There is a lot of uncertainty in the world right now, and the case is no different with regard to freight volumes. As 3Q23 earnings unfold, most management teams to date have been tempering expectations for a better-than-expected peak season, and pushing out the timeline for freight recovery, in our view. Over the past several weeks, equities markets have largely reflected that sentiment, too.

However, certain large forwarders, including Kuehne + Nagel, recently pointed to a pickup in airfreight rates out of China—specifically, Hong Kong and Shanghai—which they attributed to Chinese e-commerce players, who were moving goods into US and European markets ahead of the Christmas season.

Curiously, our US consumer data so far does not suggest an uptick in demand that would warrant that behavior.

So, what sayeth the BAI air cargo data? Well, last month, we revealed that sequential air freight rates had ticked up healthily from August to September on major Asia-outbound lanes and that trend continued this month. Hong Kong to North America (BAI 32) and Shanghai to North America (BAI 82) both increased around 13% (versus 8% and 11%, respectively, last month).  That compares to an average sequential seasonal uptick of 6% and 5%, respectively, on those lanes over the past five years (excluding 2022, which saw sequential rate decline). Meanwhile, Hong Kong to Europe (BAI 31) and Shanghai to Europe (BAI 81) monthly rates rose 11% and 14.5% from September, respectively (versus 7% and 34% growth on those lanes from August to September). Those compare to an average sequential increase of 12% and 9% over the past several years, excluding the 2022 drop.

Our conclusion is that there is a discernable late-season uptick in rates and, while it is more pronounced than normal, it hasn’t yet risen to a level that suggests a major shift in the market or in sentiment. 

On its recent earnings call, C.H. Robinson articulated that, while it was hopeful for improved market conditions, it saw no evidence of green shoots in global forwarding demand. The limited corroboration of fundamental demand inflection and commentary from domestic transportation and logistics companies suggests that the increase in activity could be specific to a few shippers or product categories. Therefore, based on what we’re seeing today, we continue to believe that demand will remain muted, capacity broadly abundant, and, while we may see some signs of episodic tightening from week-to-week or from lane-to-lane, the overall peak won’t offer much to write home about. 

 

Exhibits 1-4: Rates on Asia outbound lanes accelerated sequentially in October, but not to a level that suggests a fundamental shift in the market

Source: Baltic Air Freight Index, Stifel Format

About Bruce Chan, Director and Senior Research Analyst covering Global Logistics and Future Mobility, Stifel

Bruce Chan joined Stifel in 2010. Based out of the Miami office, Mr. Chan is a Director and Senior Research Analyst covering Global Logistics and Future Mobility.

Bruce Chan can be reached at [email protected]. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation or needs of individual investors. For more information and current disclosures for the companies discussed herein, please go to the research page at www.stifel.com.

©2023 by J. Bruce Chan.