2015 may be the Year of the Sheep in the Chinese lunar calendar, but the bulls seem to be ruling the air cargo business—December continues with projections of demand driven by ocean slowdown continuing into the first quarter of next year.

     Strong air freight demand on key lanes could be sustained into 2015 as U.S. port chaos continues to drive Transpacific demand in the lead up to Chinese New Year in February.
     Led by a Transpacific surge, Drewry’s East-West Air Freight Price Index rose by 11.9 percentage points in October to a year-peak of 115.6 points, the second highest level since the data series started in May 2012, on the back of a strong peak season and conversion from ocean transport.
     “The U.S. West Coast port slowdown could not have been designed to have caused more disruption or extra cost,” said Drewry.
     Earlier last week IATA said that global demand was now back to levels not seen since the 2010 post recession bounce-back, fuelled by strong demand out of Asia especially on Transpacific lanes. This was reflected in the performance of Asia Pacific airlines in October, which saw a 6.4 percent increase in international demand on the back of “buoyant demand for electronic goods from manufacturing hubs in North Asia,” according to the Association of Asia Pacific Airlines.
     Port delays are now spilling over into the U.S. hinterland, a development that threatens to encourage further modal shift to air in the run-up to Chinese New Year, when most factories in China close down for an extended period, prompting a pre-holiday export rush, according to Cathy Roberson, senior analyst at Transport Intelligence.
     “These delays will likely continue for quite some time unless they are alleviated if a labor contract is agreed upon, but even then there are other issues, such as a shortage of truck drivers and backlogs needing to be cleared,” she added.
     “Combine this uncertainty with the need to replenish inventory from what is shaping up to be a busy holiday season and airfreight is looking to be the best option for shippers at least up to the Chinese New Year.”
     Indeed, Drewry Maritime Research said recent U.S. West Coast port congestion and labor issues had “temporarily” reversed the long-term modal shift from air to ocean as shippers sought out alternative ways to make sure their goods hit the stores in time for the U.S. holiday season.
     The analyst said multiple factors had prompted a long-term shift from air to ocean in recent years. But, although this trend will continue, supply chain issues in the container sector—poor reliability, rolled cargo, missed voyages in peak cargo months and port congestion—may slow its impact. “More recent numbers show that international air freight growth is starting to keep up with container traffic growth and even overtake it in certain months,” said Drewry.
     “Shippers converting to air freight [now] are doing so at a time when air rates are at their seasonal high point of the year.
     “The backlog at U.S. west coast ports has the potential to soften the traditional drop in Asia to U.S. rates in December, and depending on how long the issue remains unresolved could prop up air rates through Chinese New Year.”
SkyKing