February 2024 – Market Update
By USA In Insight On 7th February 2024
HOLIDAY ALERT
Chinese Lunar New Year - February 10, 2024
Holiday closures and delays anticipated during the period of February 8 - 17
Countries: China, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan, Vietnam
AIR FREIGHT
Rates
The situation in the Red Sea has yet to create a surge in air cargo demand. Shippers are reviewing charter and air-sea options via Los Angeles in case significant disruptions occur in the future. For now, air freight rates remain stable.
Capacity
Global Air Cargo capacity increased by 7% in January. Year over year, there has been a 12% increase in lower deck capacity due to the growth of international passenger travel.
Demand
- Some industry forecasts indicate a short-term spike in air freight demand before the Lunar Year. This could lead to increases in spot rates in early February.
- Increases in activity from the Retail, Electronics, and Manufacturing sectors are competing with continued e-commerce demand from China. This creates space constraints and higher spot rates in the China–USA market. Forecasts indicate this trend may remain in place after the Chinese New Year.
Jet Fuel
Jet Fuel prices continued to fall in January. Events in the Middle East may impact this trend should oil supply chains be disrupted. A significant rise in oil prices would put upward pressure on global air freight rates.
Aircraft Orders
Widebody freighter conversions have slowed. There have been multiple cancellations of 777 conversions. Narrow-body aircraft (737-800 and A321) conversions continue, but demand has decreased. Most cancellations are based on slowing airfreight demand. This, coupled with increased lower deck capacity, makes medium-term yields unattractive for freighter operators.
Service to Tel Aviv
European carriers continue to increase service to Israel. Significant backlogs can be found in many European airports. In the US, only United Airlines has resumed daily service; two flights a day from Newark to Tel Aviv.
For airfreight, always consider "Express, Standard and Economy" services accordingly. This can help to reduce costs (for Standard/Economy) and/or avoid delays (Express bookings) depending on your overall needs and requirements.
Follow our LinkedIn page to stay aware of any immediate market changes.
OCEAN FREIGHT
Flow Disrupted
Between two wars and two canals facing issues, the world is at the mercy of geopolitical unrest. The Russo-Ukrainian War has been causing significant supply chain issues since Russia's invasion in 2022. Now, the war between Israel and Hamas has spread to the Red Sea, where vessels are under attack by the Houthis. 30% of global ocean traffic has been affected by the re-routing of ships away from the Red Sea/Suez Canal to the Cape of Good Hope.
On the other side of the world, the Panama Canal's low water level continues to impact the number and size of ships that can pass through the waterway.
All these factors are causing delays, extra costs, and shortages in space and equipment. Rates are higher than pre-pandemic times, and if these situations persist, we might see rates increase even further, especially after the Chinese New Year holidays.
Market dynamics are changing quickly. We suggest that our customers book as early as possible and always add a few weeks into their supply chain planning. Ocean freight costs are not expected to stabilize in the near future. Therefore, shippers should also anticipate extra shipping expenses.
U.S. Port & Rail
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