As summer capacity pours into the market, Asian air cargo rates have fallen to their lowest levels in more than three years, and analysts believe that at least through the fourth quarter demand improvement is unlikely.

The International Air Transport Association's April 2023 global air cargo market regular data show that, in terms of cargo ton-kilometers (CTKS), air cargo demand continued to decline by 6.6 per cent year-on-year (international demand fell 7.0 per cent), and the slowdown in the previous month (down 7.6 per cent) improved.

Bruce Chan, director and senior research analyst at Investment Bank Stifel, said that we expect demand to continue to be weak for most of this year, belly capacity will continue to enter the market, and the market may experience the most serious oversupply of cabin space. As seasonal passenger demand drives oversupply, and the freight network bottoms out in destocking, freight rates may fall to the bottom in the next few months, so continued interest rate pressure should be the theme for 2023.

The average spot rate from Shanghai to Northern Europe fell to $3.02 per kilogram this week, down 57% from a year ago and the lowest since March 2020, according to BAl. Freight rates from Shanghai to North America slid 51% YoY to $4.36 per kg, also the lowest since March 2020. "

BAl data show that despite this, compared with the May 2019 pre-epidemic, Shanghai to Northern Europe prices are still up 21%, while trans-Pacific prices are up 27%.

Demand signal unclear

IATA Director General Willie Walsh also highlighted the challenging supply and demand environment.

Walsh said, "Air cargo is in the adjustment phase to adapt to the impact of the expansion of abdominal traffic brought about by the recovery of passenger demand." "Inflation suppression is certainly positive, but the extent and speed at which it could lead to monetary policy easing, which could stimulate demand, is unclear. ".

Denmark-based DSV chief operating officer Jens Lund said that as major economies battled high inflation, people cut costs and reduced consumption, which had an impact on air cargo demand.

Air cargo capacity in the Asia-Pacific region rose 32 percent over the past two weeks compared with a year earlier, while tonnage fell 7 percent over the same period, dragging rates down 44 percent year-on-year, Dutch air cargo analyst WorldACD said. This imbalance between supply and demand makes the market difficult to interpret.

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