The overall global air cargo demand continued its downtrend in January, according to a new report by Xeneta-owned CLIVE Data Services, although volumes between Europe and North America inched up even as global uncertainties remained.

According to the latest weekly market intelligence from CLIVE, overall global air cargo demand was down 8% last month, as earlier Chinese New Year and economic headwinds subdued other major lanes.

This came even as global air cargo capacity restored a noticeable 11% year-on-year, 2% below the 2019 level.

"Overall global air cargo growth continued to slow last month," CLIVE said, adding that this decline was 10% lower than the same month in pre-Covid 2019.

"The ... fall in demand contributed to the 37% decline in the global airfreight spot rate to US$2.89 per kg, narrowing the gap to the pre-pandemic level to +55%," the report added.

CLIVE said the global average dynamic load factor — measured in cargo load factor by considering both volume and weight perspectives of cargo flown and capacity available —  stood at 54% in the first month of 2023.

With the capacity increase and the volume decrease, this resulted in a load factor decline of 7% pts compared to a stronger New Year in January 2022.

It added that compared to 2019, it was also down 5% pts as the demand/supply balance started to lean towards oversupply.

Europe-North America demand up 6%

Meanwhile, the market intelligence from CLIVE noted that despite high inflation and falling US retail sales, westbound air cargo volumes between Europe and North America rose 6% year-on-year in January.

It said Europe to North America corridor stood out in terms of growth in January, although its average spot rate of US$3.09 per kg edged down 4% from last month.

"However, compared to the shrinking volume of ex-APAC and inbound Europe trades, westbound transatlantic demand remained buoyant. But growth has decelerated dramatically from the three-digit growth in rates of +124% in April 2021 when compared to the pre-pandemic level," CLIVE said, adding that the "signs of resilience" in westbound transatlantic volumes go against the continuing economic pressures facing consumers in the US.

The recent analysis said as the air cargo market tends to be "more sensitive" to economic cycles than the general market, air volume decline led to the decline of retail sales by 2 months, and the market outlook remains uncertain.

It said the total inbound US air cargo market registered its first negative growth in May 2022 and stayed in negative territory for five out of the seven remaining months of last year.

In January 2023, global air cargo volumes into the US continued to fall, down 2% from a year ago.

"The economic headwinds blew even harder on the European market. Due to the knock-on effects of the Ukraine war, inflation rates have seen double-digit growth since August 2022," CLIVE said.

It added that although European inflation rates might have reached their peak, they remain highly elevated (+10.4%) compared to the immediate pre-pandemic periods.

"Both retail sales and general air cargo volumes were hit hard by this. Inbound Europe chargeable weight fell for a 13th consecutive month year-on-year in the first month of 2023, with January air cargo volumes down 9% from one year ago," it said.

Market outlook remains "uncertain"

Meanwhile, although the average spot rate from APAC to  Europe dropped 11% month-over-month to US$4.18 per kg, it remained 72% above pre-pandemic levels, partly due to the rate impact of rising operating costs caused by the Ukraine war.

The average spot rates on the APAC to North America corridor slid 13% from last month to US$4.74 per kg in January, 48% above pre-pandemic levels.

For ex-Southeast Asia trades, average spot rates fell more noticeably, or down 17% to US$ 4.06 per kg, only 24% above pre-pandemic levels.

"The early Chinese New Year might be causing some noise in the January air cargo data with factories there closing ahead of the New Year, contributing further to a weak global market producing load factors at a level we haven't seen for some time," said Nial van de Wouw, chief airfreight officer at Xeneta.

"So, there is still a high level of uncertainty, but if rates haven't yet reached the 2019 level in value in the current climate, and with an expectation that inventory levels will need restocking at the end of Q2 and Q3, then it's unlikely we will see spot rates return to the pre-pandemic level unless this happens soon," he added, although noting that this depends on consumers spending.