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Freight rates plunge as China, Asia, Europe demand slows as capacity rises

AIR and ocean freight rates for some of the world抯 busiest trade lanes are tumbling as slower growth in China combines with a sluggish Eurozone that slashes forecasts for higher volumes.

And this during a traditionally busy late-summer season, pounded by the worsening over-capacity in all modes of cargo transport.

Market watchers are blaming lower demand from Europe, as well as a shrinking Chinese appetite for luxury goods and other imports. Traders in London and Singapore said last week抯 devaluation of the Chinese yuan is already having a profound impact on shipments of luxury goods from Europe.

揥e are seeing shipments of luxury items like handbags, branded clothing and shoes down by around 17 per cent since the devaluation," said one broker.

He added that the Shanghai stock market抯 meltdown would make Chinese and Hong Kong consumers more jittery, adding that shipments of upmarket European cars are also sliding, though would take a few weeks to determine the impact.

The outlook for air freight is also deteriorating. Drewry Shipping Consultants director Martin Dixon expects global air cargo volumes to stagnate after first projecting growth. A big weight is falling demand in China and Asia, Wall Street Journal reported.

China accounts for one-fifth of global air exports by weight, and 10 per cent of global air imports, according to merchant banking firm Seabury Group LLC.

Air cargo shipments passing through Hong Kong, for instance, slumped two per cent last month, Mr Dixon said. Prices across 21 global routes have fallen 27 per cent since November to a record low in June, his consultancy said.

The air cargo market is suffering on several fronts while air cargo capacity climbs. A large chunk of the air freight market is transported in the belly hold of passenger aircraft. With major airlines adding flights globally this year, cargo rates are being squeezed. Falling fuel costs also are delaying plans by airlines to retire older jets, exacerbating the problem.

揥ith capacity continuing to rise, supported by strong passenger demand, the industry faces a challenging period of weak load factors and low yields," said Mr Dixon. 揂nd with jet-fuel costs set to fall further, we expect air freight pricing to weaken further."