Market Overview

US Air Cargo Trade: Decline Leaves Big Shoes To Fill

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US Air Cargo Trade: Decline Leaves Big Shoes To Fill

Air cargo volumes have taken a hit globally this year. IATA shows flown volumes down 3.9% in August. WorldACD reports global kilos off 7.1% and yields down 9.4% in August. Both sources note 10 straight months of lower year-over-year air volumes. Likewise for U.S. international trade, Census Bureau statistics show imports by air up in value through August by 1.2%, but down in tonnage by 3.9%. The value of air exports from the U.S. is also slightly up, 0.5%, but again lower in tonnage by 6.0%.

What's most noteworthy in the U.S. trade data are the big drops this year in the top U.S. trading partners. It's a huge gap for airlines, forwarders, customs brokers, air cargo handlers and trucking firms that all service the air cargo business to fill. SONAR displays the year-over-year change in August volumes for most U.S. carriers, with shading in red and purple tones indicating negative monthly performance. 

SONAR AIRRTM TreeMap displays year-over-year cargo volume changes.

China, Germany and Japan drive the big hole in air imports

For air cargo, China is more than twice as large as the next country, both for import and export cargo. In 2018, China and Hong Kong together represented a whopping 26.8% of the imported tons flown by air to the U.S. Germany was a distant No. 2 at 8.7%. All other Asian countries (Northeast and Southeast) combined represented under 17% of the volumes.

Source: U.S. Census Bureau, USA Trade Online

With trade wars and tariffs this year, China is currently running 10.1% less tonnage by air to the U.S. That deficit represents 10,600 metric tons kilos per month of lost air cargo, roughly equivalent to 97 full Boeing 747-400 freighters monthly!

Widening that hole for air cargo to backfill is the sharp drop in German traffic. While air imports from Germany are up in value by 6.7% through August, tonnage is off 8.2%, with huge declines averaging 21.5% over the last three reporting months. This loss is nearly 2,900 metric tons per month in 2019. High value but lower weight pharmaceuticals shipments averaging $4,814/kg are replacing lower value but high-volume automotive parts worth $22/kg. Realistically, airlines need both types of cargo to create consistent volume and high enough yields for full airplanes and profitable flying.

Finally Japan, the third-largest supplier of import air cargo to the U.S., is down 10% year-to-date, or 2,400 metric tons monthly, largely due to fewer auto parts shipments. Overall these top three countries alone are down a staggering 16,000 tons per month (145 747-400 freighters monthly).

Recovering and replacing lost tonnage from China by other supplier nations is occurring, but slowly and inconsistently. Imports from Vietnam have grown 77% in value and 13% in tonnage year-to-date. That's worth 1,200 metric tons more per month. However in August itself, Vietnam air imports were actually slightly down. Taiwan has seen 29% more imports by value and 13% more volume, worth just over 1,000 metric tons monthly. India is up overall for the year by 5% in kilos, but is very inconsistent from month to month. Lastly, the U.K. is also increasing traffic to the U.S., up roughly 8% or nearly 1,200 metric tons per month. These top four growth countries combined are up 4,000 metric tons per month. That's only 25% of the tonnage that the top three are down.

Source: U.S. Census Bureau, USA Trade Online — data through August 2019

China also leads U.S. export volumes

In 2018, China represented 14.6% of the air volumes exported from the U.S., with the U.K. and Germany running at 7.1% and 6.8%, respectively. Despite trade war pressures and retaliatory tariffs from China, U.S. air exports to China actually increased in value by 4.1% through August; however, volumes dropped 13.8%, worth 6,000 metric tons kilos per month. 

Source: U.S. Census Bureau, USA Trade Online

But reduced automotive shipments, semiconductor manufacturing and fruits and vegetables are significantly impacting volumes to Japan (down 7%), South Korea (down 11%), the U.K. (down 6%) and Germany (down 5%). Between these four are another 5,300 metric tons less of air cargo per month flying from the U.S. All told, nearly 11,300 tons of air cargo across five of the top six U.S. export markets have been impacted.

Offsetting this is the rise of Chile and Vietnam as the fast-growing new U.S. export markets, each with 26% more tonnage so far this year. Still, the top five countries with absolute growth only muster 2,300 more metric tons a month, or 20% of the dropoff from the top five.

Source: U.S. Census Bureau, USA Trade Online — data through August 2019

How and where the industry can quickly recover these large tonnage losses and regain stability is a big issue. WorldACD notes pharmaceuticals, perishables and vulnerable/high-tech cargo with steady growth, but much larger volumes in these areas would realistically be needed. Cross-border e-commerce growth continues, although this appears to have benefited a limited number of carriers to this point. A revival of automobile sales could occur with renewed auto parts demand by air. Clearly, favorable resolution of current trade war issues will reinstill business confidence. In the meantime, my experience says any upswings will be uneven and most likely regionally centered. It may well be a matter of waiting until the next business cycle globally for the tide to lift all boats.

Image Sourced from Pixabay

Posted-In: air cargo Freight FreightwavesNews Markets General

 

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