DGF, CEVA and Kuehne+Nagel see demand strengthening

A ir cargo demand remained sluggish post-Lunar New Year at the beginning of February, as belly cargo capacity increased and rates softened, but senior executives from leading freight forwarders expect a gradual improvement in market conditions . “ Due to high inflation and high inventory levels overall, demand at the beginning of the year was weaker than in the same period in 2022 ,” Thomas Mack , global head of air freight for DHL Global Forwarding (DGF), told Air Cargo Next . “ The uptick in volume after the Lunar New Year was rather lean compared to the usual surge we normally see . [caption id="attachment_57066090" align="alignright" width="300"] Photo/CEVA Logistics[/caption] “ However, the good news is that the quite volatile airfreight market of the last months — or even last two years — continues to stabilize,” Mack added. “The capacity situation continues to improve with increasing passenger service frequency and new cargo planes are being deployed by carriers. So, overall, capacity is sufficient to support current demand levels on all trade lanes.” E-commerce, automotive see volume upswing Yngve Ruud, executive vice president of airfreight logistics at Kuehne+Nagel , noted that after a rather flat start to the year, there has been a recent upswing in volume, especially in the e-commerce and automotive verticals. “ Belly cargo capacity is indeed returning with an increase in flight rotations in and out of Hong Kong, for example, and for mainland China, we see positive signs of air travel resum ing soon,” Ruud said . “ Import and export shipments to and from China started to recover after Chinese New Year,” he added. “The waiving of the zero - C OVID policy was necessary to reinstate the trust in the strong Chinese manufacturing economy and also to motivate Chinese nationals to further consume, which is beneficial to import flows. ” But the overall global market remains significantly lower in terms of volumes when compared to the first two to three months of last year, Ruud said. “ The largest declines [have] been recorded ex-North-America and Asia Pacific to worldwide destinations,” he said. “Europe and Central America markets are performing better, showing far less of a dip in year-to-date volumes, with some lanes even showing small year-on-year growth. We expect demand to strengthen as the year unfolds, most prominently during the second half.” Import, export tonnage expected to increase H2 2023 DGF’s Mack noted that while China’s export tonnage is still down compared with 2022, there is “ continuous improvement month on month. On the import side, we see a similar development. We expect both export and import tonnage to increase in the second half of 2023 year on year.” There is quite high demand on airfreight routes to Australia, India and Latin America, with some lanes showing small year-over-year growth, he added. The trend set off more available capacity, which is expected to continue — especially on long-haul passenger flights operated by cargo-friendly widebody aircraft on key routes such as Asia-North America and Asia-Europe, according to Peter Penseel , chief operating officer for airfreight at CEVA Logistics . Lower inventories trigger uptick in demand “ At the same time as capacity is increasing, we are likely to see inventories drop throughout the year, triggering an uptick in demand in the back half [of 2023] as re stocking takes place via air, thanks to its speed to market,” Penseel said. Mack added: “ Currently, we are observing a recovery in capacity, with growing pax frequency and air carriers introducing new cargo planes. At the same time, we expect demand to pick up in the second half of 2023, resulting in a relatively healthy capacity/volume ratio.” However, the cargo capacity surge has raised concerns over possible over-supply. “ If demand remains soft, with all the freighter capacity still being deployed and belly cargo space getting closer to pre-COVID levels, there could be overcapacity in the market for a certain period of time,” Mack said. Rate levels depend on trade lanes Another key question is whether rates will return to pre-pandemic levels this year. “ Whether it’s fixed or spot agreements, when it comes to rates, it’s always very trade lane- specific ,” CEVA’s Penseel said. “ It’s very possible we’ll see rate levels lower than those of pre-pandemic periods on certain trade lanes. However, I think that on the major ones, rates will remain static as a result of consistent demand across those lanes.” A ggressive spot rates across most trade lanes will continue, Mack said, adding that “ with the market likely to recover toward the second half of 2023, we should see an increase in long-term rates.”

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