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E-commerce fuels post-Lunar New Year air cargo surge

Exports from Asia set for an extended upturn.
Exports from Asia set for an extended upturn.
03 April 2024 •

Led by strong Asian exports, air cargo markets roared back to life in March, leaving the Lunar New Year lull firmly in the rear-view mirror.

Figures from air cargo data publishing company, WorldACD Market Data, revealed that combined export tonnages from Asia Pacific origin points rose by 8 percent in the two weeks of 4 to 17 March, compared with the previous two-week window. For the same period, the year-on-year increase is at 10 percent.

Longer transit times for ocean freight, due to vessel diversions around the Cape of Good Hope also pushed shippers towards pure air freight and sea-to-air solutions.

Despite the large increases in fresh capacity available on most Asia Pacific lanes, rates still rose substantially in March. WorldACD reported that average rates from Asia Pacific origin points also grew by 8 percent in weeks 10 and 11, compared with the previous two weeks.

However, like most origin regions, rates were down on a year-on-year basis – which is not surprising, given that available capacity ex-Asia Pacific is up 19 percent year-on-year.

Export demand growth is not confined to Far East origins. According to the latest DHL Airfreight State of the Industry update, India is now experiencing substantial air cargo demand driven by e-commerce and disruptions, causing industry backlogs and rate spikes.

“Markets such as India and Dubai have seen air freight demand exceeding capacity. As such, we have been advising our customers to optimize their inventory strategies and working closely with them on alternative modes of transport where possible to alleviate these delays,” said Niki Frank, CEO, DHL Global Forwarding Asia Pacific.

The popularity of sea-air solutions shows few signs of slowing, particularly on Asia-Europe routes where importers are keen to avoid extended transit times. Air cargo volumes at Dubai were up 165 percent year-on-year in week 11, while Colombo-Europe and Bangkok-Europe tonnages have been strong since the start of 2024.

This is a clear sign that global air cargo demand is rising after the Lunar New Year. “March looks encouraging. Some of this is seasonal or related to specific products, but consumer demand is picking up in some key markets and we are seeing this across hubs in Asia where traffic is proving brisk,” added Frank.

Outlook seemingly positive

In a further boost for air freight stakeholders, the forward outlook is increasingly positive, even though economic headwinds and risks remain major features across freight markets.

Nomura’s leading index of Asia ex-Japan’s aggregate exports (NELI), which comprises nine forward-looking components and has a three-month lead time, has extended its expansionary streak, according to the latest analysis released in the third week of March.

NELI surged to 99.9 in March and then advanced to 100.3 in April. This suggests that overall Asian export growth could rise into a positive double-digit territory in early Q2.  A key reason for the upward trend is the global tech upswing with semiconductors and consumer electronics, which comprise around one-fifth of Asia ex-Japan’s total exports.

Nomura now expects Asia's goods cycle to transition from a recovery to an expansion phase. However, the forecast came with the caveat that much depends on whether China’s economy has bottomed out. The analysis firm also highlighted a potential broadening of Asia's export recovery in the coming months, due to a continued strong U.S. economy and nascent signs of improving European economic conditions.

Getting a boost from e-commerce

E-commerce, technology products, and the demand for textiles helped fuel the recovery. DHL’s Airfreight State Of The Industry reports that e-commerce continues to drive volume growth out of South China and Hong Kong. The monthly report noted that air cargo demand remains high from Bangkok to Europe, boosted by road-air volumes trucked down from Vietnam and other regions impacted by conflicts in the Middle East.

“Trends indicate more consumers are buying on e-commerce platforms and the intercontinental nature of these businesses, as well as the speed with which they are expected to deliver, is benefiting air cargo. For some airlines, e-commerce now makes up over 50 percent of their revenue ex East Asia,” noted Niall van de Wouw, Chief Airfreight Officer, Xeneta.

However, as e-commerce demand from Asia to the U.S. has ramped up, the unwillingness of U.S. carriers to resume flights to China due to low passenger demand is limiting belly capacity and tightening the freighter market. In March, the U.S. Department of Transportation granted waivers to American Airlines, Delta and United Airlines to suspend flights to China for another 90 days.

Will airfreight demand continue to soar?

The big question for the airfreight market is whether the current market strength will last.

The March edition of DHL’s Air Freight State Of The Industry noted a significant rise in widebody belly capacity for trans-Pacific and Asia Pacific-EU routes. Global air cargo capacity is now at 9 percent year-on-year versus March 2023, while belly cargo capacity is now up 12 percent year-on-year.

Given that over half of air freight shipments move in the bellyholds of passenger planes, the rise in belly capacity could alleviate some of the pressure from the increasing airfreight demand. “Striking a balance between demand and capacity will be paramount to normalizing the airfreight situation in the coming months,” added Frank.