The balance of supply and demand in early 2023 will be a mix of mediocre or flat demand combined with strengthening supply, according to Ti Insight in its latest data report – Air Freight Tracker Q4 2022.
In 2023 freight rates will continue to weaken and this will end when the American consumer decides, according to data from Ti Insight’s knowledge platform GSCI, featured in its latest report – Air Freight Tracker Q4 2022 – which takes an in-depth look at the demand drivers of air freight, from a muted consumer economy in the US to Asia-Pacific production.
The extraordinary conditions of the past two and half years have ended, with the notable exception of China. However, the effects of the policies remain in the form of inflation that has resulted in higher interest rates and higher prices.
Key findings & data from GSCI:
– The US consumer: The way that US consumer demand moves will have a disproportionately high impact on air freight demand, especially in Q3-Q4 2023. Internet-retail volumes in markets such as the US have fallen-back noticeably, affecting both the domestic and international operations of the big air express companies.
– Inventory: In both electronics and US retail, inventory levels have increased over the past several quarters. In container shipping the so called ‘peak season’ failed to arrive, with demand flatish in Q3 and Q4. This is a strong signal that retailers perceive that their inventory levels are at least adequate and possibly too high- going into Christmas. This is a strong signal that air freight rates will be under downward pressure in Q4 2022 to at least Q1 2023, and very probably following quarters.
– Asia-Pacific production: The forecast for demand from semiconductor manufacturers suggests that demand will fall between 10-15% year-on-year in Q4 2023. This represents a marked slowing from the perceived wider market trends at the beginning of the year. The result is a much weaker air freight demand environment, especially across and around the Pacific.
– China & its COVID policies: China’s COVID policies are continuing to depress activity of all kinds, especially air transport. This reduces both the supply of and demand for air freight capacity. However, if China were to return to something like normality, then the implications for the wider global air freight market would be significant with renewed demand surging onto the market.
– Passenger air travel: The appetite for passenger air travel is returning, yet in many regions the volume of air transport operations is not yet at 2019 levels. However, the trajectory looks promising and there is a real prospect that early 2023 will see the belly freight market returning to the very well supplied conditions seen previous to 2020.
– Express carriers expand: All of the three large express carriers have expanded their fleets over the past two years, whilst airlines such as Emirates retain enlarged freighter capability. There have also been significant new entrants, such as Maersk and CMA CGM who have engaged substantial fleets of freighters. All of this suggests that the supply side will be very accommodative in 2023 and beyond.
– Jet fuel: At present it might be tempting to assume that prices will remain high. However, they weakened noticeably through Q2-Q3 2022, so further weakening in the face of any recession in the US and low growth in China should not be ruled-out. Although the war in the Ukraine is perceived to have affected oil prices, the effects of this should not be exaggerated. Oil is more fungible than gas.
To view the tracker in full, which contains further key data on the North America and Middle East markets, plus analysis of the underlying drivers of air freight demand in Europe, visit: ti-insight.com/whitepapers/q4-2022-air-freight-rate-tracker/
Source: Transport Intelligence, December 1st, 2022
Author: Transport Intelligence