Confidence up in air freight

Confidence up in air freight

It’s official. Air freight is having a good quarter – even a ‘peak’ season.

According to the Stifel Logistics Confidence Index, there is a “positive freight forwarding volume environment”, and confidence is up 3.8 points in October over last year.

Sea freight is faring less well, but the Index notes that “these trends are consistent with the holiday lead shipping times inherent in each mode”.

Confidence in air freight rose 0.8 points to 56.5 in October, with all lanes seeing increased activity, except Europe to Asia – although this lane has stood up fairly well this year in general, providing a better balance in the market.

Trade between Europe and the US, both ways, has increased, although US to Europe saw stronger gains. The main commodities in this tradelane are auto parts, industrial consumables and machine parts.

Meanwhile, Asia to Europe rose slightly to reach a healthy 56.9, which, notes the report, “may be indicative of a stronger and earlier peak than normal”.

The results certainly chime with anecdotal evidence from carriers which have been reporting higher volumes in recent weeks. Spurred by recent hi-tech shipments combined with less capacity, the market is thought to be performing better than it has for some time.

The outlook, however, is less certain. One airline executive expressed concern that a peak season would give carriers a false confidence for next year, which could be blighted in Europe in particular by a slowdown in Germany, which this year has performed well, driving growth in the region.

He added that yields could be further harmed by “stupid airlines offering stupid rates”.

Yields have improved this year, although they remain weak, and with continued overcapacity in the market they are unlikely to rise significantly next year. While supply and demand have been far better balanced this year than last, there still remains a significant amount of widebody capacity coming into the market – in another blow for Europe, the majority of this will be deployed between there and the Middle East.

In sea freight, the Stifel Index declined on all lanes except Europe to Asia. The sharpest fall was Asia to Europe. On the six-month outlook, European export lanes looked strong.
It concludes: “Our outlook for freight forwarding volumes in 4Q 14 remains one for modest year-over-year growth, with still generally improving global trade conditions. That said, growth should decelerate from 3Q 14, especially with regard to global seafreight volumes.

“Longer term, overcapacity continues to be an issue in both modes, and gross profit per unit yields remain under pressure for most public forwarders. That pressure should continue into 2015, in our view, as shippers continue to optimise their service and modal mix.”

Source: The Loadstar

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