'Alarming signals' as airfreight capacity rises and rates fall
If you thought the ocean market was poor, air cargo is faring even worse – ...
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By Alex Lennane
Order volumes are finally picking up momentum, but the past six months has seen low trade activity – leaving fragility in air freight markets.
Retail trade dropped 12 points below expectations in Q1, according to Tradeshift’s Index of Global Trade Health, and demand for transport and logistics capacity remained low, at 9 points below the baseline.
But there could be spring-like signs of hope for air cargo: higher interest rates are seeing companies look to convert goods into cash sooner, noted Tradeshift.
“Large buyers are coming out of a nasty bullwhip cycle”, said CEO Christian Lanng. “We’ve seen orders fall consistently over the past six months as organisations attempt to rebalance inventory levels.
“Order volumes picked up momentum in Q1, but in the short term, we’ll see a liquidity gap opening up that will hit supplier cash reserves. With the cost of borrowing rising, businesses are looking at ways to monetise new orders and turn them into cash faster. We’ve seen a spike in demand for services, such as invoice financing.”
He added: “The good news, both in the US and at a global level, is that orders are starting to rise again, suggesting a period of readjustment that, while painful, is at least temporary. These are positive signs, suggesting a level of confidence across large buyers that has been lacking over the past year.”
The index also revealed that sourcing diversification from China had seen trade activity in Vietnam grow five times faster than the global average, while in Mexico it was six times faster.
And the positive signs are beginning to show. Last week global air freight rates edged up, according to the TAC Index. Its Baltic air freight index rose 0.9% in the week, supported by an 18.6% rise out of London, likely impacted by the Easter holiday. Outbound from Chicago also rose 12.8%.
However, Shanghai, Hong Kong and Frankfurt were weaker.
But the overall rise showed sigs of improvement over the previous week, when there was an overall week-on-week drop of 2%, according to WorldACD – albeit, up from the 8% fall of a week earlier.
WorldACD noted that capacity was up 12% year on year, while worldwide rates are some 37% lower, at an average of $2.56 per kg.
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