Super-peaks in prices continue to rock the Asia outbound market, with Shanghai/Hong Kong to Europe BAI81 picking up +59.77% since mid-August.

Direct flying on freighters remains the core option, increasing the premium required for air freight with the spot market roiled by bumped cargo:  the entire Asia-based supply chain remains under pressure. The forward market remains overwhelmingly bullish, although there remains an expectation for the market to come off beyond December. However, the relative level versus the start of 2020 is still high

This was matched by BAI31 up +31.47%. Much of this had already been baked in, with Asia-Europe widebody passenger traffic remaining incredibly thin, albeit with core routes to layover points such as Dubai and Doha picking up significantly following the draw back of COVID related travel restrictions. Singapore went into lockdown again last week even with the country being put on green travel lists by the UK and other European countries. This throttled available capacity via another crucial midpoint. Direct flying on freighters remains the core option, increasing the premium required for air freight with the spot market roiled by bumped cargo:  the entire Asia-based supply chain remains under pressure. The forward market remains overwhelmingly bullish, although there remains an expectation for the market to come off beyond December. However, the relative level versus the start of 2020 is still high

Asia-US prices appeared to pull back slightly last week, putting a dent in what would have been a similar straight peak seen on the Asia-Europe route. Shanghai to US BAI84 picked up +$0.53/kg on the previous week. However this has been balanced off by Hong Kong to US BAI34 pulling back $0.20/kg breaking a surge in prices since the first week of August. This happened even though we have yet to enter the traditional volume peak in Q4 for the air freight market. There is a potential that the air freight price has been heavily supported by ocean-air conversions as congestion on the US West Coast breached its previous record in August and September. However this has begun to taper off prior to Golden Week.

On the transatlantic routes, the big-mover has been the proposed opening of travel corridors for vaccinated travellers between UK and Europe to the US. The transatlantic market has remained noisy in terms of volatility, but monthly averages remain quite flat. Any return of passenger travel threatens to add in capacity in a lane previously dominated by belly freight, with a general sense that the value of cargo on the route will pull back in line with how this route sat historically.

 

About Peter Stallion, Head of Air and Containers, Freight Investor Services

Peter Stallion heads up the Air and Container Freight desks at FFA brokerage Freight Investor Services. He started his career in air freight chartering, and has a passion for emerging risk management markets and the logistics industry.