The latest economics bulletin from IATA on the air freight sector provides a good insight into why prices in many logistics sectors, not just airfreight, are increasing so strongly.
IATA’s numbers show that airfreight activity in the three months to April 2021 saw operations measured in terms of cargo tonne-kilometres (CTKs) rise by 8% above the level for the same period in 2019, a faster rate of growth than the global trade generally.
The reasons for such growth are clear when looking at the economic metrics. For the past six months, Purchasing Managers Indexes from around the world have been consistently strong, with developed markets heading above 60 in the second quarter of the year. International trade is taking a higher proportion of economic activity, with Q1 seeing a rise of 3.1% as compared to 1.6% for industrial production as a whole. Yet despite this production activity stocks of goods remain low, with the US inventory-to-sales ratio sustaining record lows in Q2-21. Of course, what under-pins this is consumer confidence. This has been strong in the US all year, however, for the wider OECD group of nations sentiment has only begun to recover but is now climbing into positive territory.
Remarkably IATA did assert that issues of sector-specific supply and demand are not alone in driving airfreight growth. In periods of low inventory, air freight benefits disproportionately as shippers such as retailers seek to rapidly move stock into the right locations. However, at present, this trend is being amplified by the increasingly problematic situation in container sea freight. Such are the delays and the price increases for intercontinental container services that airfreight is becoming comparatively more attractive. This underpins demand in the short-to-medium term even if, as is probable, belly-freight starts to re-enter the market.
Yet even away from the airfreight sector, the underlying level of economic growth suggests that inflation and congestion will not just continue in the short term but may well get worse. Even if new capacity in air, sea and land freight transport is introduced, it may have to work hard if it is to keep up with a global trade sector that is showing signs of over-heating.
Source: Transport Intelligence, July 6, 2021
Author: Thomas Cullen
