Air freight rocked by volatility and uncertainty, reflected in rate rise and fall
07.14.2020
Air freight rates from China to Europe have continued their descent, falling 4.64% in the week ending 13 July, to $3.08 per kg. However, rates to the US from Asia ticked up 3.42%, to $4.53, according to the TAC Index.

Freight Investor Service noted that the rise was «a speedy market adjustment» to the news that US carriers had cancelled flights to Hong Kong, after the territory said all crew members would need to be tested for Covid-19 on arrival, and could face 14-day quarantine.

American Airlines has postponed the resumption of its flights to Hong Kong until 5 August, while United said it was suspending plans pending a review.

«The recent crew-testing requirements imposed at airports like Hong Kong will lead to reduced capacities again,» said David Wystrach, senior director air freight EMEA for Flexport.

«Some carriers may act fast and implement (PAX) freighter-capacity-flights intra-Asia to utilise international capacity from other airports to the US, for example, but this will have impacts on transit times and costs.

«The industry and customers will have to remain flexible and make data-driven decisions within the next weeks and months, when the only constant will be change.»

He said volatility remained: «While we have seen the market opening up in the past weeks, at the same time some markets have suddenly seen tighter capacities again. The uncertainty is reflected in rates going up and down week by week.

«This may lead to a lot of uncertainty in the coming weeks and months, and in particular around any potential peak season. Staying flexible and having clarity about cargo-readiness to better plan and forecast is becoming more and more essential in this environment.»

Airlines are struggling to manage their networks consistently in the face of changing demand and prices, especially with low-margin passenger-freighters.

IAG Cargo today published new flight schedules, which appear to show it attempting to keep its network intact, but with low frequencies to many destinations — although it appears to be ramping up others. North American destinations including Atlanta, JFK, Boston, Chicago and Miami are seeing daily — or more frequent — flights out of London, but there are far fewer frequencies out of Madrid, in particular to South America. Hong Kong, Beijing and Shanghai have daily flights from London, while there is less frequency to Bangkok, Singapore and Narita.

One customer said: «It looks like IAG Cargo has pulled flights, as either they can’t pay their way with current market rates, or the demand has dried up.»

FIS said the uncertainty in the market was also impacting contract renewals.

«For the most part, the drive remains downwards, back to some form of normality. A poor view of the future of the market has started to impact the highly diversified time frames for BSA or long-term contract renewals.»

FIS, which is introducing price index-linked contracts, claimed: «Although the near-term market will rely on how effectively businesses continue to react against the uncertain environment, the avenue is wide open and the timing is right to implement contracts that can help provide consistent pricing, while still absorbing the real fundamental impacts of price volatility.»

Analytics on topic
Report
07.17.2020
Report
07.17.2020
The EU chemical industry’s output decreased after the first months of the COVID19 pandemic
The chemical industry is one of the pillars of the European economy. The industry has been hit hard by the COVID-19 pandemic. The report of the European Chemical Industry Council (CEFIC) provides performance for the chemical industry in the first quarter of 2020, in particular, the dynamics of industrial production, sales of goods, foreign trade.
Source: European Chemical Industry Council
Report
05.27.2020
Report
05.27.2020
Review of the current state of sea and air cargo transportation market: crisis recovery scenario

The coronavirus outbreak exposed the fragility of global supply chains that move goods between countries. Due to the volatility of the logistic market, carriers are facing new risks and the need to promptly respond to changes in order to manage them. The global cargo transportation market is experiencing significant difficulties caused by abrupt decrease of the transport infrastructure throughput due to the coronavirus (COVID-19) pandemic.