Air freight rates showed signs of plateauing in June. 

Cargo originating from Shanghai bound for Europe, as well as for the United States, saw air freight rates drop slightly on a monthly basis. At the same time, cargo originating from Hong Kong bound for both Europe and North America witnessed air freight rates that increased slightly on a monthly basis but peaked in the middle of the month. 

Specifically, air freight rates on the Shanghai to Europe (BAI 81) trade lane dropped by 1% MoM but remained 44% higher than a year ago. Air freight rates on the Hong Kong to Europe (BAI 31) trade lane increased by 2% month on month (MoM) and stood 24% above last year’s prices at the end of June.

Specifically, air freight rates on the Shanghai to Europe (BAI 81) trade lane dropped by 1% MoM but remained 44% higher than a year ago. Air freight rates on the Hong Kong to Europe (BAI 31) trade lane increased by 2% month on month (MoM) and stood 24% above last year’s prices at the end of June.

Air freight rates for the Shanghai to North America (BAI 82) trade lane decreased by -3% MoM but remained 38% higher than a year ago. With respect to the Hong Kong to North America (BAI 32) trade lane, air freight rates increased by 2% MoM and stood 21% above last year’s prices at the end of the month.

The strong development in air freight rates remains well supported by growth in cargo volumes. According to IATA data for May, global volumes increased by 14% year on year (YoY). From a regional perspective, cargo volumes in Europe grew by 17% YoY, just slightly behind volumes growth in the Asia-Pacific region which advanced by 18% YoY. Volumes growth in the Middle East stood at 15% YoY while the North American region was a bit slower at 9% YoY. The strong increase in demand outstripped capacity growth in all regions as the latter came in at just 7% YoY globally. Still, most of the observed increase in cargo volumes remains concentrated in e-commerce according to our conversations with freight forwarders and carriers.

It remains to be seen whether other segments of the air freight market will show a meaningful recovery in cargo volumes in the second half of the year. In our discussions with freight forwarders and ocean carriers, we heard of a significant increase in ocean freight volumes in May and June but, as of now, it remains unclear whether the strong increase in demand is related to a genuine recovery in underlying demand or if this is merely a pull-forward effect.

It remains to be seen whether other segments of the air freight market will show a meaningful recovery in cargo volumes in the second half of the year. In our discussions with freight forwarders and ocean carriers, we heard of a significant increase in ocean freight volumes in May and June but, as of now, it remains unclear whether the strong increase in demand is related to a genuine recovery in underlying demand or if this is merely a pull-forward effect.

Here, shippers might be tempted to pull forward orders to avoid port congestion and anticipated delays later in the year as they have learned their lessons from the pandemic when severe supply chain disruption caused cargo to be late and sales to be missed. If ocean volumes remain strong throughout the summer, this might bode well for air freight volumes and, in connection with the unprecedented increase in e-commerce volumes, this heightens the risk of demand outstripping supply in the second half of the year.

About Marc Zeck, Senior Research Analyst, Stifel

Marc Zeck is a Senior Research Analyst covering Global Logistics and Aerospace & Defence at Stifel. Mr. Zeck is based in Frankfurt, Germany and joined Stifel in 2020. He previously worked in Equity Sales at Lehman Brothers, Nomura and UBS.

Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation or needs of individual investors. For more information and current disclosures for the companies discussed herein, please go to the research page at www.stifel.com.

©2024 by Marc Zeck.