Local air traders in Hong Kong signalled optimism for the second quarter, with many noting that the transition from ocean to freight that began earlier this year would persist, according to the latest DHL Hong Kong Air Trade Leading Index (DTI) findings.

The report—commissioned by DHL Express Hong Kong and compiled by the Hong Kong Productivity Council (HKPC)—found that the Overall Air Trade Index rose by 3.2 points to 39.2 points in Q2 2024, with both the Air Imports and Air (Re—) Exports indices recording an upward trend, reading 41.6 points and 37.7 points, respectively. 

 [Source: DHL Hong Kong Air Trade Leading Index]

This development halted the continuous decline that had been observed since Q3 2023. However, it remains weakened compared to the level reported in Q2 2023 (45.6 points).

It added that around 40% of traders transitioned freight from ocean to air at varying levels in Q1 2024 in response to the ongoing Red Sea incident, and they expect this shipping arrangement to remain similar in Q2 2024.

Air traders were also more optimistic about sales volume, which increased by 4 points to 40 points this quarter, while both product variety and shipment urgency remained stable.

According to the report, the online B2C business outlook declined significantly (-3.9 points), heavily influenced by a decrease in product variety, which retreated by 4.3 points.

Asia Pacific, Europe and Americas markets witnessed a recovery in their index performance in Q2 2024, especially in their sales volume.

Asia Pacific's Index (42 points) rebounded by 4 points, largely due to the strengthened import performance observed in China and Japan.

The report said China's Index (46 points) had reached the highest level since Q1 2022, mainly attributed to the robust performance in Imports (+25 points). There was also a relatively modest increase in (re-)exports (+5 points).

Japan's Index (41 points) rebounded by 4 points as the market saw a remarkable uplift in import performance (+13 points), offsetting the decline in (re-)export performance (-8 points).

It added that the Index for Other Asia Pacific regions (40 points) experienced a slight retreat by 1 point. An upswing in (re-)export performance (+5 points) partially mitigated the impact of a weakened performance in imports (-12 points). 

The DHL Hong Kong Air Trade Leading Index (DTI) said despite the imminent Labour Day holiday and the 2024 Paris Olympics, only one-tenth of surveyed traders observed an increase in demand for air freight goods.

"In light of the Red Sea incident, around 40% of traders transitioned freight from sea to air in Q1 2024," the report added.

"A similar pattern of transition is also expected this quarter. Traders who did not transition from sea to air shipping in Q1 demonstrate behaviour changes in Q2, with a notable shift towards both the Europe and Americas markets," it added.

 [Source: DHL Hong Kong Air Trade Leading Index]

A growing number of air traders are also expressing willingness to reduce carbon emissions, reaching a peak level of 77% this quarter.

The report noted that over 90% of these traders are willing to allocate up to 10% of their logistical costs to achieve this goal.

"The Overall Air Trade Index improved by 3.2 points this quarter, reaching 39.2 points. However, it remains relatively weak due to uncertain economic factors. Only about 10% of air freight users expect increased demand during the upcoming Labor Day holiday and the Olympic Games Paris 2024," said Edmond Lai, chief digital officer of HKPC.

"Air freight users should be prepared for long-term challenges caused by economic uncertainties," he added.

Lai also noted that despite the economic impact, over 75% of air freight users are willing to actively participate in carbon reduction initiatives.

Air freighted commodities

The report said except for gifts, toys, and houseware, which suffered drops by 6 points, all air-freighted commodities enjoyed varying degrees of increment in their indices.

 [Source: DHL Hong Kong Air Trade Leading Index]

It added that distinctively, electronic products and parts registered a big leap forward owing to a notable improvement in its import performance. 

The DTI analyzes the key attributes of business demands based on a survey of more than 600 Hong Kong companies that focus on in- or outbound air trading.

An index value above 50 indicates an overall positive outlook, while a reading below 50 represents an overall negative outlook for the surveyed quarter. The further the reading is from 50, the more positive or negative the outlook is.