This peak season is showing some airfreight pricing muscle.

With peak season now well underway, the Baltic Air Freight Index climbed to an average of 2,651.25 in October, 8.2% higher than in September and a year-on-year (YoY) increase of 25.9%. As was the case in September, most of the major outbound indices grew month-on-month (MoM), but Chicago O’Hare Outbound Index (BAI50) was an outlier and fell by 8.6% to 1,181.25 in October.

In Europe, the Frankfurt Outbound Index (BAI20) and the London Heathrow Outbound Index (BAI40) both performed well, jumping by 10.8% and 32.9% MoM, respectively.

In Asia, the Singapore Outbound Index (BAI60) grew by 37.5% in September, while the Hong Kong Outbound Index (BAI30) rose 9.7% and the Shanghai Pudong Outbound Index (BAI80) was up by 5.0%.

EU e-commerce handling fee begins

The Asia-Europe market has undergone another structural change. On 1 November, the EU’s newly imposed €2 handling fee for all e-commerce imports came into effect, adding to the €3 fee for parcels worth less than €150 entering the bloc that began in July.

These fees are taking a toll on e-commerce trade into Europe. After declining by 40% YoY in July, volumes of low-value, B2B and B2C e-commerce shipments entering the EU from China dropped by 59% YoY in August and a further 56% YoY in September, according to Cargo Facts Consulting analysis of China customs data.

The Asia-Europe market has undergone another structural change. On 1 November, the EU’s newly imposed €2 handling fee for all e-commerce imports came into effect, adding to the €3 fee for parcels worth less than €150 entering the bloc that began in July.

These fees are taking a toll on e-commerce trade into Europe. After declining by 40% YoY in July, volumes of low-value, B2B and B2C e-commerce shipments entering the EU from China dropped by 59% YoY in August and a further 56% YoY in September, according to Cargo Facts Consulting analysis of China customs data.

These decreases are likely to continue in the months ahead.

However, the two main Asia-Europe indices still showed MoM increases in October, with Hong Kong to Europe (BAI31) rising 11.1% and Shanghai Pudong to Europe (BAI81) 3.6% higher.

Cargo Facts Consulting data shows that there was a slight recovery in freighter capacity on the Asia-Europe lane in September, with a MoM increase of 5.2% after three consecutive months of decline.

By contrast, Asia-North America capacity continued to creep up with a MoM increase of 2.3% in September, the third consecutive month of growth.

Looking at the relevant indices, Hong Kong to North America (BAI32) rose by 8.8% MoM in October and Shanghai Pudong to North America (BAI82) was up 7.1%, while Hong Kong to USA (BAI34) and Shanghai Pudong to USA (BAI84) grew by 8.9% MoM and 4.6% MoM, respectively.

Jet fuel continues pushing up rates

There is a reason for all these rate increases: jet fuel. With the International Air Transport Association’s (IATA’s) latest data showing that jet fuel prices are still more than double what they were a year ago, it is not surprising that airfreight rates have continually been climbing.

In fact, almost every index was up YoY by double digits in October. London Heathrow to USA (BAI44) was a particular highlight for the month, accounting for the highest YoY growth at 61.1%, as well as the highest MoM growth at 50.3%.

Elsewhere, the next greatest YoY increases for October came from Frankfurt to Southeast Asia (BAI23) at 55.4% and Chicago O’Hare to Southeast Asia (BAI53) at 53.1%.

Mammoth 777 conversions enter service

There were recent developments in the freighter fleet that could influence capacity. Most notably, in late October, DHL Air UK started a revenue service with its first Mammoth Freighters 777-200LRMF, becoming the launch operator of the new type. With a second following in November and more in the coming weeks and months, the additions will help inject more capacity and provide relief to the large-widebody market, potentially moderating yields.

There were recent developments in the freighter fleet that could influence capacity. Most notably, in late October, DHL Air UK started a revenue service with its first Mammoth Freighters 777-200LRMF, becoming the launch operator of the new type. With a second following in November and more in the coming weeks and months, the additions will help inject more capacity and provide relief to the large-widebody market, potentially moderating yields.

These, alongside other 777 conversions, are among the 2,851 freighters that will join the worldwide fleet over the next 20 years to bring the total to 3,867 units by the end of 2045, according to Cargo Facts Consulting’s latest freighter forecast released in late October. Although this will transpire over the long term, newer capacity should be good news to the industry.

About Cargo Facts Consulting

Founded in 1978, Cargo Facts Consulting (www.cargofactsconsulting.com) is a leading air cargo consultancy and data provider. Through our specialised services in digital innovation, strategic planning, and growth management and data solutions, Cargo Facts Consulting helps its clients navigate the complexities of the air logistics industry.

 

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