full of mixed signals as airfreight stakeholders entered the second quarter
of 2019 hoping for an upturn after a slow start to the
After three consecutive contractionary months
of scores below 50, the official Chinese manufacturing Purchasing Managers’
Index (PMI), which measures sequential growth momentum, climbed to 50.5
in March from 49.2 in February.
Of more interest to the logistics sector, the
new export orders sub-index jumped to 47.1 in March, from a slump to 45.2
a month earlier, while the new orders sub-index climbed to 51.6 last month
from 50.6 in February.
Yet despite the upturn in economic indicators,
analysts warned the jump in activity might simply be a rebound from post-Chinese
New Year factory closures. Certainly, there was not much sign of a major
turnaround in airport volumes at key Asian origins at the start of April.
Flexport reported that although the ex-China
market was picking up and rates had increased into the EU and U.S., there
was still ample capacity available to shippers. Ex-Vietnam capacity was
stable, but rates were “expected to increase”, while ex-Hong
Kong “market demand is picking up, especially to the U.S. East Coast,”
although “no backlogs are foreseen.”
Moderate But Slow
Paul Tsui, managing director of Hong Kong-based
forwarding and logistics operator Janel Group, said the current market
to the U.S. “was at a moderate level,” but other trade lanes
“were quite slow at the moment.” Tsui does not expect a significant
pick up in the Asia export market before August, at best.
Taking a different tack, Peter Stallion, an air cargo derivatives broker
at Freight Investor Services, told FlyingTypers that the China-U.S.
market had rebounded into positive territory.
By contrast, China-Europe lanes had seen “a
continued decline in prices indicating a drop in volumes,” although
he said market feedback was more positive than price movements suggested.
This, he added, possibly indicated that European trade lanes were being
“Market drivers remain the same as always,”
he said. “Our Chinese freight forwarder clients report they are
experiencing a minor rebound of export demand into the U.S. and Europe.
We will have to wait for volume data from IATA to confirm this. However,
it appears this demand will be outstripped by capacity over 2019. Even
with this being the case, carriers have maintained higher price levels,
perhaps in an attempt to compensate for lack of booking volume given slack
According to Stallion, the key market feature
of 2019 will be increased spot-market buying, resulting in an increase
in market volatility with forwarders betting on their buying teams securing
ad-hoc space effectively.
“The danger is that barriers to cross-border
commerce—trade wars, tariffs etc.—will wind down as early
as Q4, which could threaten to flood the market with extra demand in a
short period of time,” he added. “You would see the market
react in a similar fashion to 2017, ideally softened due to greater wide-body
The latest analysis of after-the-fact volumes
covering February by WorldACD revealed the usual disruption caused by
diminished business activity around Chinese New Year. To overcome the
difficulties presented by the lunar calendar in terms of year-on-year
comparisons, the analyst instead combined January/February data to get
a more accurate reading.
“The area Asia Pacific took the largest
beating in the first two months of 2019: outgoing volumes were down year-on-year
by 6.8%, incoming by 6.1%, against the backdrop of a 3.6% worldwide decrease,”
said WorldACD. “All other regions also suffered in incoming traffic,
with year-on-year percentages ranging from -5% for Central & South
America to -0.6% for North America. “In year-on-year outgoing business,
performances ranged from +2.5% for Africa to -3.8% for North America.
“Taking a slightly longer view, we should
draw your attention to the fact that Jan/Feb 2019 were still better than
the first two months of both 2016 and 2017.”
However, World ACD said predictions of 3% annual
air freight demand growth this year would likely prove optimistic. “At
this moment in time, it seems harder and harder to achieve the 2% to 3%
growth predicted for the full year 2019 by some of the industry players,”
IATA said demand for air cargo continued to face significant headwinds
including trade tensions, weaker global economic activity and tepid consumer
confidence, and declining global PMI figures for manufacturing and export
orders. Indeed, IATA noted that global export orders have now been contracting
since September 2018.
“Cargo is in the doldrums with smaller
volumes being shipped over the last four months than a year ago,”
said Alexandre de Juniac, IATA’s Director General and CEO.
“And with order books weakening, consumer
confidence deteriorating and trade tensions hanging over the industry,
it is difficult to see an early turnaround. The industry is adapting to
new markets for e-commerce and special cargo shipments. But the bigger
challenge is, trade is slowing.
“Governments need to realize the damage
being done by protectionist measures. Nobody wins a trade war. We all
do better when borders are open to people and to trade.”
However, Dean Maciuba, head of consulting services
at Logistics Trends & Insights, told FlyingTypers that IATA’s
analysis was too simplistic. “It’s much too easy to lay-off
air cargo declines on global economic softness and protectionist trade
policy at the country level,” he said.
“My clients are telling me that air cargo
rate increases, especially via the air cargo carriers flying dedicated
freighters, are forcing them to source manufacturing and assembly solutions
closer to the end user.”