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   Vol. 15  No. 18
Wednesday March 2, 2016

Where Are We Now

Where Are We Now

The predicted pre-Chinese New Year upsurge in air freight demand in January and early February failed to materialize, leaving carriers facing a bleak first quarter, with many Western retailers’ inventories reported to still be well-stocked.
     “It simply didn’t happen,” said one Hong Kong-based forwarder. “Exports from China, Korea, and Taiwan were slow, and we’re not now expecting any upturn until at least the end of March and perhaps longer.”
     This view was supported by a range of disappointing purchasing manager index figures for new export orders—Indonesia, China, Malaysia, and Taiwan have all reporting contracting orders in recent weeks.
“It used to be that activity spiked in the month leading up to China’s New Year: workers rushed to get orders filled before taking off for a long holiday,” said a note from HSBC. “No longer. Things turned even soggier in January, with little sign of a bounce any time soon. China continues to move sideways, while Korea and Taiwan slipped again.”
As reported in FlyingTypers, analysts at Drewry had forecast a demand and rates rebound in January after the Drewry East-West Airfreight Price Index recorded its steepest monthly fall in December. However, the Index—a weighted average of all-in airfreight “buy rates” paid by forwarders to airlines for standard deferred airport-to-airport airfreight services on 21 major East-West routes—instead dropped further in January, down 7.4 points to 83, its lowest level since the Index was first launched in May 2012.
      Last month’s drop in pricing on major lanes represented the third consecutive month of falling pricing, during which the index declined 16.7 points from its October peak. Indeed, compared to the same month last year the Index is now a startling 16.4 points lower.“
     Rates were expected to strengthen on the back of tighter capacity conditions in the run up to an early Lunar New Year, but the anticipated peak did not materialize,” said Drewry. “The fact that the index has hit an all-time record low further reinforces the perilously weak state of the market.”
     Despite the earlier start to CNY in 2016 compared to 2015, Cathay Pacific saw just a 0.3 percent year-on-year increase in cargo uplifted in January, despite a 2.4 percent increase in offered capacity and surge in shipments towards the end of month.“
     We saw a falloff in airfreight demand after the end-of-year peak and we reduced the number of freighter services operated accordingly,” said Mark Sutch, Cathay Pacific General Manager Cargo Sales & Marketing.
     Sutch said demand on the key transpacific routes had been solid, and Cathay continued to see strong cargo traffic to and from India, but added, “rate-cutting as a result of overcapacity continued to put significant pressure on cargo yield.”
     Frank Naeve, Lufthansa Cargo Vice President Asia-Pacific, said the carrier had seen a peak ahead of Chinese New Year but recovery had been slow since. “It is too early to make a serious prognosis on how the whole year will pan out,” he added. “Whilst it’s true that the overall macroeconomic indicators are not all positive, Lufthansa Cargo still sees opportunities to expand our presence in Asia in 2016, including China.There is no doubt that we are facing challenging market environments. However, the picture is a differentiated one and as such we have to remain flexible in order to take advantage of dynamic market changes.”
     Drewry expects airfreight rates to remain weak until demand picks up in the Northern Hemisphere as European and North American retailers rebuild inventories for the new spring season.
     Yet analysis by Hackett Associates suggests Drewry’s forecasts could again prove overly optimistic. The consultant’s Global Trade Pulse concluded that U.S. imports were unlikely to see much growth over the coming months and exports were also trending down due to the strength of the Greenback. In Europe imports had also been in decline and the export pulse “flat.”
     The collapse of global stock markets, according to Ben Hackett, was pushing global consumers to save rather than spend. “What we are seeing is a fundamental change in the way that the global economy reacts to political and financial instability,” he said. “Gone are the days of heady consumerism, replaced by a more cautious approach to spending and a distrust of institutions.”
     Worryingly, Hackett warned the transport industry to “forget about strong growth.”
Sky King

If You Missed Any Of The Previous 3 Issues Of FlyingTypers
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Vol. 15 No. 15
An Evening Along The Chism Trail
Dornier Push-Pulls Into 2016
Vol. 15 No. 16
Lithium Ban Enacted
All About Lithium
Beam Me Up, Scotty
Black Wings Pioneered Flight

Vol. 15 No. 17
Carmen Taylor Unplugged
Chuckles For March 1, 2016
5/20 Or Fight
A Brief Conversation With Duncan Watson

A Leap Of Faith

Publisher-Geoffrey Arend • Managing Editor-Flossie Arend •
Film Editor-Ralph Arend • Special Assignments-Sabiha Arend, Emily Arend • Advertising Sales-Judy Miller

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