Air cargo market heading for muted peak season

Stagnating demand on a number of major trade lanes and the gradual recovery in bellyhold capacity has triggered some downward pressures on airfreight rates, but continued volatility and uncertainty are making the air cargo market difficult to read, forwarders say. However, the consensus appears to be that Q4 and peak season will be less hectic than the two previous pandemic-driven years. “It is very difficult to speak of one market right now,” said Eric Martin-Neuville, executive vice president of freight forwarding at Geodis. “While the ex-China into Europe and North America trades have showed signs of weakening demand, demand remains quite strong ex-Europe — bolstered by the decline of the euro — and also from the U.S. to Europe, as well as on most north-south routes, for example, Europe-Latin America, Europe-Africa and Europe-Middle East,” Martin-Neuville said. “There are concerns over the likelihood of a strong peak season between China and Europe, but access to capacity remains difficult between Europe and China and will lead to a rebalancing in pricing between the two legs,” he added. Increased capacity, sluggish demand [caption id="attachment_99165" align="alignright" width="366"] A March relief charter arranged by Kuehne+Nagel. Photo/Kuehne+Nagel[/caption] On long haul trades ex-China, prices have decreased and access to capacity is far less constrained than it used to be, Martin-Neuville said. “At the same time, we are seeing the opposite situation between Europe and China and between the U.S. and Europe. “While access to capacity is much easier than it has been on the main front-haul legs, it varies a lot from trade to trade due to a number of factors: the speed of return of passenger services, the exchange rates impact and the type of goods being carried,” he added. Demand has been “sluggish” since Q3 with little or no sign of a pick-up in a number of regions, Claude Picciotto, airfreight director, middle-office, at Bollore Logistics, told Air Cargo World . “We are expecting a muted Q4 2022 to last until Q1 2023 at least,” Picciotto said. “We’ve entered a quite volatile market and have seen rates declining in recent weeks.” On the ex-Greater China trade, including Hong Kong, post-Golden Week could see some rebounds in volumes, he noted. “We don’t have clear signals on a possible peak season but clearly expect a less hectic one.” Turning to South-East Asia, there has been some pick-up in air cargo activity out of Hanoi, Bangkok and Yangon, driven by the high-tech and textiles manufacturers, Picciotto said, adding that this is only anticipated to last until the end of October. “Therefore, a muted peak is likely to be the way to end 2022.” As for Northeast Asia, “a deep cut in export activities ex-Japan and Taiwan will further suppress a hyper peak,” he said. Normalizing demand Pointing to a recent “normalization of air cargo demand,” Yngve Ruud, executive vice president air logistics at Kuehne+Nagel, added that “with the volatility and uncertainty in the market it is too early to conclude that this is a trend.” “Compared to 2021, we will not have a strong peak season [this year] as over the past few months the market has softened due to geopolitical uncertainty, inflation and changing consumer demand,” Ruud said. “Consequently, there are fewer capacity constraints than 12 months ago.” Martin-Neuville largely concurred, adding, “We expect to have a more ‘peaceful’ peak season when it comes to the Asia-Europe and Asia-North America trades. However, we remain cautious as it is still early in the game and we’ll only have a clear view post-Chinese Golden Week [Oct. 1-7] when the real peak usually starts.” Heading into 2023 As to how the market may look next year, poor visibility is making predictions difficult. “We believe that volatility will continue to prevail, but at the same time that 2023 will give us a clearer view on how the air logistics market will settle in the short term,” Ruud said. While some of the heat may have gone out of the market, Kuehne+Nagel is poised to activate the agreement it announced with Atlas Air in February for the charter of “the entire and exclusive capacity of two new B747-8F aircraft to support customers on volatile trade lanes, such as the trans-Pacific routes,” he added. “This is a strategic initiative of Kuehne+Nagel based on long-term customer demand,” Ruud said. “We expect the first 747-8F to be delivered around November-December and the second one at the beginning of 2023.” As for Geodis’ controlled freighter network, “We continue to operate our three main services: Hong Kong/Shanghai into Guadalajara and Los Angeles and Amsterdam-Chicago and Amsterdam-Zhengzhou return trips,” Martin-Neuville noted. “We will soon resume operating twice a week into Chicago and twice a week into Zhengzhou to match the current level of demand,” he added. “Our two frequencies between China and Mexico remain in place, though we are prepared to add frequencies if the peak season requires it.” Meanwhile, Bollore Logistics continues to operate its four, round-trip, Europe-China charter flights. “We’ve contracted additional charters for the peak to support our customers’ demands,” Picciotto said. Join Air Cargo World for our next webinar, “Dangerous goods in focus: Shoring up air cargo logistics,” on Tuesday, Nov. 15, at 11 a.m. ET. Click here for more information and to register.

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