Global cargo market sags as softer economy points to gloomy Christmas

Leading global retailers like FedEx and Cathay Pacific Airways dwarfed the holiday season at the end of the year – the business slowdown they’re seeing points to weaker-than-expected consumer demand, not a holiday bonanza.

The bleak outlook comes as consumers worldwide struggle to cope with rising costs for food, fuel and housing. Even more wasteful shoppers in China are tightening their wallets, industry watchers say, as the country’s severe COVID-19 curbs have hit the economy.
FedEx, which on Thursday pulled a forecast it released just three months ago, said a global demand slowdown accelerated in late August and will worsen in the November quarter.

The Christmas holiday season is usually hectic for air freight and freight forwarders, transporting newly launched smartphones, toys and clothing from factories in Asia to the United States and Europe.

But Western retailers, including Costco Wholesale Group COST.O and Macy’s Inc MN, have found their shelves crammed with unsold goods, suggesting they misjudged demand and are likely to be more cautious about restocking.

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“The absence of a ‘freight wave’ from China’s reopening was a negative sign for freight demand,” said analysts at JP Morgan, who downgraded FedEx stock to “neutral” from “overweight” on the forecast warning.

“It seems to have first influenced FedEx as the leading air freight carrier in Asia Pacific.”

FedEx shares tumbled 16% in New York on Thursday, dragging shares of logistics giant DHL owner Deutsche Post DPWGn.DE down 3.6% in the slipstream of early Frankfurt trading.

Hong Kong’s Cathay Pacific Airways 0293.HK has warned this year’s peak cargo season could be weaker than last year due to inflation and China’s zero-COVID policy. Transport company CMA CGM based in France [RIC:RIC:CMACG.UL] said weak consumer spending was dampening shipping demand and rates.

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“Bringing air cargo to China remains a challenge,” said Anthony Chung, director at Auslink Marine, a Singapore-based family business that has been shipping seafood to China for 30 years.

Chung said supply chain challenges that would hurt international air freight are unlikely to end until China eases curbs.

According to booking platform Freightos Group, shipping rates for ocean containers from Asia to the US west coasts have fallen by almost three-quarters to their lowest level since May 2020 due to a year-to-date slump in demand.

Global air freight volumes fell 11% year-on-year in the first full week of September, according to WorldACD Market Data, which said there were no clear signs of a pick-up just yet.

The Baltic Air Freight Index, backed by TAC data BAI-TAC-INX, which hit record highs in December amid a pandemic-driven peak season rally, has since plummeted nearly 40%.

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“Typically prices are rising at this time of year as the traditional peak season approaches, but there is little sign of that yet,” the TAC Index said in a weekly market update.

Deloitte this week forecast US retail sales growth to slow sharply over the holiday season, hurt by “slumping demand for consumer durables, which had been at the heart of pandemic spending.”

Still, people are spending on some goods and services, like cars and restaurants, even though a surge in commodity prices and a still-raging semiconductor shortage have dampened sales.
Source: Reuters (Reporting by Jamie Freed in Sydney and Sayantani Ghosh in Bengaluru; Additional reporting by Miyoung Kim in Singapore and Casey Hall in Shanghai; Editing by Kenneth Maxwell)

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