International air freight market - Forecasted to be gloomy in the first half of 2023

The international air freight market is forecasted to be gloomy in the first half of 2023, TAC Index's Outbound Shanghai air freight fell 9.2% from the previous week, down 37.9% year-on-year.

“The first half looks bleak,” an air freight forwarder told The Loadstar this week. “Anyone that said things would pick up in March was not working on logic, but wishful thinking.”

By most metrics, the market looks very weak. 24 January's TAC index showed its overall Baltic Airfreight Index fell nearly 8% over the past week, leaving the index 34% lower than it was a year ago.

“Sources said there was a ‘dead market’ due to Chinese New Year, with the latest Covid wave in China perhaps past its peak and the effects of that on ground handling and airlines now largely worked through. But the impact of higher interest rates and falling demand is still being felt,” noted TAC editor Neil Wilson.

“Outbound Shanghai fell 9.2% week on week, taking its year-on-year change to -37.9%, while Hong Kong was down 5.6% WoW, taking it to -41.9% YoY.”

Nick Coverdale, Aeromar's head of marine aviation expertise, says that even in a weak market, "there is the odd shipment". “But with pure air rates now below $2 per kg from, for example, Vietnam to Europe and, for that matter, the US west coast, we won’t carry anything,” added Nick Coverdale.

The TAC index also shows that outbound rates to all major destinations have fallen, with Frankfurt down 5.8% in the week, Heathrow 12%, Chicago 8.6%; China to Europe fell 10% in the week, to $4.35, while China to the US fell 5.4%, to $5.60, as of January 23.

Mr Wilson added: “Declines were even greater in markets where a higher proportion of business is done at spot rates – with India to US routes now down over 66% YoY and Vietnam to US now down a whopping 80% YoY."

An Indian forwarder confirmed to The Loadstar that "market is very soft, ex-India". He added: “Due to upcoming holidays volumes are expected to further drop in the coming weeks.”

However, in the weekly update, Flexport is a bit more optimistic, especially about Vietnam.

“Demand ex-South-east Asia remains low, with capacity widely available except for Hanoi, which is experiencing a pre-holiday rush.”

Flexport said demand in North China had picked up ahead of the lunar holiday, "leading to some rate level increases," but acknowledged that current prices will fall "quite a bit" over the holiday season through the end of the month. Demand in South China has been declining and prices have fallen, Flexport added.

Flexport said high passenger demand in Taiwan during the holiday season could lead to some cargo being unloaded and noted that the eastbound market on the trans-Pacific to North America route in South Korea is growing, but in the opposite direction is trending down. The company considers the Americas to be "stable".

In Europe, demand is weak and freight rates are "normal Q1 levels", added the forwarder added. On the other hand, ground operations are doing well, with no pressure on congestion.

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