Global demand continues to weaken into holiday season

There is still no sign of peak season as worldwide tonnages and rates continue to slide amid weakening demand despite a modest volume and rate recovery in October. Worldwide tonnages fell a further 7% for the weeks of Oct. 31 and Nov. 7 compared with the previous two weeks , according to a Nov. 17 report by WorldACD. Outbound tonnages decreased in every main region, with ex-Europe falling 12% and both ex-Asia Pacific and ex-North America dropping 5% on a two-week-over-two-week basis. On a lane-by-lane basis for the same period, tonnages fell between Europe and North America (-12% westbound and -10% eastbound) and between Europe and Asia Pacific (-7% westbound and -14% eastbound), according to WorldACD. Year over year, the drop in tonnage is steeper, with ex-Asia tonnage falling 25%, ex-North America declining 18% and ex-Europe decreasing 13%, despite higher capacity out of most regions, the report stated. Meanwhile, average worldwide rates decreased by 1% on a two-week-over-two-week basis to $3.34 per kilo, a 22% YoY drop. Carriers see moderate peak [caption id="attachment_57065660" align="alignright" width="399"] Photo/FedEx Express[/caption] Carriers agree that peak season likely will not ramp up to 2021 levels. FedEx projects Cyber Monday on Nov. 27 as well as the week ending Dec. 3 to be the busiest period for the season, accounting for roughly a quarter of peak season volume , a FedEx spokesperson told Air Cargo World . “We expect a moderate peak season relative to last year,” the spokesperson said. Meanwhile, UPS expects to see a delayed peak season, a spokesperson told Air Cargo World . “We expect peak volumes will come in later in December compared to last year and we expect consumers to return to more pre-pandemic shopping behaviors,” the spokesperson noted. Within airfreight, ocean shipper Maersk is continuing to see high levels of inflation having an impact on demand, as lower sales and increased inventory are causing issues for businesses across Europe, Maersk noted in its Nov. 9 Europe Market Update. The shipping giant established its cargo airline, Maersk Air Cargo , earlier this year. "As such, we have not yet seen signs of a significant peak season in Q4, although air will continue to be a frequently used option for companies moving last-minute stock ahead of the busy Christmas period,” according to the report. It noted that Europe outbound continues to stabilize across sectors, although inbound European cargo decreased by 10% YoY in October. Elsewhere, capacity reductions between Europe and Asia, due to sanctions against Russia, are leading to significant re-routes of Asia-Europe flows via the Middle East, impacted further by a volatile jet fuel market that continues to affect rates. "Staff shortages in airports mean backlogs continue to pose issues, and although a more reliable ocean network has reduced the demand for airfreight slightly, we expect the pressure to remain prominent in the coming weeks," the report stated. Rates fall for forwarders Rates have come down to nearly pre- pandemic levels for German forwarder Quick Cargo Services’ (QCS) core shipments out of Frankfurt Airport (FRA), and space is not as tight as it was in previous peak seasons, Chief Executive Stephan Haltmayer told Air Cargo World . “The big boom [of peak season] has yet to turn up,” Haltmayer said. Due to the strong U.S. dollar, QCS is seeing good export volumes from Germany. “Shipments to Thailand and Vietnam have grown a lot lately and China is also still very strong,” he noted. With airlines not offering much Block Space Agreement (BSA) space in winter schedules, spot rates remain at relatively high levels. “Lately, to China, we have seen spot rates below the BSA rates, but these are from carriers who do not fly direct from Frankfurt but operate from airports such as Liege [LGG] or Maastricht [MST] ,” Haltmayer said. Looking ahead to 2023, Haltmayer expects the first quarter of 2023 to be “normal,” but that demand is likely to weaken in Q2 as a result of the impact of shippers’ higher production costs, notably the hike in energy bills. “Most shippers have not passed on these cost increases to customers, in [terms of] raising the prices of their products,” he said. “But I expect this to happen in Q2. This will reduce air cargo shipments.”

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