Reports
from Asia’s forwarders are not exactly uplifting.
One told this correspondent that there had been “barely
a sliver of improvement” post-Chinese New Year
in import and export demand across the region, “with
the exception of the Philippines.” Another said
it was “downright depressing” when asked
about prospects for the rest of this year.
And it’s not hard
to see why gloom is the dominant mood. China, critical
as always, saw its trade volumes ominously contract
last month, with exports in February down 25.4 percent—the
worst decline since 2009, the height of the global financial
crisis. It’s worth noting that the baseline drop
of 25.4 percent was in export value, not volumes, as
reported elsewhere. Moreover, the earlier Chinese New
Year in 2016 versus 2015 and recent currency fluctuations
skewed February’s year-on-year figures. March
data will reveal a more accurate overall picture of
Q1. But, even so, last month’s exports decline
caught analysts by surprise and deepened concerns about
the state of the world’s second largest economy.
With the European and
U.S. economies both also looking fragile, albeit in
different ways and for very different reasons, the fact
that airline executives and air freight forwarders seem
especially pessimistic about key trade lane yields and
rates to Europe and the Pacific out of Asia is no surprise.
Indeed, it reflects the views of ocean freight executives,
who have also seen spot freight rates collapse this
year on poor demand and excess supply.
What was a surprise was
IATA’s early March report, which claimed that
global air freight markets had seen a 2.7 percent year-on-year
rise in freight ton kilometers in January, while Asia
Pacific carriers, which account for 39 percent of all
air freight, had expanded by 1.3 percent year-on-year.
“This continues
the improving trend witnessed toward the end of 2015,
and is the fastest pace since April of last year,”
said the Association, which countered its “good
news that volumes are growing” with warnings that
yields and revenues “were still under tremendous
pressure.”
It will be interesting
to see how IATA’s February figures and analysis
compare to January’s when they are released in
the first half of April, not least because the Association
of Asia Pacific Airlines noted a 0.7 percent decline
in FTK year-on-year in January among its Asia Pacific
carrier members.  Andrew
Herdman, AAPA Director General, reported that “the
usual lift in air cargo shipments seen ahead of the
holiday season had been somewhat muted, as seen in the
continued weakness in air cargo volumes.”
Given the downpour of
poor macro readings, Drewry’s analysis of air
freight markets puts some rates to the various airline
association musings on FTKs and also gives a more meaningful
take on Q1 overall.
The analyst’s East-West
Airfreight Price 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 for
cargoes above 1,000 kg—dropped by 3.8 points in
February to a reading of 79.2. This
represented the fourth consecutive month of falling
pricing, during which time the index has declined by
20.5 points from its October peak. In terms of average
pricing, this converts to $2.57 per kilo in February,
down from $3.24 last October and $3.17 a year earlier.
Perhaps more significantly,
it means the index is now at its lowest level since
it was launched in May 2012. “Drewry expects airfreight
rates to remain challenged over the course of the year
by weak global demand yet rising capacity, as buoyant
passenger traffic releases more bellyhold space,”
said the analyst.
The March Stifel Logistics
Confidence Index (LCI) painted a similar picture, with
airfreight and ocean freight markets weakening. “The
overall climate suggests weaker than normal seasonal
levels, as it has for the last six months,” said
Stifel.
“Our baseline expectation
is for 2016 to be a slow year for global GDP, and maybe
an even slower year for global trade volumes. The LCI
six-month outlook remains barely above the 50.0 (total
freight at 50.4, with air freight at 51.7 and sea freight
at 49.1) threshold for growth vs. normalized levels,
suggesting that survey respondents feel similarly.”
In the March Index, air
freight results were mixed, with the trans-Atlantic
outperforming the Asia-Europe trade. The total air freight
logistics confidence Index gained 0.5 points in March
2016, totaling 48.6. The Index is 9.3 points lower than
in March 2015, and 7.3 points lower than in March 2014.
“On a year-over-year
basis, our index readings on Europe-Asia and Asia-Europe
lanes are likewise down well into the double digits
in both air and sea freight. As a result, we believe
the market remains soft.”
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