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The picture for freight demand remains mixed, but signs of an upturn in March and the sense that European and U.S. retailers are restocking are buoying industry confidence, at least on some lanes.
      Hackett Associate’s Global Trade Pulse noted that U.S. retail sales had been rising this year but not by much, while inventories remained high and an economic slowdown in Q2 was a possibility. By contrast, in Europe “the forward looking import and export trade pulses show that year-on-year they are on solid ground.”
      The latest Danske Bank Markets’ European Freight Forwarding Airfreight Index, which covered February sentiment in comparison to December 2015, remained slumped at 46, indicating lower volumes over the two-month period. However, expectations for April rose to 67, “suggesting a lot higher volume.”
      China’s export growth for March came in above market expectations at 11.5 percent year-on-year as external demand improved, particularly to EU and ASEAN markets, although HSBC warned “the recovery in exports is still very fragile considering the tepid growth outlook for China’s major export markets such as the EU and U.S.”
      In March, there was at least a recovery in pricing as Drewry’s East-West Airfreight Price Index—a weighted average of all-in airfreight “buy rates” paid by forwarders to airlines for standard deferred airport-to-airport airfreight services on 21 major East-West routes for cargoes above 1,000 kg—inched up 0.3 points to a reading of 79.5. This brought to an end four consecutive months of falling pricing during which period the index declined over 20 points from its October peak.
      Yet despite the slight improvement in rates last month, the Association of Asia Pacific Airlines noted that Asian carriers registered a 5.3 percent decline in March traffic even with the pick-up in Chinese exports following the Lunar New Year factory closures. Freight load factors remained under pressure, with the average international freight load factor registering a 5.2 percentage point decline to 62.9 percent after accounting for a 2.6 percent expansion in offered freight capacity.
      AAPA Director General Andrew Herdman commented that during the first quarter of the year “international air cargo demand remained soft, with volumes declining by 6.5 percent compared to the same period a year ago, reflecting the general slowdown in global trade.”
      Certainly, growth indicators in Asia offer a mixed picture. Shanghai Pudong Int’l Airport Cargo Terminal (PACTL), which now handles also most half of Pudong’s cargo, set new records for both the first quarter of the year and March. Although Q1 volumes were up just 1.5 percent year-on-year, the 6.8 percent increase in March suggested accelerating demand.
      Hong Kong International Airport recorded “mild growth” of 1.1 percent year-on-year in March, driven by 5 percent growth in exports and 3 percent growth in transshipment traffic. “Amongst the key trading regions, traffic to and from India and Australasia increased most significantly during the month,” said a HKIA statement. Yet despite the March improvement, volumes handled at the world’s leading international freight hub over the first quarter were down 3.5 percent year-on-year and, on a rolling 12-month basis, dropped by 1.4 percent to 4.34 million tons.

      Cathay Pacific Airways, meanwhile, reported that combined Cathay Pacific and Dragonair cargo and mail volumes in March dropped 0.4 percent compared to the same month last year, while the cargo and mail load factor fell by 5.4 percentage points to 63.0 percent on a 4.3 percent increase in capacity. Over the first quarter, tonnage was down 3.1 percent against a 2.6 percent increase in capacity.
      “Following a generally weak February, we saw some improvement in airfreight demand in March,” said Cathay Pacific General Manager Cargo Sales & Marketing Mark Sutch. “This was helped by the shipment of new consumer IT products out of the major manufacturing cities of Western China.
      “There was a pickup in traffic on key transpacific routes, and we mounted a number of additional flights into India in response to continued robust demand. Overall, however, the air cargo markets remain soft and yield remains under pressure in what is a highly competitive environment.”
      Evidence of some improvement in the air freight market in March was also tempered by a rate environment that globally still remains tepid. As Drewry noted, the gains of March still left its price index at its second-lowest level since it was first launched in May 2012.
      “Drewry expects airfreight pricing to temporarily strengthen from its current lows as European and North American retailers rebuild inventories for the new Spring season,” added the analyst.
Sky King