The overall synopsis for airfreight persists from March, with airfreight in a global drawdown following the easing of supply chain pressures. The major Asia outbound routes trend has been fairly linear – pointing down but not yet achieving anywhere near the lows of the 2019 freight bear market. In terms of a market report, this is at risk of becoming repetitive. However, more triggers for further volatility lie in the range of known unknowns linked to the Russia-Ukraine conflict and the sharp drawdown of oil prices (putting pressure on fuel surcharges). 

The bull case for airfreight lies in a market recovery after a sharp bullwhipping of supply chains and inventories. Inflation in major economies has put pressure on spending power and thus put pressure on the retail economy. However mid-April saw the topping out of major CPI and inflation benchmarks and the slight recovery of retail orders following a six month draw down. The main Hong Kong-Europe BAI31 benchmark saw a +0.03$/kg move up after a consistent down trend since 8 August. 

Up until recently the success story for the transition to a new normal in freight rates has been on Transatlantic fronthauls, which had risen sharply in Q2 2020 and maintained consistently high levels all the way through and out of the back of the COVID period.

Inflation in major economies has put pressure on spending power and thus put pressure on the retail economy. However mid-April saw the topping out of major CPI and inflation benchmarks and the slight recovery of retail orders following a six month draw down. The main Hong Kong-Europe BAI31 benchmark saw a +0.03$/kg move up after a consistent down trend since 8 August

We also see this price support in the container market, with transatlantic ocean freight rates forming the last bastion of the freight bull market. Rates have since started to collapse, on the back of shrinking Europe to US import demand and the alleviation of congestion. We have started to see this in airfreight, with Frankfurt to North America BAI22 down 46.5% from highs on 4 April 2022. Relative market weakness has started to be felt in airline financials, Korean air cargo revenue falling 51%, overmatched by Lufthansa with a 64% drop in profits. 

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.