News / Normal seasonal patterns suspended – where is the air cargo being held?

© Voraphach Phaisri

Global airfreight rates have edged up this week, including on transpacific eastbound, as the US reciprocal tariff deadline looms.

But there are questions over where inventory is being held in the world, which will inevitably impact rates and demand. 

Greater China to North America ticked up from $4.34 per kg yesterday to $5.17 today, according to Freightos’ FAX.  

Any surge in demand will likely be triggered by low inventory levels, with some companies now choosing to order only what’s needed, as a ‘wait-and-see’ policy over US economic changes takes hold. 

Visibility platform FourKites said today it saw an inventory problem on the horizon: ‘shadow inventory’.  

“The biggest trend I’m watching is what I call ‘shadow inventory’ – product that’s stuck in the grey zones of near-shore supply chains,” said Stephen Dyke, principal solutions consultant manager. 

“There’s the risk that inventory piles up in places like Laredo trucking yards or with Vietnamese freight forwarders that won’t show up on anyone’s dashboard until it’s too late.  

“On the heels of the first wave of tariff announcements, we saw the World Bank cut global trade growth forecasts to just 1.8%, and carriers like FedEx pulling 35% of their Asia-to-US air capacity. As wild fluctuations continue, and if we see higher import duties stick, there could be a real mismatch between the inventory plans companies made and the demand they face this autumn.” 

The issue could be a boost for agile air cargo. 

“The winners will be companies that have the most operational flexibility, rather than just hoping their plans are perfectly executed,” he said. 

Mr Dyke pointed to Target’s plan for factory-direct shipping to customer, currently in the pilot stage.  

“I expect to see more stories like Target’s launching just as its comparable sales fell 3.8% – ambitious supply chain strategies colliding with softening demand.” 

He pointed out that companies had made inventory decisions based not so much on predicted retail demand, but rather “on capacity and trade deals that are moving faster than consumer demand signals”. 

Stuck inventory could account for today’s data from WorldACD, which shows a second consecutive week of falling tonnages from Asia Pacific origins to the US, “where volumes dropped by another -5%, WoW, after a -2% decrease reported last week.

“The decline in week 28 was again mainly driven by Southeast Asia origins, including double-digit percentage declines, WoW, from Indonesia (-23%), Thailand (-21%), Vietnam (-14%), and Singapore (-10%). All had already recorded WoW declines in week 27, with the exception of Thailand, which had recorded a +2% WoW rise in week 27.”

Trends not based on consumer demand has made forecasting for carriers nigh-on impossible.

As Richard Forson, CEO of Cargolux, told The Loadstar earlier this year: “In this industry, it’s becoming more and more difficult to predict long term. The days of spending two months preparing a budget for the next 12 months is probably not adding a lot of value for the company in this kind of an environment, because things change so quickly. 

“What we tend to rely on more and more is re-forecasting during the course of the year – what the results are likely to be – to take into account changing circumstances. Because we don’t want to work with a budget that’s cast in stone.” 

There are few signs to reveal whether or not there will be a peak of any significance in the second half – some observers, such as Xeneta chief air freight officer Niall van we Wouw are sceptical of any burst of activity in the second half. Others, such as Virgin Atlantic, believe it could be strong.  

“We are optimistic about the outlook for the second half, having seen periods of strength throughout the summer. We are always talking to our customers and early conversations ahead of peak season further support this view, head of cargo commercial Mark Faulkner told The Loadstar this month. 

Current rates and capacity data hold no clues. 

Global freighter capacity has gone up 2% in the past week, compared with the average of the previous four, according to Rotate. But the growth is on particular lanes – Asia-Middle East, the transatlantic, and Africa –Europe. Intra-North America has seen a 12% rise this week.  

Rate-wise, China to Europe has largely remained flat, as has the transatlantic. Extra capacity on lanes between Africa and Europe has caused rates to fall in the past week. 

Following the retailers – and consumer demand – could be the only way to discover how the second half will turn out. Normal seasonal patterns have been suspended.