Change of dynamic: air freight demand now 'the reverse of three weeks ago'
Date: Monday, March 30, 2020
Source: The Load Star
Air freight demand is expected to plummet as consumers in Europe and the US are forced to stop buying by shops closing.
The automotive industry has already stopped requesting components as plants have closed; retail has cancelled orders – Bangladesh alone faces cuts in orders for apparel worth $2.67bn.
“Shopping is just not a priority,” said one forwarder. “The only real air freight demand now is medical equipment and some urgent products.
“Just-in-time may be changed for ever.
“There is also no cashflow.”
He said air freight demand was now “the absolute reverse of two to three weeks ago; the dynamic has changed”.
The news comes as China yesterday told its domestic airlines they could only operate to one international country, with just one flight a week. Foreign airlines have also been limited to no more than one flight a week to China, as the country faced a second wave of infections, potentially sparked by people returning.
The cuts will reduce capacity by 90%, with only 131 international flights operating. Cargo-only flights, however, are still able to operate.
However, one forwarder, when asked whether this could meet existing demand, said: “What demand? Who wants anything now? You can’t sell it, you can’t make it, you can’t distribute it.
“But freighters will become mega-expensive when the ‘ping’ comes – it’s just a case of when.”
UK forwarder Westbound Shipping said it had spotted a customer trend that could be placed into three categories: shippers cancelling orders awaiting the worst of social distancing to be rescinded; importers that had cautiously slowed down orders as a temporary measure; and those that had enough cash and storage to stockpile and were bullishly preparing for a sudden surge of demand when restrictions on consumer shopping are eventually lifted.
Another forwarder noted that while demand was, perhaps 15% of what it was three or four weeks ago, supply is at about 10%.
“So there is still high demand in a relative sense.”
The real question for transport companies is what will happen in two to three months’ time, when consumers are likely to be able to buy again – but may not have the money to do so.
Singapore, which said yesterday it was headed into a full-year recession, is likely to be a strong barometer for other countries further behind the curve.