Market Update Region MEA - June 2021 - DB Schenker
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Market Update
Region MEA
June 2021
Air Freight
Summary
Market Forecast Capacity Carriers
‒ Middle Eastern airlines posted a robust ‒ Cargo capacity ‒ Passenger flights not expected to return
4.4% m-o-m increase in cargo volumes shortage due to lack to pre COVID levels until 2026; more
of passenger aircraft fallout expected
capacity still down
‒ Industry-wide CTKs were up 12.% in April by 14% as compared ‒ African Airlines performed the strongest
2021 compared to the same month in to 2019, despite the of all regions. With CTKs up just over 23%
2019. This strength partly reflects a weak steady growth of compared with pre-crisis level in March
month of April 2019, when the industry freighters 2019 and Middle east carries up 9.1% in
was affected by the US-China trade same period
dispute
‒ After stripping out fluctuations caused by
seasonal patterns, air cargo displays a
steep upward trend, started when strict
lockdowns were lifted in May 2020.
Seasonally adjusted (SA) volumes rose 4.% Rates Jet Fuel
m-o-m in April, the highest growth rate ‒ 2021 rates continue to remain the same as compared to 2020, ‒ Crude oil reaching new heights will have an
since September 2020. SA CTKs are now although still higher as compared to 2018 - 2019 impact on jet fuel prices
around 5% higher than the pre-crisis
August 2018 peak
Market Developments
Economic Outlook Economic backdrop
‒ On average, before the crisis, air ‒ The latest PMI results show that
cargo worldwide was 12 times the economic backdrop continues
more expensive than the ocean to improve across the three key
freight. Since April 2020, container economies that we track for the
rates have grown faster, whereas MEA region. In Saudi Arabia,
air freight rates have been stable business activity began to recover
in H2 2020, while South Africa and
the UAE are seeing an economic
expansion now
Capacity Development
‒ Industry-wide available CTK picked ‒ As of May 2021, African carriers
up by 5.6% m-o-m in March and are expected to receive 35% more
were ~12% below the pre-crisis aircraft deliveries in 2021 vs 2020,
levels while Middle Eastern airlines
should get 19% more deliveries
‒ ACTKs of African and Middle
Eastern carriers were down 4.6% ‒ In both regions, the number of
and 12.5%, respectively deliveries will most likely not reach
The above figures are updated only quarterly
2019 levels
Market Developments
Economic Outlook Economic backdrop
‒ African airlines performed the ‒ The substantial rise in demand for
strongest of all regions, with CTKs logistics benefits all modes of
up just over 23% compared with transport
the pre-crisis levels in March 2019
‒ The increase in demand and
reduction in capacity has disrupted
supply chains across the world,
pushing business to operate in a
just-in-time model
IATA Air Cargo Market Analysis
‒ The Middle East and African carrier’s RPK are posting a weaker outcome as they significantly rely on improvement in international demand
‒ Slow vaccination rate will hinder air travel recovery in Africa, while Middle East RPK will adversely be impacted by travel restrictions and international long-haul routes
‒ In Q1 2021, the airline industry continues to post net losses and looking ahead, the financial performance will vary depending on the size of the domestic market and the
pace of vaccine rollout
‒ Higher fuel surcharges will be a challenge to return to profitability when traffic rebounds
Market Outlook
APAC Americas Europe MEA
‒ Capacity is stable on Lower Deck ‒ Capacity is stable on Lower Deck ‒ Capacity is stable on Lower Deck ‒ Capacity is stable on Lower Deck
but challenging for Main Deck but challenging for Main Deck but challenging for Main Deck but challenging for Main Deck.
‒ Rate levels are maintaining the ‒ Rate levels are maintaining the ‒ Rate levels are maintaining the ‒ Rate levels are maintaining the
momentum of 2020 levels momentum of 2020 levels momentum of 2020 levels momentum of 2020 levels
Ex
MEA
‒ Capacity offer is limited ‒ Capacity good/ pricing stable, ‒ Tightening capacity/ pricing might ‒ Capacity is stable on Lower
Exception to South Africa (JNB) increase to South Africa Deck but challenging for Main
‒ The rate level maintains at about Deck
80% above the pre-COVID levels ‒ Space tight and rates high ‒ Supply and demand are stable to
the rest of MEA ‒ Rate levels are maintaining the
Into momentum of 2020 levels
MEA
Ocean Freight
Summary
Market Forecast Space Equipment
‒ Demand From Europe to the Middle East continues to be high; ‒ Further capacity constraints expected due ‒ Equipment shortage prevails in Egypt and Saudi
however, space and equipment allocation from the carriers to MEA is to vessels planned for periodic maintenance Arabia
limited, creating a demand-supply imbalance on this tradelane and/or scrubber installation
‒ Ex Europe and APAC, equipment situation
‒ For the month of June, Europe to MEA tradelane is expected to be high ‒ Carriers are closely monitoring the space remains critical
on utilization. Equipment availability will remain a challenge across agreement. In the case of non-utilization,
Europe (except the UK) the agreed space allocation is scaled down. ‒ We strongly recommend a minimum of four
weeks forecast to secure booking with the
‒ Ongoing issue at Yantian terminal, China, will have a ripple effect on ‒ Although there is a capacity constraint, carrier and to ensure equipment and space
