Low air freight prices have businesses eager to sign long-term contracts
The International Air Transport Association reported global airfreight volumes declined 8.1 percent in the first half of 2023 year over year.
Kuehne & Nagle global logistics company CEO Stefan Paul said there is broad uncertainty across the shipping sector, and lower rates will carry into 2024.
“Unfortunately…there is no peak season to be expected in 2023. There are no signals on air or sea, at least not for the time being,” Paul told Freightwaves.
With prices low, businesses are opting to negotiate long-term contracts with lower prices rather than rely on spot prices, Paul said. The spot market has declined by 45 percent in 2023, after accounting for around 55 percent of all shipments in 2022.
In July 2023, airfreight earnings declined 2 percent year over year, and the marine shipping industry is also struggling. A slowdown in China's economy and persistently high stockpiles of goods in the U.S. and European Union are the primary drivers of the downturn, according to freight intelligence provider Xeneta. Freightwaves reported many retailers are rebalancing inventory levels after and are reluctant to place new orders "until the direction of consumer demand becomes clear."
More broadly, global industrial production remains down 6 percent from pre-pandemic rates. China's total exports dropped 14.5 percent in July, including a 23 percent decline in shipments to the U.S. China's imports also dropped for the ninth consecutive month, and U.S. production has also declind for the last nine straight months.
Photo courtesy of Gorloff-KV/Shutterstock