Air cargo demand eased in January, but IATA says brace for impact of Ukraine war

Date Added: 9 March 2022

Air cargo demand eased in January, but IATA says brace for impact of Ukraine war

We have a strong presence in the expedited airfreight arena through our subsidiary, Davies Turner Air Cargo, and note that in its latest report, IATA says that global air cargo demand saw a decline in January from December’s levels, while capacity continues to claw its way back to pre-Covid levels.

Supply chain disruptions and capacity constraints, as well as a deterioration in economic conditions for the sector dampened demand.

Global demand, measured in cargo tonne-kilometers (CTKs), was up 2.7 percent compared to January 2021 (3.2 percent for international operations). This was significantly lower than the 9.3 percent growth seen in December 2021 (11.1 percent for international operations).

Capacity was 11.4 percent above January 2021 (10.8 percent for international operations). While this is in positive territory, compared to pre-Covid-19 levels, capacity remains constrained, 8.9 percent below January 2019 levels.

Supply chain disruptions as well as a deterioration in economic conditions for the sector are slowing growth. Flight cancellations due to labour shortages, winter weather and to a lesser extent the deployment of 5G in the USA, as well as the zero-Covid policy in mainland China and Hong Kong all contributed to capacity restraints.

The Purchasing Managers’ Index (PMI) indicator tracking global new export orders fell below the 50-mark in January for the first time since August 2020, indicating that a majority of surveyed businesses reported a fall in new export orders.

The January global Supplier Delivery Time Purchasing Managers Index (PMI) was at 37.8. While values below 50 are normally favourable for air cargo, in current conditions it points to delivery times lengthening because of supply bottlenecks.

The inventory-to-sales ratio remains low. This is positive for air cargo as it means manufacturers may turn to air cargo to rapidly meet demand.

“Demand growth of 2.7 percent in January was below expectation, following the 9.3 percent recorded in December. This likely reflects a shift towards the more normal growth rate of 4.9 percent expected for this year, said Willie Walsh, IATA’s director general.

“Looking ahead, however, we can expect cargo markets to be impacted by the Russia-Ukraine conflict. Sanction-related shifts in manufacturing and economic activity, rising oil prices and geopolitical uncertainty are converging. Capacity is expected to come under greater pressure and rates are likely to rise. To what extent, however, it is still too early to predict.”
Russia Ukraine conflict

The Russia Ukraine conflict will have a negative impact on air cargo. Airspace closures will stop direct connectivity to many markets connected to Russia.

Overall, the impact on global markets is expected to be low as cargo carried to/from/within Russia accounted for just 0.6 percent of the global cargo carried by air in 2021. Several specialised cargo carriers are registered in Russia and Ukraine, particularly those involved with heavy lift operations.

As the UK’s highest placed independent freight forwarder in the latest IATA/CASS league table for 2020, measured by CASS airline tonnage, Davies Turner Air Cargo welcomes enquiries about our global airfreight services. Just contact aircargo@daviesturner.co.uk or visit https://www.daviesturner.com/air-freight
 

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