Despite an array of influences on air freight prices and the general supply and demand picture (especially out of Asia), BAI prices have seen little more than a slight slump through the beginning of Q4.P This may indicate  the seasonal peak in Q4 the airfreight market had gotten used to before the COVID period failed to materialize. The BAI00 Global Average has slumped from a high of 5,254 points on 13th December 2021, down 45.27% to date; however, relative to some of the triggers for spot price volatility near term markets have been relatively flat. 

Much of the stability has been the basis of the reintroduction of contracts rather than a structural shift in demand. In real terms, demand for airfreight has slumped – large airfreight shippers have been adversely impacted by inflation and recession in Europe and North America, with the price of energy and cost-of-living crises in many developed countries taking the steam out of retail business. Much of the slump has affected the technology industry, major players of which will have moved market prices substantially (recalling a certain smartphone product launch in 2017 that roofed Q4 prices) have been absent, at least in terms of volume. 

Over recent years, the renewed focus on airfreight has forced airlines to put more weight on freight to support commercial aims, and whilst passenger travel has returned the value remains much higher on freight than in 2019. Underlying feedstocks to freight prices also remain consistently high, despite sharp moves linked to unrest in China and its subsequent impacts on energy and oil demand. 

An interesting shift has been a push towards index-linked contracting. Airlines and shippers want to create more resilient market-based contracts against a highly volatile and uncertain forward outlook. Over recent years, the renewed focus on airfreight has forced airlines to put more weight on freight to support commercial aims, and whilst passenger travel has returned the value remains much higher on freight than in 2019. Underlying feedstocks to freight prices also remain consistently high, despite sharp moves linked to unrest in China and its subsequent impacts on energy and oil demand. 

Looking forward, the shift is distinctly away from very long-term arrangements, with much more focus on chartering and controlling the capacity to react to rapid local and geopolitical changes. The war in Ukraine continues to pin down capacity, the majority of which is very unlikely to return in the foreseeable future. Whilst the economic outlook for 2023 is dire, 2024 leaves all to play for – importantly, any drain on freight demand will also drain on passenger flight demand, rebalancing the demand picture that had been heavily skewed towards under-capacity and strong demand for the past three years.

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.