As we head into August, experts weigh in on the current situation and expected outlook on the air freight market. Here is an update on the air freight market in August 2020.
Air freight rates have been increasing for several weeks. Ocean freight is seeing longer wait periods – up to four weeks – for bookings from China to Europe and the U.S., which is resulting in a boost in demand for air freight in order to move goods faster. While capacity remains largely unchanged, in contrast to increased capacity in ocean freight, the rising demand causes rates to climb.
For instance, last week’s TAC Index showed rates for Shanghai to the U.S. went up 10.9% to $5.51, while China to the U.S. rose 5.81% to $5.46.
Prices are expected to increase further, especially as new tech products geared toward air freight are expected to launch.
“We are still looking down the barrel of various airfreight-centric product launches that correlate with a bullish viewpoint,” said Freight Investor Services. “However, capacity still remains highly uncertain, linked to passenger traffic inconsistencies.”
“What is more of a concern for shippers is a new and persistent requirement to absorb both the higher air freight rates and direct market volatility.”
According to Seattle-based freight forwarder Expeditors, the second quarter of 2020 has been “intense” and “unsettled” for air cargo due to the supply-demand imbalance. President and CEO Jeffrey Musser stated that the market for air freight was particularly affected by the grounding of passenger operations amid COVID-19, as passenger operations make up roughly 45-50% of overall air cargo capacity.
“The air market has been particularly unsettled, with the cancellation of so many passenger flights limiting access to passenger belly space and requiring the increased use of charters to meet customer needs.
“While air capacity has been tight, demand for shipping technology-related equipment, medical equipment and supplies and other priority goods has been intense, creating a supply and demand imbalance and a spike in buy and sell rates.
“Airfreight buy and sell rates, which peaked in April and May and started to decline in June, remain highly volatile and continue to be unpredictable.”
However, despite these conditions, Musser stated that the company’s revenue was “much greater than anticipated” in Q2 of 2020.
Air cargo volumes grew throughout July (an increase of 8% from June), according to data from CLIVE Data Services, with dynamic load factors to and from Asia remaining ahead of 2019 levels by about 8 percentage points.
Said Niall van de Wouw, Managing Director of CLIVE Data Services, “Our market analyses for July, especially compared to what we were reporting a few months ago, shows the gradual but consistent climb up the slope to recovery for the air cargo market is continuing.
“This is obviously no ‘V’ shape recovery,” van de Wouw noted, “but even as additional capacity comes into the market with the return of more passenger services, cargo volumes are showing some reassuring resilience.”