MFC - Shipments and rates fall by double digits but market is still stronger than before pandemic

Air cargo peak season evaporates on low demand, higher capacity

It’s the time of year when retailers typically make their final push to ship goods from abroad in time for holiday shopping and freight rates are highest, but so far signs of peak season in air cargo are difficult to find. Instead, rates continue to slide as global economic clouds dampen demand and airlift supply rises with the recovery of passenger travel.

Air freight spot rates tumbled 9% year over year in September to below the 2021 level for the first time this year, Xeneta, an ocean and air freight rate benchmarking and data analytics firm, reported Wednesday.

The cost to ship by air lowered another 2.8% in the past week and is now 21.6% less than a year ago, according to the Baltic Air Index. A year ago rates were up about 80% on a yearly basis.

Analysis by WorldACD, another provider of air freight data, also shows tonnage and prices slipping marginally again in the second half of September. More notable, however, is that volume is down 12% from last year despite a 6% increase in capacity. Its data also reflects a 10% decline in spot rates to an average of $3.46 per kilogram.

And the International Air Transport Association (IATA) on Thursday provided lagging data for August that reinforced earlier evidence, including front-line reports from logistics companies, of muted demand. IATA said cargo throughput on airlines fell 8.3% year over year, an improvement from the 9.7% contraction in July. Xeneta previously reported that August volumes contracted 5% year over year and 4% compared to pre-pandemic levels.

Drilling down to specific trade lanes demonstrates how the market has stalled. Slowing demand for goods out of China has caused trans-Pacific air cargo rates to drop 32% since September to $5.12/kg – half the level of a year ago – while China-to-Europe rates fell 19% to $4.13/kg, 43% lower than last year, according to Freightos. Trans-Atlantic rates are more stable, but 25% lower than a year ago as passenger capacity on the lane has increased.

Results for the first week of October are likely to be even weaker as cargo airlines cut back activity in China to coincide with the Golden Week national holiday when factories are closed. In a normal year that would be followed by a burst of catch-up flights, but the past has proven a poor barometer for logistics predictions this decade.

To read it in FreightWaves : click here

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