CH Robinson reports a stabilising air cargo market

The air cargo market has settled back into normal seasonal patterns as the peak season arrives, according to CH Robinson’s vice president of global forwarding Matt Castle.

Speaking to Air Cargo News, Castle provided an update on the current air cargo market as industry data continues to show an improvement in demand.

For example, the latest figures from Xeneta show that air cargo demand was flat on a year ago in September after months of declines.

Castle said the demand stabilisation was in part down to companies having worked through excess inventories while the return of seasonal fluctuations was also having an impact.

“I think there is part of it where you have a little bit of a clean slate, excess inventory has been worked off and then you go through these various seasonality changes which shape the dynamic of what is driving demand,” he said.

Lower airfreight rates are also resulting in some sectors returning to the air.

“We are starting to see an uptick in ocean conversion for certain industries that run thinner inventory levels, which means when there is an uptick in demand, there is a move into airfreight, particularly as pricing has fallen back,” he said.

“When rate levels escalate the way that they did, there was a lot of commodities where [airfreight] just wasn’t practical.”

He added that there had been “a number of new tech launches” that have also boosted demand out of Asia.

Castle explained that the new products tended to draw on defined capacity and do not necessarily impact the general market. However, the accessories that accompany these new launches, such as new cases and wires, do hit the general market.

The demand improvement has seen a slight tightening of capacity, but not to the extent of the Covid years when CH Robinson was one of a number of companies to charter aircraft.

“I would say capacity is readily available, but it takes a little bit of planning,” said Castle. “It’s not like it was over the last six months where you didn’t think twice about it.”

CH Robinson is securing capacity through Block Space Agreements and then supplementing that with spot market space where required.

On the transatlantic, demand has been healthy but bellyhold capacity has not been drawn down as much as usual for the quieter winter travel period.

Border congestion and strike action

Another development that has had an impact on the air cargo market in North America has been congestion on the border between Mexico and the US.

The border congestion was caused when the Mexico customs system went down at the same time as closures of certain crossing points and the resumption of extra truck inspections.

The situation is easing but there is still congestion and backlogs.

Castle said that CH Robinson has been supporting customers with air solutions, such as charter flights when required, as well as re-routing trucks to other ports such as Nogales or Laredo depending on final destination in the US.

Elsewhere in the US, the United Auto Workers union has been on strike for the past five weeks and reports suggest automotive inventories are starting to wear thin.

Castle said it is the lull before the storm, with air demand expected to surge when the strike comes to an end.

“For us, there are a lot of planning conversations that we are having with customers,” he said.

“We really try to use this downtime to get into as much planning as we can. We steer customers into dialogue.

“You don’t want to continue building and then put it into a warehouse because that has an expense to it, so we encourage customers to start looking at ocean as an alternative – use ocean as a floating warehouse as a way to defer but keep manufacturing moving so you don’t get to the point where you are stopping.”

Another trend that has been affecting the North American market – as well as elsewhere – has been the development of nearshoring, or reshoring, as companies look to diversify their manufacturing activity.

Castle said that this development started with the US-China tariff war in 2019 as companies realised they had a “lot of eggs in one basket”.

“We have taken steps to bolster our footprint and our offering in relation to cross border because [nearshoring] has certainly materialised.

“Mexico was a huge trade partner to begin with and I think they have been a beneficiary as have a number of other countries.”

Castle said that airfreight has benefitted from this trend in recent years as companies sought to fly in components to their new manufacturing sites.

However, this demand has started to taper down as companies have recalibrated where they source components from to be closer to the new manufacturing sites.

“We saw a tremendous amount of airfreight as people were making those decisions, but it was only a matter of time before they found an alternative,” Castle said.

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