Through May, airfreight has been rocked by several key factors that have plagued global freight modes, although a shift towards price surges following the near-overnight reduction in freight capacity as a result of the Russian invasion of Ukraine has led to more price risk down the curve. Freight prices have been held up despite a pullback in export demand from China, with BAI31 Hong Kong to Europe ticking up 0.05$/kg through May. The market into Europe appears to be baked in on the back of a fairly stagnant situation in China. Looking forward on the Asia-Europe trade lane, however, the lack of export volume and inflation in Europe could put pressure on long-dated rates as capacity frees up as a result of any reopening in China. The capacity picture regarding Russian freight aircraft is unlikely to change with any pace, however, considering sanctions by most of Europe on Russia act to throttle capacity and inflate the cost of fuel. Both of these factors are relatively bullish. 

Looking forward on the Asia-Europe trade lane, however, the lack of export volume and inflation in Europe could put pressure on long-dated rates as capacity frees up as a result of any reopening in China.

On the Asia-US routes, the market has also remained fairly supported, although BAI Hong Kong to North America has ticked down a touch by 0.09$/kg since 16–30 May. Largely driven by the same fundamental capacity issues as the Asia-Europe trade, a key market trigger will be any change in Covid-19 restrictions in China, as well as the cumulative impact of inflation in the US and the result this will have on seasonal spending and demand surges in the fourth quarter. Moreover, fuel prices remain extremely supportive for bullish freight rates, raising the likelihood for volatility over the next six months at least. Western resolve over the Russia-Ukraine war has yet to falter, at least in terms of sanctions, extending the period where fuel and capacity will remain persistent issues for the market.

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.