The latest figures from CLIVE Data Services, which is part of the Xeneta rate benchmarking platform, show that demand for March was 4.5% down compared with a year earlier – and 6.5% down on pre-Covid 2019 levels – marking a “sudden interruption to the recovery trend of recent months after the peak Covid disruption of the past two years”.

Capacity in March was down 3% compared with last year and 14% against 2019 levels.

As a result, dynamic load factors – accounting for both weight and volume – stood at 66%, which is the same level as recorded in 2019 and six percentage points lower than 2021 after record levels were reached that year.

Despite aircraft being less full in March than they were a year ago, rates have actually increased by 27% year on year and are up by 141% compared with two years ago.

Niall van de Wouw, chief airfreight officer at Xeneta, said this was down to disruption on the ground.

“There are also still many issues with capacity on the ground. One bottleneck got replaced with another one,” said van de Wouw.

“Load factors are lower this year than they were last year, but prices are higher. The latest disruption in Shanghai is not unexpected but it adds to the worldwide issue of staff absence because of high Covid cases.

“Pilots, cargo handling workers, truck drivers etc, unlike many others, cannot work from home. It’s hardly surprising then to hear the International Monetary Fund (IMF) blaming soaring shipping costs for driving up inflation rates.

“Right now, the airfreight and oceanfreight markets are in general a mess, with shippers and consumers having to pay the price. In the first two months of 2022, we were talking of growing resilience in the airfreight market and a recovery to pre-Covid levels. March data shows how quickly this can change.”

CLIVE also noted an increase in the placement of capacity into the spot market on certain trade lanes, such as Europe-Japan trade, where the amount of chargeable weight at a spot rate increased to 60% of the market, or 20 percentage points higher than February’s spot share.

Rates from Japan to Europe increased to around €5 per kg, nearly 50% higher than the weeks preceding the Ukraine war.

Carriers on the route had removed capacity as they sought flight paths that avoided Russian airspace.

“In overall air cargo market terms, March was a step back from the trend we saw late last year and earlier this year. We have been reminded of how the limited control the general airfreight market has over its own destiny and how it is impacted by passenger traffic trends, disruption in the ocean freight market, and geopolitical events,” said van de Wouw.

He added that ongoing disruption in ocean shipping could provide a boost to air cargo demand while higher inflation could have a negative impact.

“Although it is too soon to tell what the skyrocketing inflation numbers in the US will result to, the logistical difficulties on the water between these two continents must put some wind into the sails of the air cargo market.

“With continuously declining schedule reliability of the ocean liners, logistical departments will likely be required to resort to airfreight because of disruptions to their supply chains caused by these record low service levels,” he said.

Source: www.aircargonews.com

Image: www.pexels.com

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Below are four charts showing where a potential escalation of tensions could be felt across global markets:

Safe havens
Inflation at multi-decade highs and impending interest rate rises have made for a bad month for bond markets, but an outright Russia-Ukraine conflict could change that.

Two-year U.S. Treasury yields have seen the biggest monthly jump since 2016 and 10-year rates appeared headed for the key 2% level. In Germany, 10-year yields rose above 0% for the first time since 2019.

A major risk event usually sees investors rushing back to bonds, which represent the safest assets on planet and this time may not be different, even if a Russian invasion of Ukraine risks further fanning oil prices — and therefore inflation.

“Clearly if the Ukraine story was to go wrong there would be quite a significant bid for Treasuries, and this notion of the 10-year getting to 2% would be put on hold,” said Padhraic Garvey, regional head of research, Americas at ING.

Other safe-havens include gold, already at two-month peaks as well as the yen.

Grains and wheat
Any interruption to the flow of grain out of the Black Sea region is likely to have a major impact on prices and add further fuel to food inflation at a time when its affordability is a major concern across the globe following the economic damage caused by the COVID-19 pandemic.

Four major exporters – Ukraine, Russia, Kazakhstan and Romania – ship grain from ports in the Black Sea which could face disruptions from any military action or sanctions.

Ukraine is projected to be the world’s third largest exporter of corn in the 2021/22 season and fourth largest exporter of wheat, according to International Grains Council data. Russia is the world’s top wheat exporter.

“Geopolitical risks have risen in recent months in the Black Sea region, which could influence wheat prices ahead,” said Dominic Schnider, strategist at UBS.

Natural gas and oil
Energy markets are likely to be hit if tensions turn into conflict. Europe relies on Russia for around 35% of its natural gas, mostly coming through pipelines which cross Belarus and Poland to Germany, Nord Stream 1 going directly to Germany, and others through Ukraine.

In 2020 volumes of gas from Russia to Europe fell after lockdowns suppressed demand and did not recover fully last year when consumption surged, helping to send prices to record highs.

As part of possible sanctions in the case Russia invaded Ukraine, Germany has said it could halt https://www.reuters.com/world/europe/germany-signals-it-could-halt-gas-pipeline-if-russia-invades-ukraine-2022-01-18 the new Nord Stream 2 gas pipeline from Russia that was expected to increase gas imports to the bloc but also underlines Europe’s energy dependence on Moscow.

SEB commodities analyst Bjarne Schieldrop said markets would see natural gas exports from Russia to Western Europe likely significantly reduced both through Ukraine and Belarus in the event of sanctions and gas prices revisit Q4 levels.

Oil markets could also be affected. JPMorgan said the tensions risked a “material spike” in oil prices and noted that a rise to $150 a barrel would reduce global GDP growth to just 0.9% annualized in the first half of the year, while more than doubling inflation to 7.2%.

Regional dollar bonds and currencies
Russian and Ukrainian assets will be at the forefront of any markets fallout from potential military action.

Both countries’ dollar bonds have underperformed their peers in recent months as investors trimmed exposure amid escalating tensions between Washington and its allies and Moscow.

Ukraine’s fixed income markets are chiefly the remit of emerging market investors, while Russia’s overall standing on capital markets has shrunk in recent years amid sanctions and geopolitical tensions, somewhat cushioning any threat of contagion through those channels.

However, Russia’s rouble and Ukraine’s hryvnia have also suffered, making them the worst performing currencies in the emerging markets universe so far this year.

Geopolitics on the Ukraine-Russian border presented “substantial uncertainties” to foreign currency markets, said Chris Turner, global head of markets at ING.

“The events of late 2014 remind us of the liquidity gaps and U.S. dollar hoarding that led to a substantial drop in the rouble at that time,” said Turner.

(Reporting by Karin Strohecker, Sujata Rao, Nigel Hunt and Susanna Twidale; Writing by Karin Strohecker; Editing by Alison Williams)

Source: www.marinelink.com

Image: www.pixabay.com

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