It has been challenging for many industries around the globe, and the air cargo market has been no exception. With ongoing external issues, the sector has faced challenges across the board. The supply/demand balance in cross border shipping markets loosened in 2022. Freight rates are expected to soften further in 2023. The ongoing war in Ukraine is a known risk but - the best logistics processes are build in the ability to respond to unknown unknowns!
It has been challenging for many industries around the globe, and the air cargo market has been no exception. With ongoing external issues, the sector has faced challenges across the board. The supply/demand balance in cross border shipping markets loosened in 2022. Freight rates are expected to soften further in 2023. The ongoing war in Ukraine is a known risk but - the best logistics processes are build in the ability to respond to unknown unknowns!
There is a hope that a greater equilibrium will return to logistics processes in 2023. Demand is expected to remain subdued with macro policies to reduce inflation resulting in low global GDP growth.
Softening Global Demand
Most predict that reduced purchasing and high inventory levels will result in overall lower shipping costs. A mix of reduced purchasing power, lower sales and high inventory levels is projected in 2023 by leading economist. There is hope that the global inflation rates will be reduced in 2023.
Cross Border Air Freight: Trending in 2023
- The trend of air shipments being converted into ocean freight will likely be reversed as ocean vessel scheduled reliability continues to improve.
- Port congestion is expected to lessen in 2023 but potential strikes across multiple stakeholders remain a possibility
- Overall airfreight capacity is expected to increase in 2023. Improving passenger demand is expected to create greater belly-hold capacity.
- Higher capacity is offset by continued high fuel prices with hope of some softening in 2023.
- Increasing capacity + sluggish demand = reduced cargo load factor
- Shippers may be able to benefit from an aggressive spot market
- Covid outbreaks, staff shortage could impact airport ground operations
Taking advantage of Cross Border E-commerce Opportunities
A bright spot for 2023 is cross border e-commerce movements are expected to increase. Retailers and suppliers continue to look at bypassing traditional processes and ship direct. We prefer the term “direct order, cross border” shipping. As air freight prices and capacity increase, shipping direct will become an alternative process to traditional methods.
Supply & Demand Adjustments
The global demand cargo is expected to continue to decrease into the first half of 2023. Macro policies to lower inflation and inflation itself is a key obstacle to GDP growth. The crazy high sea freight rates and congestion which drove air freight demand in 2022 is not expected in 2023.
The good news is that while growth is slowing, the world economy is still growing. And the role air freight is expected to continue to grow in importance to the overall logistics mix.
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