Business Bayani PH

In a recent report by DHL Global Forwarding, the global air cargo demand witnessed a notable three percent increase in December compared to the same period in 2022. The Air Freight State of the Industry report sheds light on various market developments and highlights key trends shaping the air cargo landscape.

The report projects a global growth rate of 2.54% for 2023, with a slight dip to 2.26% in 2024. The global economy sped up in November, boosted by steady new orders leading to a slight increase in output. The Purchasing Managers’ Index (PMI) reached 50.4, signaling a revival in output growth. Despite this, manufacturing output stayed in contraction for the sixth straight month.

The service sector continued to grow, but certain regions faced capacity constraints due to increased seasonal demand in Q4 2023. The report anticipates an average EIA (US Energy Information Administration) Brent crude oil spot price of $83 per barrel in 2024.

Demand and tonnage surge

Worldwide air cargo demand remained resilient, standing three percent higher year-over-year. A substantial rise in tonnage was observed in the Asia-Pacific region, propelled by the booming e-commerce sector, new product introductions, and increased use of air shipping by retailers. The technology and consumer sectors played a significant role in driving this increased demand, resulting in industry backlogs in China and Hong Kong.

However, tonnage dropped noticeably in North America and Europe due to lower consumer demand. The report emphasizes Asia’s key role in boosting global air cargo demand, showing a tonnage surge and increased dependence on air shipping.

Capacity trends and industry backlogs

Global capacity surged by 10% from December 2022, mainly due to a robust increase in passenger belly cargo, up by 17% year-over-year. While the European Union and the Middle East to the US faced capacity constraints due to fewer flights and seasonal slot limits, the Americas maintained sufficient capacity.

Industry backlogs were noted in Tel Aviv and major airports in the Asia-Pacific region, particularly at Shanghai Pudong International Airport and Hong Kong International Airport. 

Limited capacity in the Asia-Pacific region resulted from severe Alaskan weather disruptions, aircraft on ground (AOG) situations due to heavy use, and scarce charter availability amid high e-commerce demand.

Jet fuel and forecast for 2024 Q1

The report anticipates an increase in the Brent crude oil spot average price from $78 billion in December 2023 to $84 billion in Q1 2024, driven by OPEC+ (Organization of the Petroleum Exporting Countries Plus) production cuts. Despite these cuts, the US EIA reduced its 2024 Brent crude oil forecast to $83 billion, reflecting the risk of rising production after Q1 2024 cuts.

Looking ahead to 2024 Q1, industry backlogs from the Asia-Pacific region are expected to persist until mid-February due to strong e-commerce demand. Some airlines, including Lufthansa and United Airlines, are set to partially resume flights to Israel in January 2024, while Delta Airlines and American Airlines have extended suspensions until further notice.

Expectations for 2024 and beyond

As companies seek to reduce inventory before a temporary lull, a stronger volume of air cargo is expected prior to Lunar New Year. IATA predicts a 4.5% rise in air cargo volumes in 2024, although pressure on rates may impact sector revenues.

The PMI Index indicates a decline in global inflation to about 3.5% in early 2024. Manufacturing output and export orders in major economies are below the growth threshold. The report foresees a global economic slowdown in the first half of 2024, followed by a rebound in activity in the subsequent months.◼