Ti’s latest Global Logistics Monitor suggest increases in freight tonnage will be modest at best for second and third quarters due to slowing Asian economies, recession in Europe and slowing economic growth in the US.
The global economy emerged from first quarter in a precarious position as the Asian economy slowed, an increasing number of European countries entered recession and growing concerns of slower economic growth for the US. Indeed, based on transportation and logistics providers’ commentary from first quarter earnings, expectations for second quarter and into third quarter are not high as many providers expect little increase in freight at best.
Data compiled in the latest Global Logistics Monitor suggests this may be the case. While first quarter is typically a slow one, March data was a mix bag, varying among the regions.
For the most part, ports ended the quarter on a positive note. Imports particularly picked up for many US ports while European ports struggled with low increases in containers. Asian ports noted good throughput in March after a slow start to the year due to the Chinese New Year. However, as capacity continues to be removed from the market, rates are on the increase in an attempt to recover from last year’s free fall.
Airfreight continues to struggle amid high oil prices and shifts to other modes. Declines have been noted by Asian and European airline associations – 4.5% (March) and 1.9% (February) respectively. Airports are also noting declines in these two regions while US airports were a surprise in March. Some US airports such as Miami, Chicago and Los Angeles all noted increases in cargo for the month of March however, this increase may be due to the launch of new electronic products from Apple and Samsung and thus may not carry over into April.
As we move into the second quarter, oil prices have declined but remain above $100 a barrel; this will continue to negatively affect the airfreight market. Also, capacity is entering the market as air cargo providers take possession of new fleet, this along with declining yields will further exacerbate an already difficult situation.
Future demand for air and ocean freight will depend on such economic indicators as manufacturing activity. Although weak, Asia noted some improvement in manufacturing activity while the US reported another surprising increase of 1% in April. Europe, however, already suffering from its economic woes, noted sharp declines. As a result, any notable rise in freight demand will likely come from the US and/or Asia.
As such, for logistics and transportation providers in search of opportunities in this uncertain environment, domestic markets appear to be a possibility as US NAFTA and intermodal trade continues to expand. Intra-Asia trade, although highly competitive, is another growth spot and finally, Europe, despite its economic situation, domestic opportunities such as road freight exist.Ti's Global Logistics Monitor is a monthly report available for subscription. It analyzes the latest global, Asian, European and US economic and transportation/logistics data and utilizes up-to-date charts and graphs also available for subscription via Ti's Dashboard service.