Ex-Asia capacity softens in September

Cargo markets ex-Asia are currently slack due to weak demand, with some rates relatively flat compared with the previous week and global airfreight tonnages dropping in the last few days of August and early September, according to recent market reports. The market in north China, specifically, is weak due to low demand while the south China market “remains soft and rate levels similar to last week,” according to last week’s Freight Market Update from Flexport. The latest rates on the China-Europe trade lane are flat week over week at $6.28/kg, according to TAC Index. Meanwhile freight moving from China-U.S. showed a slight 3.8% WoW uptick to $7.87/kg. Volumes ex-Korea also continue to be low with “no signs of picking up before the Korean Thanksgiving holiday” which recently passed on Sept. 10, according to Flexport. Fuel charges for both Korean Air and Asiana Airlines have also been recently lowered . Vietnam, which has been seeing lower airfreight volumes due to a shortage of raw materials , is seeing demand ex-Hanoi (HAN) pick up while demand ex-Ho Chi Minh City (SGN) remained stable with expectations to pick up in the second half of September, according to Flexport. Airfreight rates from Vietnam to Europe are currently at $5.61/kg, up 7.7% WoW, according to the latest data from TAC Index. Meanwhile Vietnam-U.S. routes dropped 7.2% WoW to $6.59/kg. [caption id="attachment_57132090" align="aligncenter" width="1109"] Graph: TAC Index[/caption] Although rates this year have generally been above 2021 levels, worldwide rates decreased 2% year over year to roughly $3.53 per kilogram, regardless of recent fuel surcharges, WorldACD reported. Regional recovery Major airfreight origin regions saw recovered tonnages across the recent two-week period (2Wo2W), with Asia-Pacific volumes up 4%, according to a recent market update from WorldACD. Cargo originating from the Middle East and South Asia, as well as Africa, also saw increases in tonnage on a 2Wo2W basis, up 8% and 6%, respectively. Meanwhile, tonnages on the Middle East and South Asia to Europe and Asia Pacific trade lane saw increases of 11% and 19% 2Wo2W respectively, according to WorldACD. Routes from Africa to Europe, on the other hand, saw a 6% 2Wo2W increase in tonnage, while Asia-Pacific volumes to Europe saw a 4% 2Wo2W increase. WorldACD further reported that intra-Asia volumes were up 6% as the “strong U.S. dollar relative to European currencies may have helped support a 3% ride in tonnages from Europe to North America.” Trans-Atlantic capacity, meanwhile, has surpassed pre-COVID-19 levels , with consistent demand that is anticipated to pick up by month-end, according to Flexport. However, recent lockdowns in Chengdu (CTU), China — which went to effect Sept. 1 — have impacted demand into Europe, while “further capacity constraints are expected as the COVID-19 measures ease and the start of the peak season [begins].” It is unclear when quarantine measures are expected to end or how exactly airfreight operations are being impacted. CTU posted 284 canceled arrivals and 283 departures between Sept. 12 and Sept. 15, according to flight tracking software. Roughly 410 flights are labeled as “unknown.” Meanwhile in the Americas, elevated passenger traffic at Vancouver and Toronto in Canada are impacting cargo operations, leading to extended “dwell times for both import and export cargo,” Flexport reported. Most U.S. airports, however, are “running at a normal pace,” with overall export demand remaining steady across most markets. Peak season Regardless of the current state of demand, stakeholders are still encouraged to plan accordingly for the upcoming peak season to secure capacity, according to Flexport. “We anticipate an increase in demand for same-day deliveries by as much as 20% over the previous year,” Millie Tarallo, chief revenue officer at same-day delivery company Dropoff, told Air Cargo World . “Shippers are seeking incremental capacity channels, as well as new service offerings to meet the increasing need for speed of delivery from buyers.” Further, Tarallo anticipates “peak season demand that will supersede that of prior pandemic years.” “As shippers position inventory closer to recipient populations, same-day deliveries become more available,” she said. “These factors contribute to consumer capacity issues with carriers, which we will see a material increase starting in September.” However, stakeholders disagree when it comes to the peak season, with some anticipating a more muted peak season while others expect volumes to continue to grow ahead of the holidays . [caption id="attachment_57132089" align="alignright" width="535"] Panelists at Air Cargo World's webinar titled, "Forward thinking: Best practices for freight forwarder success"[/caption] Indeed, panelists speaking at Air Cargo World’s Sept. 13 webinar on forwarder best practices also expressed diverging expectations for 2022’s peak season . “There’s not going to be a peak season as it stands right now,” Thomas Christensen, senior director of air and sea at global transport and logistics company DSV, said during today’s webinar hosted by Air Cargo World . With a lot of new capacity going into the market right now, paired with increasing belly capacity from carriers, available capacity is currently surpassing demand. “Will [carriers] maintain that capacity in the market even though the demand is not here? Or will they start pulling some of that capacity back out of the market…. That will determine it, but as of right now, we don’t really see a peak season,” he said.

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