December 15, 2024 - By : admin
The biggest development in terms of stimulating demand continues to be Chinese internet retailers’ activities.
These shippers are now focused on using airfreight instead of sea freight to service the North American and European markets.
And while the US consumer remains important, the impact of retail demand on airfreight is not certain since container shipping “is functioning normally across the Pacific and consumer facing inventory levels are stable,” says Ti’s last quarter report.
Still, the future of global trade appears “very uncertain” with air freight being the beneficiary of this uncertainty.
Ti’s caveat: Just because there seems to be quite satisfactory growth rates overall does not mean the market is stable.
Global air freight rates have been moving up, with third quarter headhaul rates rising 5.9% Quarter-on-quarter, headhaul rates were up 8.8%.
In the near term, e-commerce demand during the last quarter peak season is seen to sustain upward pressure on freight rates.
However, the long-term impact of EU and US tariffs on Asian imports stays uncertain.
Based on available data, Ti says “the global economy looks moderately healthy from a distance, but that is probably deceptive.”
The US economy has proven to be resilient, both in terms of consumer demand and in the production sectors. The tech sector, in particular, has proven to be a significant driver of growth, having a ‘knock on’ effect on air freight demand.
The Ti report says air freight in the US “reflects the complex picture in e-retailing, with domestic e-retail air freight volumes passing through the express networks still depressed but Chinese sourced e-retail demand booming.”
The report cites a red flag in China, where the current situation is deemed “extraordinary.” Its banking sector has been in distress resulting in a slump in demand in the property sector as well as consumer demand.
China’s air freight volume has therefore been depressed, with Chinese industrial producers turning to exports to make up for the shortfall.
Ti says the demand picture is made harder by the complexity of the contemporary market.
The cycles seen in the airfreight market before 2020 were driven by demand for consumer electronics and other consumer durables, but this is less the case today.
Some reports indicate that for short periods over the past quarter, there were ‘spikes’ in demand with some US-based shippers turning to airfreight to quickly build ‘safety stock’ in case of disruptions in port operations.
Another third quarter spike seems to have been driven by certain shippers building inventory in anticipation of the effects of possible sanctions imposed by the US.
Both are indicative of the unpredictability of the airfreight market in the past quarter.
It is worth noting that various Purchasing Managers Indexes show low or no levels of growth.
The volatility of demand remains ever present.
As an example, German exports are shaky while China’s exports continue to boom, says the Ti report.
For the latter, Chinese internet retailers can take the credit as “they have not deviated from their airfreight based logistics model.”
IATA data shows that total cargo demand measured in cargo ton kilometers grew by 9.4% in September 2024 compared to the same period last year. International operations rose 10.5%, marking 14 consecutive months of growth.
Meanwhile, capacity measured in available cargo ton kilometers rose 6.4%, including an 8.1% rise in global operations in September, compared to the same period last year.
Ti states that “the global supply-side in air freight situation in the third quarter of 2024 is complex and volatile.” It cites the three largest air express providers as struggling with over-capacity.
Overall, “the underlying picture for freighters is that demand is strong, utilization is high, and the market for new freighters tight.
By: Air Freight Rate Tracker
Source: Portcalls