The product was frozen: why the demand for air cargo fell to the lowest level in 11 years

The product was frozen: why the demand for air freight fell to a minimum of 11 lekgotla link
09:16

Vladimir Agoev
According to the International air transport Association (IATA), global demand for air transportation of goods has been declining for ten consecutive months. The market decline was the longest since 2008. Experts attribute the situation to the General slowdown in the global economy and trade war with China. Moreover, over the past few years, the growth in oil prices provoked a rise in the cost of jet fuel. As a result of delivery of products by air became less profitable for business. Can the air cargo sector to recover from the losses in the material RT.

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In August 2019 the global demand for the delivery of goods by aircraft decreased by 3.9% compared to the same period of 2018. This is stated in its October report, IATA. As noted in the organization, the index continuously decreases from November 2018. Thus, the market decline was the longest over the past 11 years.

«Demand reduction of ten consecutive months not seen since the global financial crisis of 2008. This causes us serious concern. Without any visible signals to reduce tensions in global trade, we expect the business environment in the field of air cargo will continue to deteriorate,» said IATA Director General Alexander de Juniac.

Pressure on the market provide a General slowdown of the world economy, trade wars and brakcet. In an interview with RT told the head of the freight Department of the AsstrA Anton Zachesov.

«The demand for air travel mirrors the state of the global economy. According to IATA, the global GDP growth in comparison with last year also fell by 0.4 percentage points. The main influence on the reduction had a trade war with China and brakcet. So, most of the goods today, fly in the directions of Asia and North America (with a share of 23.6%) and Asia — Europe (21.4 per cent),» said Sacharow.

As explained in an interview with RT investment strategist «BKS the Prime Minister» Alexander Bakhtin, the trade war the US and China triggered a slowdown in the two largest economies in the world. As a result, the volume of trade between the States began to decline. From January to September 2019 U.S.-Chinese trade turnover has decreased by almost 15% to $402 billion Such data results in the General administration of customs of PRC.

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Recall that the trade war between the US and China began in 2018. States has accused China of illegally obtaining U.S. technology and increased duties on imported Chinese goods. Beijing has imposed retaliatory measures. After a series of negotiations in may 2019 Washington went to the aggravation of the conflict: in addition to the introduction of new fees, American technology companies have begun to cease cooperation with Huawei. In August, the country once again failed to find a compromise on the terms of a commercial transaction and since September has introduced a new mutual constraints.

At the end of the negotiations in October, China and the United States were still able to partially agree on the terms of the bargain. Meanwhile, global investors are concerned about new tensions.

«The trade war has already led to a decline in economic activity of enterprises not only in the United States and China, but around the world. The threat of escalation of the conflict and its spread to other countries that are partners of the PRC, has created a lull and uncertainty in the global market», — said in an interview with RT the head of the analytical Department AMarkets Artem Deev.

As previously stated the Director of the International monetary Fund Kristalina Georgieva, the tariff war virtually stopped the growth of world trade. As a result, by 2020 the global economy could be short $700 billion.

In its latest report, the world trade organization (WTO) has lowered its forecast for growth of world trade in 2019 from 2.6% to 1.2%. According to Alexander Bakhtin, the growth rate will be the lowest in ten years.

Moreover, in the third quarter of 2019 index international air cargo WTO for the first time from 2011 dropped to the level of 91.4 points. Note that the indicator drop below the level of 100 points speaks of the backwardness of the industry from the mid-term trends.

In addition to the trade wars, the impact on the market was put by the high price of oil. As noted by Alexander Bakhtin, the increased cost of raw materials led to higher prices of aviation fuel and made the transportation of goods by air less profitable.

«The slowdown in demand for cargo, the average price of Brent crude oil remained fairly stable in 2018 totaled $69,8 per barrel, and in 2019 is projected at $65. Maintenance of a stable oil prices at a relatively high level reduces the profitability of the air transport cargo», — said the analyst.

According to Bakhtin, the future dynamics of the market will largely depend on economic growth in developed and developing countries, and the pace of recovery of world trade. While Anton Zachesov expects the air cargo sector could resume growth in the near future.

«First, the US and China ever will be able to negotiate a deal. Second, there is a growing demand for e-Commerce and Express delivery. There are new high-tech goods with short «cycle of life» and goods with strict requirements on logistics (temperature and perishable goods, expensive parts). All these factors will ensure the restoration of the cargo aviation market in the near future», — concluded the expert.

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