Air Market Bearing up, "Rates 75% Higher Than Pre-Covid" Says Analyst

The air cargo market is holding its own despite the onslaught of economic pressures in the past year. According to the latest industry analysis by Xeneta-owned CLIVE Data Services, chargeable weight fell 8% year-on-year (y/y) in December and the general airfreight spot rate registered its largest y/y decline of 35% while capacity recovered to 93% of the 2019 level. CLIVE’s ‘dynamic load factor’, which measures both weight and volumes, declined seven percentage points y/y to 57% and was five percentage points below the figure for December 2019 but overall, average rates remained 75% above the pre-COVID level (see Figure 1).

“It would be easy to take a pessimistic view of the global air cargo market’s downturn, but this would ignore where it has come from. There is little use comparing it to the same time last year because then we had no Ukraine conflict, no high energy prices, no soaring interest rates, nor the impact of the subsequent cost-of-living pressures. So, based on the global environment we see right now, airlines are still achieving rates 75% higher than pre-COVID. That indicates the glass is very much still half full,” Niall van de Wouw, Chief Airfreight Officer at Xeneta pointed out.

Van de Wouw noted there was less pressure on shippers, despite the higher costs in the current market. He said this would help the long-term sustainability of the air cargo supply chain. Yet, the future remains uncertain. An earlier Chinese New Year will likely have an impact on the industry, alongside “rising COVID levels in China, which is already impacting some factory production”, van de Wouw noted. Increasing capacity will continue to put pressure on the industry, but the decline in rates is “gradual” rather than rapid which has helped the industry adjust, he said.

“It’s clear it remains in a very unpredictable state given world events. We don’t see demand recovering quickly because of what is happening around the world, but we do expect to see supply continuing to come back into the market. This, of course, will put further pressure on load factors and rates…Looking at the broader perspective, we still see a very efficient air cargo market, especially when compared to the 70-80% fall in ocean rates in the past 8-9 months.

“The fact that the airfreight domain is more competitive and more fragmented on the supply side meant rates didn’t go as crazy as we saw with ocean container prices, so the decline, now airfreight volumes are lower, is more gradual. Air cargo is much stronger than it was pre-COVID, but the current direction of the market means there is some degree of good news for everyone,” van de Wouw added.

Source: Air Cargo News

New Year Brings New Challenges for the Container Market

Drewry’s WCI Asia-North Europe index recorded a 10% increase in the spot rate reading from pre-Christmas levels yet, export demand to North Europe ahead of the Chinese Lunar New Year (CNY) remains dampened and that is expected to continue post-holiday.

Lars Jensen, CEO of Vespucci Maritime says the rate spike on the tradelane needed to be put into perspective, noting that the reading is 19% below pre-pandemic levels recorded in January 2020. “As we move into 2023, it is clear that container market conditions will be drastically different from 2022,” he said.

According to Jensen’s analysis in the latest Baltic Exchange FBX report, demand is currently subdued because of an inventory oversupply. He says the possibility of a demand surge once the inventory overcorrection happens would “largely depend on the depth and duration of the current economic downturn”. “At best, such a surge might happen in peak season 2023; at worst, it might be postponed until early 2024 in the lead up to the lunar new year,” Jensen postulates.

Overall, carriers are more optimistic about demand recovery prospects on the Trans-Pacific than on the Asia-Europe trades, but how the market will behave post-CNY remains unclear.

Meanwhile, demand on the Trans-Atlantic Westbound trade has been buoyant, with U.S. consumers gravitating toward goods from Europe than from Asia.

Source: The Loadstar

Chinese Export Container Rates Drop 27%

Chinese container exports which typically spike in the weeks leading up to Chinese New Year (CNY), faced a drop in prices and continues to downtrend, performing the worst in 13 years, according to chief shipping analyst at BIMCO, Niels Rasmussen.

“Spot rates for containers loading in Shanghai will normally be 12% higher just before CNY than ten weeks earlier. Similarly, average rates for all containers loading in China will normally end 4% higher. This year, both spot and average rates, however, continue to fall,” said Rasmussen.

The China Containerized Freight Index (CCFI) which measures average container freight rates for exports out of China, has seen a 50% drop since February 2022. In the lead up to CNY, it has continued to fall, dropping by a further 27% since mid-November.  

“From 2011 to 2020, the CCFI on average increased 3% in the seven weeks from week 10 before CNY to week three before CNY. The worst year was 2012 when the CCFI fell 6% during those seven weeks while the best year was 2020 with an 8% increase. The market situation in 2021 and 2022 was unique as congestion and a spike in consumer demand led the market, and the lead-up to CNY was also strong. So far, the development in 2023 is therefore the worst in thirteen years,” Nielsen commented.

For exports to Europe and the Mediterranean, the CCFI has fallen by 34% and 57% respectively during the last seven weeks, while exports for the U.S. West and East Coast are down by 26% and 27% respectively.  

“During the last seven weeks, the CCFI has also dropped faster than spot rates for exports out of Shanghai (as recorded by the Shanghai Containerized Freight Index - SCFI). The SCFI has fallen 23% whereas the CCFI has fallen 27%,” noted Rasmussen.

Source: BIMCO

Port of Houston Long-dwell fee to Come Into Effect February 1

The new fee created by the Port of Houston to address the issue of excessive import dwell times at its facilities will come into effect on February 1, 2023 at both the Bayport and Barbours Cut Container Terminals.

According to a statement released by the port, shippers will be charged a $45 fee per unit per day, starting on the eighth day after the expiration of free time. The long-dwell fee would be in addition to the regular demurrage charges the port imposes for imports that dwell past their free time. The port indicated containers will be held until all terminal fees are reconciled.

“We’ve seen during the recent increase in demand that containers sitting on terminals for an extended period of time are a challenge. We are implementing this additional tool to help optimize space at our terminals and keep goods moving to the consumers in our region who need them.” said Roger Guenther, Executive Director at Port Houston.

Container volumes at the port continue to rise at Port Houston. November was the port’s fourth-largest month in terms of volume, with the facility handling 3.5 million containers.


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