Demand growth for global freight still robust in August

Corresponding with the brisk pick-up in global trade, freight demand, measured in freight tonne kilometers (FTKs), shot up 12.1% in August 2017 versus the same period a year ago, according to the latest International Air Transport Association (IATA) report.

Demand keeps growing at exceptional speed when compared to the five-year average growth rate of 4.4%.

In fact, this was the fifth time in six months of double-digit gains on the previous year’s performance.

Correspondingly, world trade volumes grew 4.2% in the first seven months of 2017 compared to 2016, their strongest performance since 2011.

This was consistent with rising export orders, which are currently around their highest levels since March 2011, and upbeat business confidence indicators.

“Air cargo had another stellar performance in August. Demand for air cargo grew at a double-digit rate for the fourth month in a row – outperforming demand for passenger travel for the fourth consecutive month,” confirmed Alexandre de Juniac, IATA’s Director General and CEO.

Rapid growth in cargo demand means that cargo capacity is now growing in response to real cargo demand rather than automatically as carriers responded to passenger demand. The pace of capacity growth, however, has slowed even as freighter fleets are being used more intensely. Overall, that should be good news for much beleaguered cargo yields,” he explained.

Freight capacity, measured in available freight tonne kilometers (AFTKs), grew 4.7% year-on-year in August 2017.

Demand growth continues to significantly outstrip capacity growth, which is positive for industry load factors, yields and financial performance. However, signs that the peak of the cyclical growth period may be near also persist.

The global inventory-to-sales ratio in the US, for example, has stopped falling. This usually means that restocking to meet demand, which gives air freight a boost, is ending.

Nevertheless, the outlook for air freight remains strong. With several months of double-digit growth in 2017, the current IATA forecast of 7.5% growth in air freight demand for 2017 appears to have significant upside potential even if we are approaching a cyclical peak.

All regions with the exception of Latin America posted double-digit freight growth in August 2017.

Asia-Pacific airlines’ freight volumes grew 11.3% in August 2017 compared to the same period a year earlier, and capacity increased by 5.7%.

Demand growth was strong on all the major routes to, from and within Asia-Pacific, consistent with strong export order books for the region’s manufacturers.

Seasonally-adjusted international freight volumes increased in August after a slight dip in July and are now almost 6% above the volumes reached following the 2010 post-global financial crisis bounce-back.

Middle Eastern carriers’ year-onyear freight volumes increased 14.1% in August 2017 and capacity increased 2.8%.

The strong pick-up in demand largely reflects favorable comparisons to a short-lived weak patch in demand in 2016 rather than an acceleration in the current demand trend. Seasonallyadjusted international freight volumes have maintained their solid upward trend.

However, amid strong competition from other region’s carriers particularly on the Asia-Europe route, the Middle East carriers are not seeing as strong a pickup in the seasonallyadjusted traffic trend as other region’s carriers.

North American carriers posted an increase in freight volumes of 11.7% in August 2017, and a capacity increase of 3.7%.

Seasonally-adjusted international freight volumes remain strong. The strength of the US dollar has boosted the inbound freight market over the past few years.

Data from the US Census Bureau shows a 12.7% increase in air imports to the US in the first seven months of 2017, compared to a slower rise in export orders of 5.8%.

Despite the US dollar remaining strong by historical standards, its slight decline since the start of the year is expected to start to help rebalance trade flows.

Latin American airlines experienced a growth in demand of 8.5% in August 2017 and capacity increased by 9.3% compared to the same period in 2016. International freight volumes increased by 9.5% over the same period.

This is close to a seven-year high and well above the five-year average rate of -0.1%.

Seasonally-adjusted international freight volumes grew strongly for the sixth consecutive month in August, however they remained 4% lower than their peak in 2014.

European airlines posted an 11.8% increase in freight demand in August 2017 and a capacity increase of 5.1%. Double-digit growth in international demand has now been recorded in 10 of the past 12 months.

Concerns that the recent strengthening of the euro may have affected the regions’ exporters have not materialized. In fact German manufacturers’ export orders are growing at their fastest pace since early-2010.