Consultant’s Insight: Air cargo remains quiet amid rising ocean volumes

Air cargo volumes continue to disappoint while month-to-month ocean freight import volumes are improving as their year-to-date volumes track close to pre-pandemic levels. Cautious shippers are in no hurry to add to already high inventory levels, but when needed for items such as seasonal inventories, shippers are turning to ocean freight services rather than more time-sensitive air cargo services. [caption id="attachment_57135937" align="alignleft" width="300"] Source: Descartes Datamyne™[/caption] April 2023 container import volumes in the United States increased 9% from March 2023 to just over 2 million TEUs, according to trade data provider Descartes Datamyne. Compared to April 2022, TEU volume was down 17.8% but up 5.3% from pre-pandemic April 2019. China represented 36.8% of the total U.S. container imports in April, an increase of 5.2% from March but still down 4.7% from the high of 41.5% in February 2022. Imports from Hong Kong increased 24.4% from March, Taiwan imports increased 19.3% and Vietnam imports were up 13.8% from March. East Coast volume growth Even though imports from China represented the largest percentage of U.S. container imports, U.S. East Coast ports saw a greater percentage in volume gain than U.S. West Coast ports. According to Descartes Datamyne data, Baltimore and New York/New Jersey ports recorded the greatest percentage volume gains from March to April at 26.1% and 19.3%, respectively. This is likely due to the U.S. West Coast labor contract yet to be resolved after almost a year since it expired. Shippers have shifted volumes to East Coast and Gulf Coast ports to avoid any potential strike or other disruption. However, the positioning of inventory closer to the customer is a trend to watch. About 80% of the U.S. population lives east of the Mississippi River. Retailers and other shippers are optimizing warehousing networks closer to customers to address faster, sometimes less costly, last-mile deliveries. Inflation, inventory surplus Any disruptions due to the lack of a labor contract and the positioning of inventories could benefit air cargo providers, if time of receipt is important. Otherwise, until inventory levels normalize, it is likely shippers will opt for a slower time-in-transit service such as ocean freight. During an uncertain economic environment, it is probable that the ocean freight market will recover faster than the air cargo market, particularly as customers remain cautious on spending and shippers are hesitant in ordering large levels of inventory replenishment. [caption id="attachment_68221" align="alignleft" width="234"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo Next columnist[/caption] While there are month-to-month ocean freight volume gains, annual volumes will likely be lower than last year due to less demand and higher inventory levels this year. “With economic uncertainty continuing, the impact on trade is clear,” Ben Hackett , founder of maritime consultant Hackett Associates, said in Port Tracker , which monitors U.S. port trends and forecasts in partnership with the National Retail Federation . “Year-over-year import volumes have been declining at most ports since late last year, and declining exports out of China highlight the slowdown in demand for consumer goods,” Hackett added. “Our forecast now projects a larger decline in imports in the first half of this year than we forecast last month. Our view is that imports will remain below recent levels until inflation rates and inventory surpluses are reduced.” The doldrums The outlook for the air cargo market is equally gloomy. “The market is in the doldrums, and we do not currently see this changing until much later in the year or early 2024,” Niall van de Wouw , chief airfreight officer at Xeneta said in Xeneta’s latest Clive Data Services monthly update. “The air cargo market is readjusting, and this will also open up new opportunities, but we see a difficult few months ahead. Right now, we don’t see any ‘ripples on the water’ to indicate more wind to give the market an uptick in volumes in the near future.”

Consultant’s Insight: Air cargo remains quiet amid rising ocean volumes

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