Prathama Line

Rates predicted to stay high despite a muted air cargo peak season

21 / 07 / 2022

By Damian Brett

Transportation rates are expected to stay above pre-pandemic levels for the foreseeable future despite the recent slowdown in demand.

Seko Logistics chief growth officer Brian Bourke said that demand had slowed this year compared with 2021 and that the constant peak season experienced over the last two years has been replaced by pre-covid seasonal trends.

He said the slowdown has been caused by rising inventory levels, inflation and the return of spending on services as opposed to goods in certain sectors.

However, he said the industry is likely to experience a peak season this year and he pointed out that volumes were still ahead of pre-pandemic levels and supply chain disruption continues.

 “Predictability has disappeared post-pandemic and we don’t see it coming back,” said Bourke.

 “Are volumes down?” he asked. “Yes they are, it is what we used to call slack season – it’s back, it has returned.”

 “It seems apocalyptic because for the first time [in a few years] we are seeing a decrease in volumes, but if you look at it compared with prior to the pandemic, trade is still strong and volumes are still high.

 “We do expect a peak season, albeit a very muted peak season. So we see that volumes are down but it isn’t anything that is earth-shattering.”

And despite a slowdown in demand compared with the last two years, Bourke said that rates were likely to stay at an elevated level due to supply chain disruption caused by labour shortages, possible Covid restrictions, capacity shortages, the war in Ukraine and ongoing port/airport congestion.

Bourke added that air cargo capacity would be reduced as the summer travel season came to an end.

He said: “We advise our clients not to expect rates to revert to pre-pandemic levels in the short-, medium, or long-term.

“It is important for shippers to take that into consideration as they start to think about next year’s budgets.”

He added: “Relative demand in air and ocean will remain a challenge from an air and ocean capacity standpoint which will create continued bottlenecks and congestion in the near and medium-term.”

Also speaking at the event was Seko vice president global carrier management Akhil Nair. He said that trade volumes had not bounced back as quickly as many had expected following the easing of covid restrictions in Hong Kong and Shanghai.

This is reflected in the latest finding from the DHL Hong Kong Air Trade Leading Index (DTI).

The index shows that “0nly” one-fifth of local air traders reported that their current businesses had grown after the situation involving cross-boundary land transport of goods improved.

A similar percentage of the respondents said their businesses have been better in June than in May 2022 amid the region’s relaxation of social distancing measures.

“Despite the slow recovery momentum in June, a more optimistic outlook for overall air trade to and from China is observed in thrid quarter 2022.”

Flexport’s latest market update suggests that airlines are continuing to lower rates in line with volume slowdowns, although prices remain well above pre-pandemic levels.

“Covid cases are increasing again in Shanghai but there has been no impact on airfreight and trucking at the moment,” said the forwarder.

“Meanwhile, Pudong Airport has already reached pre-lockdown levels of daily tonnage turnover.

 “Shanghai is also experiencing its hottest week in recent years which is leading to payload reductions ranging from 3-10%.

 “As a result, some cargo may be offloaded at the last minute and may cause service delays. For Frankfurt (FRA) bound volume, continue to expect delays of two-four days due to manpower shortages and flight cancellations.”

TAC Index figures show rates declined in June, while CLIVE Data Services data for the same month also showed rates cooling.

Leave a Reply

Your email address will not be published. Required fields are marked *