Port strike to boost air freight demand: Dimerco

The sharp decline in the manufacturing sector has heightened concerns about weakening demand and renewed destocking.

The Global PMI Composite Output Index rose slightly to 52.8 in August, up from 52.5 in July, according to the latest update from Dimerco. "However, this growth was entirely driven by the service sector as manufacturing output fell. The Global PMI New Export Orders Index dropped to 48.9 in August from 49.6 in July, indicating deteriorating trade conditions for the third consecutive month, with the fastest decline in eight months.

"While goods trade slowed in both developed and emerging markets, India remained a leader by maintaining modest growth in goods export orders in August. In contrast, China’s goods exports fell for the first time in 2024, signalling a broader decline in manufacturing as the year progresses.

"The interest rate cut by the Federal Reserve could be a key factor in reviving global goods trade by the end of 2024."

Kathy Liu, VP, Global Sales and Marketing, Dimerco Express Group says: "E-commerce and electronics volumes underperformed expectations in September but a surge is anticipated from late September into October with high demand likely starting mid-October to prepare for traditional online shopping festivals. The potential International Longshoremen's Association (ILA) strike on October 1 is expected to further boost air freight demand, particularly for shipments to the East Coast, as ocean freight switches to air. Globally, intra-Asia capacity will tighten, with long-haul routes prioritised during the peak season."

Market trends
Shanghai Pudong International Airport is seeing tight space and rising rates for intra-Asia routes while India (Chennai/Bengaluru) is seeing soft capacity and stable rates.

Asia-US/Canada space and rates are tight and rising across hubs - Hong Kong, Incheon, Chennai/Bengaluru and Hanoi, Vietnam.

The story is set to repeat for Asia-Europe with tight space and rising rates across hubs - Qingdao, Penang, Singapore and Ho Chi Minh City, Vietnam.

While space continues to be soft and rates stable on US/Canada to Asia and Europe, Amsterdam to Asia is seeing an upturn in space with stable rates.

Mexico to Asia, Europe and the Middle East and North America is seeing an upturn in space with stable rates.

Country report
Space availability has improved since last month from Taipei to the U.S., giving larger shipments more room to negotiate better air freight rates. "Space remains tight from Taipei to India, with full bookings through the end of September. Urgent shipments to Chennai, Delhi and Mumbai will face higher rates."

The Tianjin freight market from September to October is under pressure from declining cargo volume and price competition. Despite a high inquiry volume for U.S. and Europe routes, the actual booking remains insufficient, the update added.

Demand has stabilised from Hong Kong to the U.S. mainly due to the decreased e-commerce shipments.

From South Korea (Incheon and Seoul), "air export volume to Southeast Asia has steadily increased compared to the previous month, with no current space issues reported by airlines. However, space for air exports to the U.S. remains tight, and export volume is expected to rise further with the start of the peak season in September.

"Securing space for semiconductor’s equipment shipments is becoming increasingly challenging at general rates, requiring bookings at least two weeks in advance at updated rates."

The peak season from China’s Golden Week is expected to tighten capacity from Singapre, making it harder to secure extra space in Q4. For large volume shipments, shippers should anticipate longer lead times and pre-book shipments a week before the cargo is ready to ensure timely delivery, the update added.

Air cargo demand remains high at major Indian airports due to a shift from ocean freight to air cargo for urgent shipments. "Be aware of upcoming festive holidays in India on October 2, 11 and 31."

Global air traffic is experiencing significant growth in the U.S., fueled by the ongoing e-commerce boom and constraints in ocean shipping. "E-commerce demand has surged to levels 10 times higher than pre-Covid with high-value goods such as technology, pharmaceuticals and perishables driving air freight growth. Potential strikes at U.S. East Coast (USEC) and Gulf ports are expected to add further pressure on air freight capacity and rates."

The airfreight market remains flat in Europe but may soon enter the traditional peak season. However, export trends from Europe are uncertain due to the significant capacity still available in the export market, the update added.

Points to watch:

1. U.S. ports brace for potential strike.

2. Golden week (China's holiday in early October) to tighten air freight capacity.

3. Panama Canal increases daily slots; and

4. Air Canada agrees to deal with pilots