vessel schedule/equipment availability and freight carriers are open to negotiating space at a availability
premium spot rate on certain tradelanes
‒ Schedule adjustments to desired tradeflows in the Far East are
prioritized over the Middle East region
Rates Others
‒ In general, 2021 base contract rates remain significantly higher than the previous year. June onwards, the ‒ For the MEA region, the blank sailings from Europe Asia will
additional rise in Bunker coupled with PSS surcharge is driving the overall rate levels across all tradelanes result in 23% capacity withdrawal, according to various carrier
sources
‒ North and South European ports continue to impose congestion surcharge that was introduced as a result
of the Suez blockage ‒ More than 200k TEUs are currently stuck at Yantian port, China,
working at 30% working capacity only. Each day port will only
‒ Space will be the driving factor in the market and, carriers will prioritize high paying/light-weight cargo accept 5000 TEUs for scheduled vessels to depart within three
days. Congestion is expected to last till June 2021
‒ Considering the shortage of equipment, free time is highly restricted as the carriers would like the
equipment to turn around quicker. The longer free time requests are imposed with a premium demurrage
and detention charges
Market Developments
Bunker Development Freight Rate Development
700 ‒ The VLSFO increased more 4500 ‒ The SCFI index was at USD
600 than 50% from Q4 2020 to Q2 4000 2719 in December 2021 and
500 2021, triggering increased 3500 currently trending at USD 4733
bunker surcharges from the 3000
400
2500
300 carriers 2000
‒ Given the current challenges
200 1500 around equipment and space
100 1000 coupled with an increase in
0 500 bunker surcharge, the freight
0
rates are expected to remain
high till the end of 2021
IFO380 VLSFO ULSFO MGO
Source: Bunker based on 4 ports for IFO380, VLSFO and MGO. Based on Rotterdam for ULSFO Source: SCFI based on 13 ports
Economic Outlook (Annual % change)
‒ The outlook for Africa stays strong at 4.9% growth for 2021 and ME at 2.5%. The global economic outlook continues to be strong for 2021, with an average of 6%
‒ Given the V-shaped economic recovery and vaccine developments across the world, air freight and ocean freight demand is expected to further increase during the year
10 7.3
5.2 5 4.8 4.7 4.6 6.1 6
4.9 4.1 4.1 4.1 4.2 4.2 4.3 4 4.4 3.5
3.5
5 2.5 3.4 3 2.8 2.7 2.7 2.2 1.9 1.7 1.7
3.4 3.3 3.3
1.5 1.5 1.6 1.6
0
Africa Middle East Asia and Pacific Europe North America World
-1.9 -1.3
-5 -3.3
-4 -4.1
-5.8
2020 2021 2022 2023 2024 2025 2026
-10
Source: ©IMF, 2021
Main Port Analysis worldwide
Hotspots of Equipment Shortage and Congestion
EU/NCP to FE
Schedules at 32.3%
TAwb/NCP/EC Vessel delay 5.5 days
Schedules at 33% Fewb/NCP
Vessel delay 6.5 days Schedules at 24.4%
Vessel delay 8 days
23,000 TEU backlog
TPeb/WC
Schedules at 22.2%
Vessel delay 10.5 days
‒ Various hotspots of congestion
and equipment shortage last as
an aftermath of Suez canal
blockage, hence impacting the
MEA region
‒ Blank sailings and scrubber
activities are creating a demand-
supply imbalance
‒ Substantial vessel utilization into
and out of the MEA region
continues to drive the ratesMarket Outlook
APAC Americas Europe MEA
Space Space Space Space
‒ Open for most of the destinations ‒ Space is open to USEC ‒ Space crunch remain extreme with all carriers ‒ Mostly open to intra MEA locations
‒ Limited space for ISC ‒ Extremely limited to USWC ‒ Light cargo continues to be prioritized by all
carriers
Rate
Rate
Rate Rate ‒ Remains high due to PSS, in addition to other ‒ Rate to Saudi has been increased almost
‒ PSS maintained by the carriers ‒ Further GRI / PSS expected factors by 70% by all main carriers
Ex ‒ Possible to negotiate rates for bulk spot
bookings
‒ Remain high, especially USWC
Equipment Equipment
MEA Equipment
Equipment
‒ Standard containers are available
‒ MSC / Messina shortage in Saudi Arabia and
Hapag-Lloyd, Egypt
‒ Shortage, as priority given to revenue
generating trades and equipment
‒ Standard containers are available ‒ Options to use NOR available from Europe to repositioning
South Africa
Others
‒ Severe berthing delays in USWC ports Free time Free time
‒ Lack of equipment has curtailed additional free ‒ No additional free time being offered,
time agreements purchase option is also limited
Space Space Space
‒ Extremely scarce ‒ Limited space ‒ Space remains a challenge. Forecasts and
‒ Priority for high paying cargo an optimal usage of given allocation are
Rate very important to manage this situation
Rate ‒ Rates stable
‒ Continue to increase Rate
Into ‒ Premium rate with guaranteed space Equipment
‒ Shortage at certain USEC ports
‒ Hapag has already published GRI for
various lanes ex Europe
MEA Equipment
‒ Severe shortage Equipment
‒ Especially 40ft containers ‒ Hinterland movements are affected, and
shortage of equipment continues
‒ Free time
‒ No additional free time being granted at
destinationsAbbreviations ACTK Available Cargo-tonne Kilometers CTK Cargo-tonne Kilometers ME Middle East MEA Middle East And Africa M-O-M Month-on-month NOR Non Operating Reefers PMI Purchasing Manager’s Index PSS Peak Season Surcharge RPK Revenue Passenger Per Kilometer SCFI Shanghai Freight Index VLSFO Very Low Sulphur Fuel Oil
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