Freight prices diverged across several routes through October, with BAI Asia-China routes actually coming off through from mid-October, BAI82 ex. Shanghai dropped from $11.31/KG to $10.04/KG in a stark reversal of market sentiment that prices into the US are actually going up. This was driven by congestion into US ports forcing more cargo into an extremely tight airfreight market. 

The market out of China continues to be driven more by owned or chartered capacity rather than traditional mid-term contracts. This has continued to spark up spot market volatility with the market on a shift towards dynamic pricing.

Tightness - and the power held by airlines - was shown by Cathay Pacific implementing a General Rate Increase on BSA (contract) capacity ‘until further notice’. As we push through into what would have been a traditional demand peak in Q4, markets already start off very high on all Asia-outbound routes. The market out of China continues to be driven more by owned or chartered capacity rather than traditional mid-term contracts. This has continued to spark up spot market volatility with the market on a shift towards dynamic pricing.

On transatlantic routes, as we’ve said before, sentiment is driven by the availability of capacity rather than any substantial fluctuation in demand. This capacity is driven by the resurgence of passenger traffic in what is usually a belly-freight dominated route. The US government announced it would lift travel restrictions from November 8, potentially putting the dampers on rates which have been held up relatively flat ever since the travel corridor was closed in Q2 2020. Again, the index price is not following this sentiment yet, with many keeping an eye on price action once passenger traffic returns. This is despite forward bookings for passenger tickets, which will have pre-loaded transatlantic schedules giving airlines more of a better reading on available capacity. 

 

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.