Although the economic outlook for 2014 is expected to be bright, it is starting off slow as the overall Stifel Logistics Confidence Index slipped 0.6 points to 56.0, the second consecutive monthly decline. The decline was mainly due to the present situation falling 1.4 points to 50.4 while the expected situation increased only 0.1 points to 61.6.
Stifel Confidence Index: Total
The overall confidence index for air also noted a decline, slipping 0.2 points. Again, this was due to the present situation. Almost all trade lanes recorded declines except for the US to Europe lane which noted a 0.8 point rise. Virgin Atlantic Cargo recently noted this trade lane, in particular, was not only a highly competitive one but also a profitable one for the company in 2013. According to its press release, the US Northeast to the UK recorded a 13% increase in volumes.
Asian air freight providers still are struggling with cargo tonnage. Although the Association of Asia Pacific Airlines reported a 0.7% in freight tonne kilometers for December, for 2013 total freight tonne kilometers declined 0.6%. A growing concern for these providers is capacity. For December, the available freight tonne kilometers increased 3.2% and for 2013 it increased 1.1%.
Meanwhile the expected situation increased 0.8 points perhaps due to upcoming technology product launches. However, IATA officials recently commented that 2014 will be a challenging year for the air cargo industry. According to its Director General and Chief Executive Officer, world trade has expanded quicker than demand for air cargo and has suffered from increasing protectionist measures by governments.
Stifel Confidence Index: Air Freight
The overall sea freight logistics confidence index fell 1.1% with much of the decline attributed to the present situation, declining 1.7 points and now hovering just above the 50 level for February.
The same story persists for the sea freight market – overcapacity and erratic rates. Based on the Shanghai Containerized Index, China to Europe average rates declined 7.8% from the beginning of January 2014 to the end of the month while average rates on the China to US West Coast lane increased almost 13% for the same period. However, compared to same period for 2013, China to Europe average rates are 19.2% higher at the end of January 2014 whereas average rates for the China to US West Coast are 15.6% lower.
The expected situation did not fare much better, slipping 0.5 points to 61.2. There seems to be uncertainty over how the P3 Alliance will impact the market. Also, as Hapag-Lloyd and CSAV merge to become the fourth largest container shipper, will this spark a consolidation within the shipping lines?
Stifel Confidecne Index: Sea Freight
Finally, in our one-off question for the month, we asked with commercial belly space growing, do you expect freighter capacity to shrink, grow or remain stable? Some 38% expected to see capacity remain stable, with almost 23% expecting growth and 24% anticipating shrinking freighter capacity. Slightly more than 15% were not sure. One respondent noted “the number of aircraft is shrinking but new aircraft have more capacity, hence total capacity is stable.”
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GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)