Air Freight Market Update

Air cargo falters as capacity returns

• A flat air cargo demand following by high inflation and new Covid lockdowns in Ningbo of China, halt some of the warehouses’ operation.

• In weeks 39 & 40 - China’s Golden Week period, the global air cargo chargeable weight, rose 4.1% compared to the first two weeks of September. However, compared to last year, it was down by 6.9%.

• From the market analysis comments, the air freight market looks edgy and nervous. By Dynamic load factor, it dropped 5.7% points compared to 2021, returned to its pre-Covid level. Asia Pacific outbound was hit hardest by the fall of 16.4% YoY.

• The returning belly cargo passenger aircraft and freight capacity are impacting rates. IATA is expecting belly hold capacity will be return to “normal levels” in late 2023 or early 2024 as more passenger flights return to service and aircraft manufacturing for new orders starts to normalize. The improvement of sea freight reliability will further push the volumes back from air cargo to ocean too.

• On the other hand, the e-commerce market in China and Japan is expected to grow by 11.7% and 6.9% annually. The e-commerce growth will support the cross-border freight demand for air cargo amid the headwinds.

Air cargo falters as capacity returns

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

Source: asiacargonews, aircargoeye, stattime, Xeneta

Ocean Freight Market Update

For freight companies, this year’s peak will be weak

• Typically, in the last quarter of the year, cargo carriers from container lines to parcel operators bulk up their profits on strong demand. But a range of measures of shipping demand across the U.S. are sliding, freight rates are falling as a result, leading carriers to pull back capacity amid concerns a deeper downturn is coming.

• Container rates collapse implies carriers were rapidly losing pricing power. According to Drewry’s index, 40-foot container is now 67% below the peak reached in September 2021. This happened in a backdrop of a significant number of “blank sailings” by container ship lines to reduce capacity and limit downward pressure on freight rates. The container lines have cancelled more than quarter of sailings across the Pacific recently according to Sea-Intelligence.

• The collapse in container rates reflected volumes that were quickly deteriorating. Retailers are more focused on clear the excess inventory, causing them to cut new order. There is a projects that imports into major U.S. seaports will be down 4% in the 2nd half of the year after expanding 5.5% YoY in the 1st half of 2022. The port of Los Angles reported the fewest number of loaded import containers in September since 2009, affecting all the major West Coast Ports and starting to hit East Coast, which down 9.8% YoY.

• With an estimated 75% of U.S. container imports related to consumer activity, a sharp drop in volume provides an ominous warning for any mode of transportation that is further downstream.

Fleet Capacity vs Global Throughput

Source: splash247, freightwaves, Hellenicshipping