IATA has published its analysis of the global air freight market, the results within suggest a market in recovery, one that is matching manufacturing levels; a sector to which it is inextricably bound.
According to IATA the air freight market grew by 4.5% in January, a sharp increase in growth from 2013’s annual rate of 1.4%. This is a reflection of global economic growth and, in particular, the recovery of global trade. However what is somewhat unusual about this recovery is that the air freight market is only matching global trade and manufacturing growth. Historically, during economic upturns the air freight market has been the beneficiary of a growth rate roughly twice that of manufacturing; that has not been the case on this occasion. Many commentators have suggested that the crucial difference between this recovery, and those that have come before it, is the global trend for nearshoring and the subsequent reduction in demand for global air transport.
Evidence of nearshoring is likely to be felt soonest, and most keenly, by the air freight market, as the industry thrives on the type of high tech manufacturing that is most likely to be moved back to developed markets first and in the largest quantities. The implications of this trend would certainly explain why, although air freight has recovered and is growing steadily, its growth has not been as impressive as historic precedents might suggest.
The evidence in support of this line of thought is considerable. JP Morgan’s February Global Manufacturing PMI, a composite index, demonstrates that worldwide levels of manufacturing have grown each month for the last 16 months, in February this growth registered on the index at a rate of 53.3 (with 50 representing no change on the prior month). Confirmation of the accelerating manufacturing recovery in the developed world, indicative of nearshoring, and relative decline elsewhere, can be found in the country by country breakdown of the PMI. It shows that the US’ growth rate increased to its highest level since May 2010, that the recovery in the Eurozone continued and that the upturns in Japan and the UK remained robust. In contrast the PMI growth rate in the manufacturing power houses of China and South Korea signalled contraction. Detractors from the nearshoring theory would point to a shift in production away from these relatively developed economies to the fast growing, but less developed, economies of India, Brazil, Vietnam and Indonesia. However, these markets recorded growth in manufacturing that lay below the global average. The variance in manufacturing growth rates between the developed economies and the developing world, combined with a considerable rise in global manufacturing is symptomatic of the reality of nearshoring.
However, nearshoring does not appear to have had any great effect on regional air freight. In Asia Pacific FTKs have strengthened in spite of the falling rate of manufacturing expansion in its economies. The region’s carriers have seen a 3.8% year-on-year January rise in the FTKs, the increase is largely the result of intra-Asian trade, supported by demand in Europe and the US. However as production to feed demand from the Western world shifts, IATA has expressed concern over the future growth of the Asian air freight market.
Indeed along with economic recovery air freight volumes and carriers in Europe and the US have benefitted from a considerable upturn in their fortunes. With European carriers recording a 6% increase on the January 2013 result. North American carriers registered just a 0.7% year over year increase; this was largely the result of the regions especially disruptive weather over the winter, rather than a systemic absence of growth.
Of course the Middle Eastern carriers recorded yet another strong result, with year-on-year growth flying in at 10.7%. The figures recorded by this crucial trans-shipment region suggest that, although nearshoring may be having some effect on the market, the recovery in the global economy and global trade will continue to stimulate a favourable, if not quite as profitable global air freight market as the upturn continues.