October 2018: back to (modest) growth - trade war effects beginning to show?

November 30, 2018

The worldwide air cargo yield moved up to USD 1.99 in October 2018, 7% higher than in October 2017, and 3 cts higher than in September 2018. Measured in Euro's, the worldwide yield increased by 10% year-over-year (YoY).

These changes occurred against the backdrop of a 2% volume increase YoY, a loadfactor decrease of 1.3 %-points YoY and a loadfactor increase of 2.8%-points MoM, i.e. from September to October 2018.

(See www.worldacd.com/yields for more yield developments)

After the YoY drop in worldwide air cargo volume in September, October showed a small YoY growth of 2.0% worldwide. Three regions recorded growth in both outgoing and incoming air cargo: Asia Pacific performed best with growth percentages of 4.2% respectively 2.7%. For Europe, the corresponding percentages were 0.5% & 2.7% and for MESA (Middle East & Souh Asia) 3.4% & 0.1%. In the other areas, the picture was mixed: Africa and North America grew in incoming but contracted in outgoing traffic, whilst Central & South America showed the opposite trend. Both In October and in the Year-to-Date, the highest region-to-region growth was observed from Central & South America to Asia Pacific (+33% in October), mainly driven by the export of seafood.

In terms of yields, expressed in USD, the origin Asia Pacific recorded the largest YoY increase (10.4%), mainly caused by a 14.3% yield growth in the market from Asia Pacific to North America. The origins Africa and North America increased yields by 8.5% resp. 6.8%. Other areas saw a more modest increase. For the year 2018, through the month of October, yield increase YoY stands at 13.4%, accompanied by a volume growth YoY of 3.1%. A remarkable yield development was noticed in the October-market from Hong Kong to the USA: the yield (at USD 4.47) increased by 19.5% YoY, whilst it topped the peak yield of November last year by 35 cents.

Effects of the trade war between the USA and China

Obviously, everyone in air cargo is curious to know whether and how the trade war between the USA and China will affect traffic streams. WorldACD compared the markets China-USA and USA-China, thus revealing information that may help to perform a reality check on the many stories going around about the effects of the US-China tug-of-war.

In the year 2018 through October, China's total outbound air cargo grew YoY by 1.9% and the USA's by 4.9% (total worldwide growth was 3.1%). China to USA and USA to China were up by 3% and 1% respectively. In other words, China to USA grew faster than China outbound worldwide, whilst the opposite was true for the USA to China.

Focusing on the last two months on record, in September China to USA was up by 2.1% YoY, whilst USA to China was up by 0.7%. But the October-comparison is more telling: China to USA up by 4.5%, and USA to China down by the same percentage! Taking the totals for the two months for both directions together, we noted a YoY growth of 1.9%, well above the world average of 0.9%.

As would be expected, the 4.5% YoY growth in air cargo from China to the USA, was largely fueled by a rise in the transport of vulnerable /high-tech goods. This sector grew by a whoppping 30.5% YoY, much more than the usual seasonal upswing, one would say. More likely a case of US businesses stocking up before tarriffs really start to bite.