News / Cross-border e-commerce props up soft Chinese air cargo demand

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Sagging economic growth in China is having an adverse knock-on effect on its air cargo exports and imports – but this is partially offset by the buoyancy of cross-border e-commerce, senior market players told The Loadstar.

Cargolux CEO Richard Forson alluded to two ‘slowdowns’ in play: a stalling internal Chinese economy, which is impacting imports; and  the global economic downturn, which reduces demand for Chinese exports.

“Both were noticeable since the end of spring of 2022 and their combination led to a somewhat muted peak season last year. Since then, the decline in imports has stabilised, while exports saw a moderate uptick from May onwards that has continued, mainly driven by e-commerce.”

He continued: “There is no denying that volumes are lower than what we have seen in previous years. However, the bigger impact is driven by the post-Covid return of passenger capacity. Volumes are being re-distributed as capacity comes back.”

On the export side, Thomas Diderich, director Mainland China, Hong Kong & Taiwan at Air France KLM Martinair Cargo, confirmed a downward trend in volumes, especially from traditional industries, such as hi-tech and textile.

“Hi-tech companies used to organise a large amount of dedicated charters during the high-demand season. However, this type of operation has decreased significantly,” he said.

“We are seeing e-commerce growth, especially into the EU, with a major focus on Paris CDG and Amsterdam-Schiphol. It seems that e-commerce is replacing the major role of hi-tech in the air cargo market ex-China, with e-commerce players organising their own charter operation on a regular basis.

“On the import side, there is “low demand caused by weak domestic purchasing power from consumers, and because of the restrictions on hi-tech products to China by the US and EU.”

Lufthansa Cargo’s Janet Mi, head of sales & handling, East and West China, said: “According to statistics, import and export cargo volume fell by 14% in July. China’s air export demand is soft but stable, thanks to the ever-increasing demand from cross-border e-commerce via air cargo service,” which, she added, account for more than 50% of the total.

Turning to capacity, passenger flights between China and Europe are resuming gradually after China abandoned its zero-Covid policy. Passenger flights between China and the US are also expected to increase after October following bilateral negotiations.

However, Mr Diderich pointed out that the number of flights from China to Europe was far lower than the level before the pandemic.

“Given the economic slowdown and capacity not being returned yet, you could say capacity and demand are fairly balanced at this moment. Having said that, the lack of demand is the most challenging part.”

Ms Mi said China-Europe trade was in a state of oversupply, in contrast to undercapacity on the China-US trade, where the recovery in airline passenger passenger services has been slow as a result of foreign policy constraints.

Peter Penseel, chief operating officer, air freight, at Ceva Logistics, said that, similar to current global trends, the company was anticipating that the air cargo market in China would continue to experience the effects of declining demand and prices.

“We expect certain tradelanes, like Asia-North America and Asia-Europe, to see a ‘mini-peak,’ but we do not anticipate any strong movement on the demand side for the remainder of 2023. The interaction between the recovering demand and the growing capacity will continue to apply pressure on both rates and contract agreements.

“While there could be more passenger capacity coming online due to international travel, the remaining capacity would likely impact routes like the transpacific lanes more significantly than others.”

As to how rates are trending for Chinese air exports and imports, Mr Forson said: “After Covid, rates had only one way to go. Since they are coming from a high level, the declines are significant, but are not too dissimilar from what one would expect in summer, typically a slow period.”

With the prospect of a further increase in belly capacity, China’s export and import rates are likely to be under pressure in the long-term, said Ms Mi, adding: “The price pressure on imports (EU to China) appears to be greater than on exports (China to EU). Nevertheless the current rate level is still higher than in pre-Covid times. We expect a seasonal slight peak trend in the coming winter flight schedule.”

Mr Diderich underlined that China export rates were still at a relatively high level, and added: “With the frequency of international passenger flights originating in China increasing and the pace of China’s economic recovery being relatively more slow than anticipated, the industry could expect the air freight rate ex-China to gradually decrease and approach the pre-Covid level.”

Mr Penseel  added: “Our expectation is for rates to continue to decline globally—including for Chinese air imports and exports. Certain routes may be the exception, but given the current economic indicators, the second half of the year should remain on a similar trajectory as the first half.”

Listen to this clip from the latest Loadstar Podcast of TAC Index’s Neil Wilson talking airfreight rates for Q4.