The global air freight forwarding market contracted 4.2% year-on-year in the first half of 2019, with the market reeling from the economic slowdown and US-China trade war, according to a Transport Intelligence (Ti) report.
The report also projects full-year 2019 decline for the market to reach 3.9%, a record low for this decade.
The volume drop in the first half was repeated across the board, with many major forwarders seeing considerable air freight volume declines, Ti said.
DHL saw Q1 volumes fall 3.9% and Q2 volumes down 5.8%. Kuehne + Nagel saw Q1 and Q2 declines of 3.1% and 8.4%, respectively. DB Schenker’s H1 volumes are down 10.9% year-on-year.
Ti noted that the initial signs of market slowdown began in the fourth quarter of 2018 with the end of the frenzied inventory re-stocking cycle in the period 2017-early 2018. This period of accelerated economic growth had seen shippers rushing to re-stock warehouses close to end consumers to meet high demand and avoid bottlenecks in the supply chain, propelling the rapid expansion of the global air freight market.
In early 2018 growth reverted to lower levels, and maintained a steady pace, until the first signs of further weakness appeared in the fourth quarter the year.
By November 2018, year-on-year FTK growth had declined to zero and in December volumes fell 0.5%, said Ti.
“The trade war has compounded the effects of the end of the re-stocking cycle and is hammering some parts of the air freight forwarding market.”
Air freight tonnage shipped between China and the US is 10.9% lower in H1 than in the same period the previous year. Both markets (especially China) have significant intra-regional supply chains feeding exports to the other partner.
“Therefore, exporters of components and semi-finished goods which are used in finished good exports have suffered significantly as a result,” said Ti.
Japan and South Korea, which are major manufacturers of chips and equipment used in Chinese high-tech finished product exports, showed sharp declines.
However, the high-tech sector is showing signs of weakness that appear to be structural. Worldwide sales of semiconductors fell 14.5% in the year through to June.
This as the so-called ‘Upgrade Cycle’ for mobile phones appears to be broken, with less consumers now upgrading their phones every two years. Similarly, increased endurance of laptops and tablets means demand for replenishment is weaker.
“This has significant consequences in air freight, where even the launch of a new iPhone can have a significant impact on certain trade lanes,” Ti noted.
The slowdown in the automotive sector, one of the hardest hit industries in 2019, has also badly affected forwarders.
“For forwarders carrying spare parts and semi-finished goods for just-in-time supply chains, this slowdown has severely damaged volumes,” confirmed Ti.
With the effects of the trade war still being felt, slowdowns in major sectors and little sign of a recovery in the global economy, expectations for the full year are similarly downbeat.
For 2019, Ti projects that “the market will have contracted by 3.9% compared to 2018. This would mark the worst year for market growth in this decade.”
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