Air cargo has followed the trend of most freight modes, with demand pulling back following Covid-related lockdowns and the shutdown of manufacturing in China. Despite this drop in demand, rates have surged through April, with Hong Kong to Europe and Shanghai to Europe posting double digit gains and drawing up in line with the rest of the Asia outbound market. Air-freight prices remain very much capacity supply driven. While we may have expected a drop off in rates from the first quarter of this year, the removal of Russian-owned air-freight capacity has artificially levered up the constraints for air-freight shippers. Asia to US rates have also seen a sharp increase, posting double digit rate percentage point increases following a collapse of available air-freight demand. However, this increase is still quite muted versus the true spot price.

Transatlantic prices continued to jostle as they have done all the way through since Q2 2020, with Chicago to Europe ticking down slightly, although still relatively higher year on year and showing little sign of weakness. Frankfurt to US has also declined slightly, although considering the relatively strong return of passenger travel (particularly on transatlantic routes) the reaction has again been quite muted. Airports in Europe have been plagued by congestion (both in terms of freight and passenger traffic) whilst the volume of cargo on the route has not really abated to a degree that might cause normality to return on the freight rate.

In the underlying feedstocks to air-freight prices, energy appears to have set up a new baseline following the return of fuel demand in Europe and North America. The impacts of this fuel demand is reasonably clear, with Singapore Jet Fuel closing back up towards its previous high of $150.39/Barrel

In the underlying feedstocks to air-freight prices, energy appears to have set up a new baseline following the return of fuel demand in Europe and North America. The impacts of this fuel demand is reasonably clear, with Singapore Jet Fuel closing back up towards its previous high of $150.39/Barrel (now $138.73/Barrel). This will feed through into fuel surcharges and forms a component of general inflation that bleeds through into the cost of running air-freight operations. The outlook is still very difficult to project given a few unknowns, primarily driven by the impact of the war in Ukraine and ongoing market issues related to the Chinese economy’s constant stop-start on the back of the country’s zero-Covid policy.

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.