When will the peak season of international air cargo come when the market is weak?

This time of year is usually the peak season for cargo, but so far, it is difficult to find signs of the peak season in the air cargo market. On the contrary, with the slowing demand and the recovery of travel leading to the increase of air transport capacity, freight rates continue to decline.

The spot air freight rate in September fell 9% year on year, which is lower than the rate level in 2021 for the first time this year. According to the Baltic Air Transport Index (BAI), the freight rate dropped by 2.8% in the past week, 21.6% lower than last year.

However, despite weak demand, air freight rates are still more than twice as high as in 2019. The BAI index shows that the air freight rates from Hong Kong and Shanghai to North America in September fell by 19% and 42% year on year respectively, but still rose by 175% and 92% compared with the pre epidemic levels.

According to Freightos data, the slowing demand for Chinese exports has led to a 32% drop in trans Pacific air freight rates since September last year, to 5.12 US dollars/kg, half the level a year ago; The air freight rate from China to Europe fell 19% to 4.13 US dollars/kg, down 43% from last year.

Last week, FedEx announced that it was reducing its aviation network, and the number of flights on trans Pacific, trans Atlantic and Asia Europe routes would decrease from October to November.

There are several factors affecting air cargo transport. High inventories, inflation and consumers' shifting more spending to the service industry have reduced the demand for international shipping and air transport. Due to the energy challenges brought about by the Russian Ukrainian conflict, the production of Germany and other European countries has slowed down. Many large shippers booked orders at the beginning of the year to avoid supply chain disruption, and were more cautious about new orders because they did not want to have excess inventory as consumers changed their buying habits.

WorldACD, an air cargo data provider, reported a decline in air cargo volume, with a year-on-year decline of 12% in the 38th and 39th weeks. The air cargo export volume of the Asia Pacific region dropped by 20% from the peak last year, while that of North America dropped by 12% year on year. The company said: "The freight volume shows a trend of continuous weakness, and there is no clear indication that there will be a peak season in the fourth quarter."

The rapid decline of freight volume and freight rate is certainly possible. However, if the inventory is fully reduced, and consumer demand remains more flexible than currently widely believed, then there may also be a rapid rise and a peak at the end of the quarter.

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