DB Schenker’s head of airfreight in the Americas is expecting another challenging year for the industry with flat airfreight rates, the ongoing trade war and a shift in production all affecting the market.
In a blog post, DB Schenker head of airfreight, region Americas, Asok Kumar said that market indicators pointed towards a tough year, but said he hoped for some improvement over 2019.
“From the market data we’re seeing and the feedback that we’re receiving, it looks as if we might see some improvement over 2019,” said Kumar. “There are definitely a lot of external factors that will play into it, so we’ll just have to wait and see.”
He pointed out that excess airfreight capacity would lead to “good rates” for the customer in 2020 and could result in some shippers exploring air services as a shipping option.
If the China-US trade war continues as it has been, it will act as a drag on the market in 2020, he added.
“However, if agreements are put in place and the issues begin to get resolved, then we may see a reverse effect,” Kumar said.
Shippers are responding to the trade war by moving production away from China to places like Mexico, Vietnam, Thailand and Malaysia.
“Vietnam seems to be the most popular choice at the moment,” said Kumar. “If the current situation continues, those shifts could accelerate.”
However, he warned that these shifts could result in capacity shortages as carriers struggle to keep up with a shift in demand.
“This could occur in countries like Vietnam and Thailand, where carriers may be unable to ‘shift’ quickly,” said Kumar, “thus creating some bottlenecks for shippers to deal with.”
Another development that could affect the market is the UK’s withdrawal from the European Union.
He said: “If there’s a hard Brexit, we could run into a challenging scenario. For example, airfreight capacity could tighten up if the current policies and procedures change regarding the movement of freight in and out of Europe.”