AIRFREIGHT MARKET BULLISH DESPITE HIGH STOCK LEVELS

AIRLINES are holding out hope for a peak season, despite many major companies facing overstocking and high inventory levels.

The airfreight market picked up slightly in August, traditionally the quietest month, leading to optimism from carriers that they will see something of a peak season.

Xeneta’s CLIVE Data Services said the slowdown in demand had eased off. June and July saw year-onyear falls in demand of 8 per cent and 9 per cent – but in August, this tailed off to 5 per cent.

While capacity has recovered over the summer, airlines are looking to reduce flight schedules as economies slow down. Jet fuel prices are also nearly 10 per cent lower than a month ago, and spot prices are also at their lowest point since September last year, boosting demand.

Niall van de Wouw, chief airfreight officer at Xeneta, said: “In many respects, this latest data is quite remarkable, relative to the two previous months. The strong dollar and its parity with the euro clearly boosted demand from Europe to North America, with westbound load factor remaining above average for the month, at 61 per cent, and rates stabilising on these lanes. If the fall in demand is easing, however, as August indicates, a capacity shift could see us return to a seller’s market again and load factors return to the mid 70 per cent to 80 per cent range. It is fair to assume volumes will be higher in November than in August.”

However, Bruce Chan, logistics director for Stifel, was more cautious. “Trends in 2022 point to looser capacity … with some softening in consumer demand … more supply-chain fluidity, albeit in a stillconstrained system, and better and more preparation from shippers -especially large ones, with earlier build-up of inventory. There has been some bifurcation of inventory strategy, with large retailers able to amass more buffer stock - and perhaps too much - while smaller retailers, brands, and industrial shippers are still struggling to normalise their inventories. We believe we’ve seen peak freight volumes. Rates are likely to remain stable or grind directionally lower. The long-term trend is reversion toward mean, with the key question being how fast and to what degree. But the market is by no means predictable, in our view, especially near term.”

Big retailers, including Walmart and Target which had brought forward orders, are now looking at discounting stocks and cancelling further orders, while Newell Brands, a distributor, said retailers were reducing orders, following the previous trend to bulk up inventories. Samsung said it expected to see a continuation of the downturn in chip sales.

 Mandy Warren ( September 2022). AIRFREIGHT MARKET BULLISH DESPITE HIGH STOCK LEVELS", VOICE OF THE INDEPENDENT, http://digital.worldlogisticsmedia.com/VOTI_129/VOTI_129.pdf, 09/2022