Although there are some bright spots in the air cargo market, generally flat cargo volumes coupled with increasing capacity are keeping things fairly calm for now.
The global heavy airfreight industry has remained in an uneasy stasis in 2012, mirroring the general conditions of the world economy. As is true of any market, the two primary drivers are supply and demand. With the global economy showing alternating flashes of growth and recession, then, the airfreight market will likely drift along for the rest of the year.
Overall demand remains flat
Demand in the passenger market has seen steady growth since bottoming out in 2009, and wide-body jets with significant cargo capacity continue to capture an increasing percentage of that market. Cargo volumes, by contrast, have given up all post-recession gains since growth trends turned downward in 2010. In most markets, cargo volumes are flat or down relative to 2011. One reason is that an increasing number of cargo shippers are relying on ocean freight instead of air freight to ship their goods overseas. As a result, cargo utilization continues to decrease in most markets, and cargo rates have echoed that trend.
Although overall worldwide demand is down, several regions, including Latin America and the Middle East, have shown rapid growth in airfreight volumes over the past year. In addition, while Asia has traditionally been (and continues to be) a source of exports, over the past year international trade has expanded on lanes **italic{into} Asian markets. This has driven increased demand for aircraft space on lanes that traditionally were considered back-hauls.
While yields on these lanes are not high enough to flip the westbound trans-Pacific into a head-haul or induce more freighters into service, the additional revenues are enhancing trans-Pacific carriers' bottom line. Moreover, the airfreight market is experiencing more "demand shocks" caused by sales of blockbuster electronic products like Apple's third-generation iPad. Airfreight rates and service availability will see increased variability as manufacturers continue to rely on event-driven sales as a marketing tactic.
More wide-body capacity
On the supply side, carriers seeking to capture the growth in passenger volumes have been adding new wide-body jets to their fleets at a rapid pace: 65 in the first quarter of 2012 alone, and this January was the busiest for deliveries in over four years. Both Airbus and Boeing are continuing to enlarge their order books, and carriers worldwide currently are awaiting the delivery of almost 4,000 wide-body jets.
Most of that new capacity will be devoted to keeping pace with the growing passenger market, where yields are continuing at pre-recession levels, according to the International Air Transport Association (IATA). Still, the addition of cargo capacity on passenger routes as more wide-bodies come online, together with flat-to-decreasing demand, will keep the pressure on cargo pricing and yields in most markets.
As carrier networks absorb this new capacity, wide-body network coverage continues to expand, with carriers adding or replacing many existing routes. Through April 2012, U.S. carriers added 61 weekly flights spread over destinations in Asia and Europe—more than double the rate of coverage growth experienced in 2011. These new routes have had the positive effect of increasing service options in a down cargo market.
Supply (capacity) and demand are not the only factors influencing pricing. The cost of jet fuel, which has experienced dramatic increases since 2010, continues to be the primary driver of airfreight-rate volatility. In the near term, at least, things may be calmer. While jet fuel prices are up about 9 percent since 2011, the U.S. Energy Information Administration is projecting flat prices through 2013.
A look down the runway
Where does all this leave the air cargo industry? As was the case in 2011, there may be short-term increases in cargo volume and rates that will be driven by market forces that are not yet very clear. Over the longer term, freight rates will be kept within a range—held down by slack capacity on the one hand, and pushed upward by what could be mistaken for an economic recovery led by the United States and developing markets on the other. Fuel costs will continue to be the unpredictable factor driving overall airfreight cost volatility.
One positive note: When robust economic growth begins in earnest, air cargo networks will have excess capacity in place on the major East-West routes to absorb growth without service interruption.
Online merchants should consider seven key factors about American consumers in order to optimize their sales and operations this holiday season, according to a report from DHL eCommerce.
First, many of the most powerful sales platforms are marketplaces. With nearly universal appeal, 99% of U.S. shoppers buy from marketplaces, ranked in popularity from Amazon (92%) to Walmart (68%), eBay (47%), Temu (32%), Etsy (28%), and Shein (21%).
