Industry forecasts for 2023 air cargo are largely pessimistic

Industry forecasts for this year are largely pessimistic with the outlook for demand muted at best, though capacity looks set to grow, writes Ian Putzger.

“Air cargo peak season has now officially failed to materialise,” wrote Freightos head of research Judah Levine on December 7, pointing to year-on-year drops of more than 40% in index rates from Asia to North America and Europe at the end of November.

Those in the industry who hope for a better year ahead have bitter predictions to chew on. With US manufacturing orders from China down 40%, there has been rising fear that the traditional surge preceding the lunar new year holiday may equally fail to materialise.

According to reports, some Chinese manufacturers planned to close their plants two weeks earlier than usual for the holiday break.

Forecasts for the remainder of 2023 are for the most part pessimistic. IATA’s most recent forecast on 2023, which was voiced by the association’s head of policy analysis on December 8, envisages a 4.3% decline in volume, with yields expected to retreat by around 22%.

Purchasing managers’ indices and their new export order components have kept showing contraction, signalling soft demand ahead. Moreover, the cake looks set to shrink for airfreight as shippers increasingly revert to ocean transport as congestion at marine gateways has diminished.

Faced with high costs overall, beneficial cargo owners are under pressure to find savings. Container lines look even more appealing to them as ocean rates have slumped even more than airfreight pricing.

Airfreight is not even the automatic choice when speed is required. Amazon now consolidates orders placed from Sweden in EU countries at its hubs in Germany and Poland and moves them by truck and ferry – for next-day delivery.

While the outlook for demand is muted at best, capacity looks set to grow further in 2023. In addition to the new and converted freighters due to roll-off assembly lines in the coming months, belly capacity should get a boost with the return of more widebodies as passenger numbers have continued to rise.

Predicting the airline industry’s return to profitability in 2023, IATA sees passenger capacity rise 18%. Much of this is going to play out in the narrowbody plane sector, but the widebody arena is expected to see robust growth.

Aircraft appraisers IBA point out that the transpacific sector, above all, shows much room for expansion, as widebody capacity there has only climbed back to 60% of pre-pandemic levels.

Shippers are now badgering carriers to renegotiate contract rates. How much of a sense of deja vu will 2023 bring?