomenal rise in energy costs and high inflation will clearly further impact consumer spending. Spot freight rates from the Far East to the USEC have gradually declined while cargo demand between Asia and North America is less felt on Far East-USEC services.

Alphaliner warned that the deterioration of trading conditions on the transpacific will likely hit independent carriers far harder than alliance members, due to their greater reliance on chartered vessels, as well as spot freight rates.

Most carriers can be profitable with a utilisation of 50-60% at today’s rates. In terms of EBIT, and this is discounting CMA CGM who does not list their EBIT, this level of profitability, however, might not continue into Q3, due to the fast-falling freight rates, and the slowdown in global demand.

SCFI revenue per nautical mile (FEU) and SCFI spot rates (FEU)