Second, they use them often, with 61% of American shoppers buying online at least once a week. Among the most popular items are online clothing and footwear (63%), followed by consumer electronics (33%) and health supplements (30%).
Third, delivery is a crucial aspect of making the sale. Fully 94% of U.S. shoppers say delivery options influence where they shop online, and 45% of consumers abandon their baskets if their preferred delivery option is not offered.
That finding meshes with another report released this week, as a white paper from FedEx Corp. and Morning Consult said that 75% of consumers prioritize free shipping over fast shipping. Over half of those surveyed (57%) prioritize free shipping when making an online purchase, even more than finding the best prices (54%). In fact, 81% of shoppers are willing to increase their spending to meet a retailer’s free shipping threshold, FedEx said.
In additional findings from DHL, the Weston, Florida-based company found:
43% of Americans have an online shopping subscription, with pet food subscriptions being particularly popular (44% compared to 25% globally). Social Media Influence:
61% of shoppers use social media for shopping inspiration, and 26% have made a purchase directly on a social platform.
37% of Americans buy from online retailers in other countries, with 70% doing so at least once a month. Of the 49% of Americans who buy from abroad, most shop from China (64%), followed by the U.K. (29%), France (23%), Canada (15%), and Germany (13%).
While 58% of shoppers say sustainability is important, they are not necessarily willing to pay more for sustainable delivery options.
Gulf Coast businesses in Louisiana and Texas are keeping a watchful eye on the latest storm to emerge from the Gulf Of Mexico this week, as Hurricane Rafael nears Cuba.
The category 2 storm’s edges could also brush Florida as it heads northwest, causing tropical storm force winds in the lower and middle Florida keys. However, the weather agency said it is too soon to forecast Rafael’s impact on the U.S. western Gulf Coast.
In the face of campaign pledges by Donald Trump to boost tariffs on imports, many U.S. business interests are pushing back on that policy plan following Trump’s election yesterday as president-elect.
U.S. firms are already rushing to import goods before the promised tariff increases take effect, to avoid potential cost increases. That’s because tariffs are paid by the domestic companies that order the goods, not by the foreign nation that makes them.
That dynamic would likely increase prices for U.S. consumers as importers pass along the extra cost in the form of price hikes, according to an analysis by the National Retail Federation (NRF). Specifically, Trump’s tariff plan would boost prices in six consumer product categories: apparel, toys, furniture, household appliances, footwear, and travel goods. “Retailers rely heavily on imported products and manufacturing components so that they can offer their customers a variety of products at affordable prices,” NRF Vice President of Supply Chain and Customs Policy Jonathan Gold said in a release. “A tariff is a tax paid by the U.S. importer, not a foreign country or the exporter. This tax ultimately comes out of consumers’ pockets through higher prices.”
The rush to avoid those swollen costs can already be measured in the form of rising rates for transporting ocean freight, as companies start buffering their inventories before the new administration officially announces tariff hikes. Transpacific rates are still $1,000/FEU or more above their April lows, showing increased ocean volumes and climbing rates generated by shippers’ concerns about supply chain disruptions including port strikes and the Trump tariff increases, supply chain visibility provider Freightos said in an analysis. "The Trump win may start shaking up supply chains even before he takes office. Just the anticipation of higher tariffs may lead importers to pull forward shipments, creating a preemptive freight frenzy," Judah Levine, Head of Research at Freightos, said in a release. “Frontloading will cause freight rates to feel the heat as importers race to dodge the extra costs, similar to what took place with Trump’s tariffs on Chinese goods in 2018 and 2019."
