CLIVE: Long-term contracts show ‘hunt for volume’ by forwarders

Global air cargo capacity saw its largest increase for the past year in March. Capacity increased 16% year over year in March, according to data from CLIVE by Xeneta . Global capacity has consistently increased each month for the past year. The global average airfreight spot rate declined 38% YoY to $2.62 per kg. CLIVE attributed the decline to shrinking cargo volumes and recovering capacity. Global cargo volumes dropped 3% YoY in March, the lowest monthly decline in more than a year. Global average dynamic load factor — which measures cargo load factor by volume and weight of cargo flown and capacity available — stood at 60% in March, down 6 percentage points YoY, but up 6 percentage points from January. Longer-term contracts between shippers and freight forwards may signal a “hunt for volume” by forwarders wanting to lock-in customers for longer time periods, Niall van de Wouw , chief airfreight officer at Xeneta, said in the report. In the first quarter of 2023, the number of longer-term contracts rose to 36% of contracts, compared with 23% in Q4 2022. “The fact that we see longer-term contracts between shippers and freight forwarders is a signal that the market is stabilizing,” van de Wouw said. “Shippers have regained some ground because of the lower rate conditions, which have affected the airlines and forwarders, but it’s not like the bloodbath we see in the ocean market. “We don’t see an airfreight market in crisis, we see it finding a new baseline,” van de Wouw added. “We see a calming down and a greater appetite for shippers and forwarders to come together on a longer term. There’s more common ground for longer-term deals in a positive way. The next interesting market development is what airlines do with their summer schedules and the further capacity boost this traditionally brings?” European manufacturing hurts westbound trade The latest PMI indicated declining manufacturing in Germany and the U.K., which led to an 11% YoY volume drop in March for the transatlantic westbound air cargo trade, according to CLIVE. Recent airport strikes in Germany , France , Spain and the U.K. have not had any meaningful impact on airfreight rates, according to the report. The general airfreight spot rate from Europe to the United States fell 46% YoY in March, hitting $2.71 per kg. Asia market update Chinese manufacturing expanded for the second consecutive month, leading to recovery for the outbound China cargo market. Air cargo volumes out of mainland China grew 30% from February and were down only 2% YoY in March. Capacity saw a significant increase from mainland China to Europe, growing 63% from February and 155% YoY in March. Airfreight spot rates from mainland China were $5.07 per kg to the U.S. and $3.65 per kg to Europe in March, both down 7% from February and 43% YoY. Downward pressure started to ease in the second week of March and rates stabilized until the end of the month, Clive noted. WorldACD Q1 update WorldACD ’s latest monthly market update reported global stabilization for demand and pricing in the final month of the first quarter. The company said it expects Q1 2023 to see an 11% YoY drop in tonnages, compared with 13% in the fourth quarter of 2022. Early 2023 revenues were the third highest in the last 15 years, according to the report. WorldACD said that over the last 15 years Q1 2023 is most comparable with Q1 2016 for cargo volumes. “Freight forwarding and shipper reports suggest that this may partly reflect an adjustment of inventory levels following restocking that took place in early 2022 in response to congestion and anticipated congestion in ocean freight supply chains, plus softer and unpredictable consumer demand in some sectors,” the report notes. The data publisher also reported that air cargo tonnages were down 8% YoY in March compared with double-digit declines in Q4 2022 and early 2023, according to preliminary findings. Global yields, including surcharges, dropped about 30% YoY in March, but remained around 50% higher than in 2019. The current subdued demand may continue through the first half of 2023, and possibly pick up in the second half, according to WorldACD.

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