A buoyant start to the year has created “a positive dynamic” in air cargo markets, according to a major forwarder – but the key question is, how long will it last?
“The air cargo market evolved in a surprisingly positive manner over Q1 24, with an overall growth in tonnage in excess of 10% compared with the same period last year, with growth on all main tradelanes,”Geodis EVP freight forwarding Eric Martin-Neuville said.
“The ecommerce boom and the impact of the Red Sea shipping crisis are supporting flows ex-Asia. Capacity has grown for the most part in line with demand, creating a rather conducive market environment.
“The China outbound market remains very much influenced by the continued robustness of ecommerce, whose volumes have largely offset the decrease in traditional Chinese air exports, which have resulted from [shippers’] sourcing diversification efforts. The ecommerce trade is mobilising significant freighter capacity, but it is only partially impacting the capacity available on passenger flights or on scheduled freighter services.”
He added: “Thanks to ecommerce, volumes are probably now exceeding pre-pandemic levels, rates remain higher than we were seeing in 2019 and, thus, overall revenue levels remain positively positioned.”
The ecommerce boom aside, the market recovery appears mainly driven by traditional air cargo verticals, such as consumer hi-tech and pharma, he said.
Turning to the resurgence in ocean-air services, Mr Martin-Neuville said this bi-modal offering was benefiting from three drivers: the avoidance of the Suez Canal by ocean carriers, due the threat of attacks on ships, leading to both an increase in transit time and rates; the rise in air cargo demand, leading to firmer price levels than initially expected; and the China to Europe rail service via Russia, which had been negatively impacted by the Ukraine conflict.
“This favourable combination of factors has given ocean-air services a new dynamic, mainly for the Asia-Europe and Asia-North America east coast flows.”
As to how he sees the market playing out in Q2 and beyond, in terms of demand, capacity and rates, Mr Martin-Neuville noted: “The first quarter of 2024 has created a positive dynamic on the market and enhanced our confidence levels, especially in the short term. For Q2, we see firm demand and expect capacity to remain adequate on most trades, although there will be pockets of shortages, as is currently the case in India.”
He concluded: “This will, in general, lead to maintaining prices at levels higher than initially forecasted. The million dollar question is how long such market conditions will last and whether they will take us through to the year-end peak.
“If all demand elements remain as well-aligned as they are today, it may become tougher than expected to access capacity with upward pressures on pricing.”