Another group sounding a note of caution about international trade developments was the Global Cold Chain Alliance (GCCA), a trade group which represents some 1,500 member companies in more than 90 countries that provide temperature-controlled warehousing, logistics, and transportation. “We congratulate President Trump on his election. We also congratulate all those who have been elected to the U.S. Senate and House of Representatives,” GCCA President and CEO Sara Stickler said in a statement. “We are also committed to promoting the growth of exports from U.S.-based food production and broader manufacturing sectors. We will engage constructively in the policy discussion about future trade policy and continue to make the case for the importance of maintaining balanced and resilient trade routes for food and other temperature-controlled products across the world.”
Businesses in the European Union (EU) were likewise wary of tariff plans, judging by a statement from the VDMA, a trade group representing 3,600 German and European machinery and equipment manufacturing companies. "Donald Trump's second term will be a greater challenge for German and European industry than his first presidency. We must take his tariff announcements seriously, in particular. This will once again put a noticeable strain on transatlantic trade and investment relations," VDMA Executive Director Thilo Brodtmann said in a statement. “The USA is and will remain the most important export market outside the EU for mechanical and plant engineering from Germany. Our companies offer the products required to implement the re-industrialization of the USA that Donald Trump is striving for. The VDMA's overall outlook for the American market therefore remains positive."
In addition to its flagship Clorox bleach product, Oakland, California-based Clorox manages a diverse catalog of brands including Hidden Valley Ranch, Glad, Pine-Sol, Burt’s Bees, Kingsford, Scoop Away, Fresh Step, 409, Brita, Liquid Plumr, and Tilex.
British carbon emissions reduction platform provider M2030 is designed to help suppliers measure, manage and reduce carbon emissions. The new partnership aims to advance decarbonization throughout Clorox's value chain through the collection of emissions data, jointly identified and defined actions for reduction and continuous upskilling.
The program, which will record key figures on energy, will be gradually rolled out to several suppliers of the company's strategic raw materials and packaging, which collectively represents more than half of Clorox's scope 3 emissions.
M2030 enables suppliers to regularly track and share their progress with other customers using the M2030 platform. Suppliers will also be able to export relevant compatible data for submission to the Carbon Disclosure Project (CDP), a global disclosure system to manage environmental data.
"As part of Clorox's efforts to foster a cleaner world, we have a responsibility to ensure our suppliers are equipped with the capabilities necessary for forging their own sustainability journeys," said Niki King, Chief Sustainability Officer at The Clorox Company. "Climate action is a complex endeavor that requires companies to engage all parts of their supply chain in order to meaningfully reduce their environmental impact."
Supply chain risk analytics company Everstream Analytics has launched a product that can quantify the impact of leading climate indicators and project how identified risk will impact customer supply chains.
Expanding upon the weather and climate intelligence Everstream already provides, the new “Climate Risk Scores” tool enables clients to apply eight climate indicator risk projection scores to their facilities and supplier locations to forecast future climate risk and support business continuity.
The tool leverages data from the United Nations’ Intergovernmental Panel on Climate Change (IPCC) to project scores to varying locations using those eight category indicators: tropical cyclone, river flood, sea level rise, heat, fire weather, cold, drought and precipitation.
The Climate Risk Scores capability provides indicator risk projections for key natural disaster and weather risks into 2040, 2050 and 2100, offering several forecast scenarios at each juncture. The proactive planning tool can apply these insights to an organization’s systems via APIs, to directly incorporate climate projections and risk severity levels into your action systems for smarter decisions. Climate Risk scores offer insights into how these new operations may be affected, allowing organizations to make informed decisions and mitigate risks proactively.
“As temperatures and extreme weather events around the world continue to rise, businesses can no longer ignore the impact of climate change on their operations and suppliers,” Jon Davis, Chief Meteorologist at Everstream Analytics, said in a release. “We’ve consulted with the world’s largest brands on the top risk indicators impacting their operations, and we’re thrilled to bring this industry-first capability into Explore to automate access for all our clients. With pathways ranging from low to high impact, this capability further enables organizations to grasp the full spectrum of potential outcomes in real-time, make informed decisions and proactively mitigate risks.”