Traditionally the end of the low seasonal demand, August has once again not failed to disappoint, following a relatively consistent trend since mid-2022. BAI00 Headline indices dropped some 2,310 points or -55.30% since 6 June 2022. Downward trends had been expected but this was against a backdrop of bleak macro-economics, particularly with regard to cargo output from China and a general disruption of spending power for North American and European consumers, which has sucked demand out of the freight markets. 

Spot rates, at least according to BAI, are currently unsustainable against some of the long-term charter rates fixed last year, with freighters out on long-term lease opening up some potentially substantial exposures on behalf of charterers. Even with this, we have seen the expansion of various would-be integrators, particularly ocean liners. However, the relatively weak performance of Maersk Logistics and its expanded airfreight arm is cause for a little bit of caution in the run-up to the end of the year.

The major supply and demand benchmarks focus largely on a growing freighter oversupply running into a relatively weak outlook for Q4 peak season. Spot rates, at least according to BAI, are currently unsustainable against some of the long-term charter rates fixed last year, with freighters out on long-term lease opening up some potentially substantial exposures on behalf of charterers. Even with this, we have seen the expansion of various would-be integrators, particularly ocean liners. However, the relatively weak performance of Maersk Logistics and its expanded airfreight arm is cause for a little bit of caution in the run-up to the end of the year.

Much of this assessment does, however, focus almost entirely on Asia-Europe and Asia-North America business. The strong freight trade between China and Russia must be noted, which draws capacity away from weaker Asia-Europe/US trades. The same can be said about North Africa and the UAE, both of which have seen a strengthening of trade outbound from China, with air freight riding this growth. Besides this, spot prices have been edging towards 2019 levels, but the slow pace of decline, particularly relative to the collapse in container freight spot and contract prices, provides a bit of hope that the drawdown from the Covid market is being handled relatively well by air cargo airlines and freight forwarders.

Contractually, the drawdown in the market has seen a slight shift to index-linking. We have also seen very fresh green shoots for air freight swaps trading, with air freight prices at an acceptable value compared to the past two years, drawing in potential buyers of swaps looking to hedge. Selling air freight swaps could also prove valuable to airlines during a very uncertain and potentially financially dangerous environment through into 2025.

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. Contact Peter Stallion on [email protected].