Air Freight Pricing is naturally very strongly correlating with capacity demand (volume) and supply. Overall volumes in December 2020 increased nearly 10% over the same period in the previous year. Usually, the peak season ends in November but we saw volumes continue well into December this year – in fact, capacity utilisation reached an all-time high in week 51 with prices reaching unexpectedly high levels, according to market consensus. The volume we saw is due to stock replenishment and we assume also in anticipation of further Covid-related lockdowns but it came alongside reduced supply in December. The annual Christmas vacations did not occur in the usual numbers meaning that the additional belly capacity was not seen this year. December numbers are therefore a result of fairly strong demand in relation to reduced available capacity.

In December Westbound pricing (from Asia to Europe/U.S. and Europe to the U.S.) was significantly higher than Eastbound pricing as the following two examples show:

  • BAI-PVG01 (PVG/EU) pricing was > 4 times higher than BAI-FRA05 (FRA/CN) 
  • BAI-FRA04 (FRA/US) pricing was > 2.5 times higher than BAI-ORD01 (ORD/EU).

Pricing from Asia to the US is still the highest followed by Asia to Europe and the Transatlantic. For December the underlying pricing difference between BAI-PVG04 (PVG/US) and BAI-PVG01 (PVG/EU) was 33% and between BAI-PVG04 (PVG/US) and BAI-FRA04 (FRA/US) 45%. Looking at the intra month development on these lanes, the consensus is that that the highest prices were reached in week 51 and two lanes BAI-PVG04 (PVG/US) increased from the first to the last weeks of December by just over 7% and BAI-FRA05 (FRA/CN) by more than 10%. Whilst BAI-FRA04 (FRA/US) dropped just over 10% and BAI-ORD01 (ORD/EU) dropped just in excess of 3%.

Only BAI-PVG04 (PVG/US) saw an increase from week 51 to 53 of 1%, BAI-ORD01 (ORD/EU) remained flat and other lanes saw a reduction of 9-15%. 

Only BAI-PVG04 (PVG/US) saw an increase from week 51 to 53 of 1%, BAI-ORD01 (ORD/EU) remained flat and other lanes saw a reduction of 9-15%. Comparing November to December pricing, two examples are of note:

  • BAI-FRA04 (FRA/CN) saw the highest increase of just above 20%. 
  • PVG and HKG to the US saw reductions

LHR specifically saw all export rates rising during December when compared to November. The increased percentage ranges from > 1% to South East Asia and > 15% to North America. Inbound pricing from PVG to LHR had the most significant increase in the week leading up to the holiday season, dropped and then recovered to 90% of the highest price in December at month-end. 

Overall December pricing held up or even increased compared with November pricing. So the expected drop after the "peak season" did not materialize in 2020. In December, no major impact from the "vaccine" shipments was obvious. It remains to be seen whether this shall have a significant impact in January. 

 

About Robert P. Frei, Business Development Director, TAC Index

Robert was instrumental in defining the TAC Index product. His air freight experience spans over 25 years in high-level positions at one of the leading freight forwarding companies. He is recognized for his passionate involvement in several innovations in the air freight industry. At TAC Index he focuses on the data providers.