US consumer demand to decide fate of global demand in 2023

U.S. consumers will have a disproportionately high impact on airfreight demand, especially in the third and fourth quarters of 2023, as inventory levels tick up and global demand for electronics wanes. While American consumers typically drive overall global demand, the lack of a significant peak season means that the U.S. will serve as the primary indicator of airfreight demand going into the new year, according to the Nov. 30 Air Freight Rate Tracker report by logistics market research firm Ti Insight. While the U.S. has not entered a recession — a positive sign for airfreight demand — the report noted that it would be “premature to make an assumption” about the country’s economic future. [caption id="attachment_57133175" align="alignnone" width="1035"] Photo/Ti Insights[/caption] Inventory levels among shippers have increased for both retail and electronics goods over the past several quarters, causing stakeholders to rely less on airfreight as a primary means of transport, according to the report. “This is a strong signal that airfreight rates will be under downward pressure in Q4 2022 to at least Q1 2023, and very probably in the following quarters,” the report stated. Semiconductor demand wanes Semiconductors, a traditional indicator for air cargo demand, are seeing weakening demand, causing manufacturers to reduce production levels. In fact, manufacturer Samsung noted in its past three quarterly earnings reports that demand was falling both for electronic components and finished products , the report stated. Since the U.S. established restrictions on exports of semiconductors to China on Oct. 7, demand has fallen further, meaning that the export controls did not have a significant impact on the overall semiconductor market. The worldwide semiconductor market is expected to slow to 4.4% growth in 2022 — down from 26.2% growth in 2021 — followed by an anticipated decline of 4.1% in 2023, according to the WSTS Semiconductor Market Forecast for Fall 2022. The trend of higher inventory and dropping demand for semiconductors may continue through 2023, with demand likely to fall between 10% and 15% year over year in Q4 2023, the report added. 2023 and beyond Despite uncertainty, rates are showing some stability as 2022 draws to a close, according to the latest analysis published by WorldACD for the week ended Nov. 27. Average worldwide rates remained stable, decreasing by 1% on a two-week-over-two-week basis for the weeks of Nov. 14 and Nov. 21. Looking ahead to 2023, supply will remain robust as several carriers expand freighter fleets or retain enlarged freighter capability, the Ti report predicted. The return in passenger travel, along with the arrival of ocean shipping giants into the air cargo space — such as CMA CGM, MSC and Maersk — only add to the projected uptick in supply. “The balance of supply and demand in early 2023 will be a mix of mediocre or flat demand combined with strengthening supply,” the report concluded. “The clear implication is that freight rates will continue to weaken. When this will end will be in the greatest part decided by the American consumer. If and when consumer demand in the U.S. recovers, airfreight rates will recover.”

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