‘Volatile’ trade talks drag on air freight

Global demand for air cargo grew at its slowest pace in more than two years.    Growth in global air freight volumes slowed for the third straight month in July as international trade tensions continued to dampen demand.
   Cargo demand grew 2.1 percent for the month compared with the same 2017 period, the slowest pace since May 2016 and well below the five-year average growth rate of 5.1 percent, according to the latest data from the International Air Transport Association. 
   The July growth was representative of an ongoing slowdown in air cargo demand, following year-over-year increases of 2.7 percent in June, 4.2 percent in May and 5.2 percent in April.
   Growth in available air freight capacity also continued to decelerate, from 3.9 percent in June to 3.8 percent in July, but still outpaced volume growth for the fourth time in five months.
   Through the first seven months of 2018, air freight volumes grew 4.3 percent compared with the same 2017 period, less than half of the full-year 2017 growth rate, according to IATA.
   IATA attributed the recent slowdown in part to the temporary grounding of the Nippon Cargo Airlines fleet, but said slower growth is likely to continue due to the end of the restocking cycle, during which businesses rapidly increased their inventory to meet unexpectedly high demand, a weakening in manufacturing firms’ export order books and longer supplier delivery times in Asia and Europe.
   IATA Director General and CEO Alexandre de Juniac said the association is still projecting 4 percent growth in air cargo for the full year, but noted that could change due to growing downside risks, most notably in the form of escalating reciprocal tariffs between the United States and China.
   “The tariff war and increasingly volatile trade talks between the world’s two largest trading nations — China and the U.S. — are rippling across the global economy putting a drag on both business and investor sentiment,” he said. “Trade wars only produce losers.”
   Broken down by geographical region, five of the six areas tracked by IATA recorded increases in demand in July, but none saw an acceleration in year-over-year growth rates.
   Growth in air freight volumes carried by Asia Pacific airlines slowed to a 0.9 percent pace after climbing 1.5 percent in June and 4.9 percent in May, while capacity grew 3.9 percent. IATA noted that because Asia accounts for more nearly 37 percent of all global air cargo shipments, “risks from protectionist measures impacting the region are disproportionately high.”
   European airlines saw freight volumes rise 2.6 percent in July following a 3.3 percent increase in June, a “significant slowdown” from the region’s five-year average growth rate of 5.6 percent, while capacity increased 4.4 percent year-over-year. Despite facing headwinds from a slowdown in export orders, European volumes “look to have resumed their upward trend in the past few months,” IATA said.
   Carriers in North America saw shipments climb 2.6 percent year-over-year in July, slowing from the 3.8 percent rate seen in June and May’s 5.9 percent increase, as available capacity grew 4 percent. IATA said a strong U.S. dollar and an overall expansion of the U.S. economy drove increased demand for imports in the region, along with a “sharp pick-up in supply chain bottlenecks, which is typically alleviated by the speed of air freight.”
   Cargo volumes carried by Middle Eastern airlines grew 5.4 percent for the month, up from the 3.8 percent uptick seen in June and the fastest growth rate of any of the six regions, but were still outpaced by capacity, which increased 5.4 percent compared with July 2017.
   Latin American air freight carriers, meanwhile, saw monthly shipments rise 3 percent, down considerably from the 11.4 percent year-over-year growth rate recorded last month, still well above the five-year average of 2.1 percent for the region. Capacity fell 7.8 percent compared with the same month last year, making Latin America the only region in which demand growth outpaced that of available capacity.
   African airlines, on the other hand, saw cargo demand drop for the fourth time in five months, with volumes falling 8.3 percent from July 2017 after sliding 8.3 percent in June, while capacity fell 0.7 percent.
   “After a surge in international FTK volumes last year, seasonally-adjusted international freight volumes have now trended downwards at an annualized pace of 18 percent over the past six months,” IATA said. “This reflects a softening in demand on markets to/from Asia and the Middle East.”