Consultant’s Insight: In search of peak

Signs of improvement are emerging within the airfreight market, with global cargo tonne-kilometers increasing 1.5% year over year in August, according to IATA . This marks the first annual growth since February 2022. [caption id="attachment_76185" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo Next columnist[/caption] Meanwhile, according to a Sept. 26 update from Freightos , forwarders reported improving signs in Asia air exports and there were upticks in Freightos’ Air Index for Asia-North Europe and transpacific rates. However, the market will likely experience little, if any, peak this year. A UPS market update last week said inventory increases have peaked but, with levels remaining elevated with prolonged inventory growth, the demand for air cargo imports is limited. Elevated inventories appear to be primarily within the wholesale segment, according to FedEx . Inventory is “in a pretty good place ... from a retailer’s perspective,” Brie Carere , executive vice president and chief customer officer for FedEx, told analysts Sept. 20. “I think the retailers have done a good job. They’re not carrying a lot of extra inventory. Wholesalers are, but the net takeaway is that inventory restocking will not help us.” Freight forwarder Bollore said in its September update that it expects pockets of rate increases following the cancellation of some freighter flights at the end of August, along with some large, high-tech shipments for Apple and Hewlett-Packard . Some fluctuations are also expected surrounding Golden Week , Oct. 1-7, which encompasses several East Asian holidays and is a time when nearly all factories in China are closed, creating a quiet week for freight. Potential for delayed peak When asked about a peak, Brian Alexander , chief operating officer at logistics firm Hub Group , told a recent Journal of Commerce conference, “We’re calling it a ‘peak in pockets.’ “With e-commerce , we’re seeing [the] peak dragging a bit later into the year, even into December,” he said. “But the peak is definitely muted compared to the past. We’re hopeful of a rebound in 2024.” The closer we get to the end-of-year peak season, speed will likely be the main reason for any short uptick in airfreight demand and will benefit express carriers the most. Shippers have been cautious with inventory replenishment and are using ocean freight because of lower rates and longer transit times. Investments in inventory planning and forecasting have helped shippers better manage the timing of inventory receipts and placement within networks. In addition, many shippers have shifted from using airfreight because of the misperception of it not being a sustainable transportation mode and due to logistics networks moving closer to the end customer, a form of nearshoring . “We started investing a couple of years ago in regional service centers in North America and Europe and in pickup points closer to the consumer in Europe, all to build a supply chain that enables us to serve demand closer to consumers,” Nike Chief Financial Officer Matt Friend told analysts Sept. 29. “It’s more sustainable because we don’t have to put the product on airplanes, and [instead] leverage our store footprint through O2O capabilities.” O2O, or online to offline, is when a company lures customers to physical locations through online methods, such as emails and internet advertising. The outlook for airfreight demand is one of lower demand for the rest of the year and into 2024. However, IATA’s latest monthly air cargo report notes that the market continues to normalize from pandemic highs as CTK growth returns to its historic relationship with industrial production and trade.

Consultant’s Insight: In search of peak

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