Global Air Freight Growth Brought Down by US-China Trade Dispute

Date: Tuesday, September 10, 2019
Source: Sourcing Journal

Air cargo continues to suffer from weak global trade and the ongoing trade disputebetween the U.S. and China.

The latest data from the International Air Transport Association (IATA) for global air freight markets showed demand fell 3.2 percent in July compared to a year earlier. This marked the ninth straight month of year-on-year declines in freight volumes.

IATA reported that trade volume between the U.S. and China declined 14 percent year-to-date compared to the same period in 2018.

“Trade tensions are weighing heavily on the entire air cargo industry,” Alexandre de Juniac, IATA’s director general and CEO, said. “Higher tariffs are disrupting not only transpacific supply chains, but also worldwide trade lanes. While current tensions might yield short-term political gains, they could lead to long-term negative changes for consumers and the global economy.”

The report noted that the global Purchasing Managers Index (PMI) does not indicate an uptick. PMI tracking of new manufacturing export orders has pointed to falling orders since September 2018, and for the first time since February 2009, all major trading nations reported falling orders.

At the same time, air freight capacity rose 2.6 percent year-on-year in July. Capacity growth has now outstripped demand growth for the ninth consecutive month.

Airlines in Asia-Pacific and the Middle East suffered sharp declines in year-on-year growth in air freight volume in July, while North American and European carriers saw more moderate declines, according to IATA. Bucking the trend, Africa and Latin America recorded growth in air freight demand compared to July 2018.

Asia-Pacific airlines saw demand for air freight contract 4.9 percent in the month from a year earlier. “The U.S.-China trade war and weaker manufacturing conditions for exporters in the region have significantly impacted the market,” IATA said. With the region accounting for more than 35 percent of global volume, IATA said “this performance is the major contributor to the weak industrywide outcome.”

North American airlines saw demand decrease 2.1 percent year to year in July, as capacity increased 1.6 percent.

“Despite a sound economic backdrop supporting consumer spending, the U.S.-China trade tensions continue to weigh on the region’s carriers,” IATA said. “Freight demand between Asia and North America has fallen by almost 5 percent in year-on-year terms.”

European airlines posted a 2 percent decline in freight demand in the month, as weaker manufacturing conditions for exporters in Germany, heightened recession fears, and ongoing uncertainty over Brexit have impacted the recent performance, according to the report.

Middle Eastern airlines’ freight volumes dropped 5.5 percent in July compared to the year-ago period. This was the sharpest drop in freight demand of any region. Escalating trade tensions, IATA said the slowing in global trade and airline restructuring impacted performance.

Latin American airlines posted a 3 percent increase in freight demand in the month. The recovery of the Brazilian economy was a positive development, the report noted, but concerns regarding the outlook for some key Latin American countries, including Argentina, remain.

African carriers experienced the fastest growth of any region, with a gain of 10.9 percent. This continues an upward trend present since mid-2018 and makes Africa the strongest performer for the sixth consecutive month. Strong trade and investment linkages with Asia have boosted a strong increase in air freight volume between the two regions over the past year.

 

Read from the original source.

 

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