The airfreight market perks up heading into peak season, with rates bouncing back from the lowest we have seen all year. A surge in airfreight demand is expected as importers scramble to replenish record-low inventory levels.
So here is a short list of what we are seeing so far today:
Market Rates Increase After Year Low: With the PPE rush nowhere near where it was earlier this year, rates from Shanghai, which were notoriously known for being at roughly $20/kg six months ago, could be procured under the $4.00/kg mark last week. Moving forward to this week, rates have jumped again to approx. $6.00/kg average.
What to Expect in Q4: A spike in demand and airfreight pricing is expected within the next couple of weeks but not anywhere near what was witnessed in the 2nd Quarter. This time around, increase of volumes are expected to be contributed by eCommerce and inventory replenishment. Inventory levels across the USA are currently at record lows.
That said, if the Covid-19 vaccine should be ready for global distribution, within the next couple of months, then it is very possible that we find ourselves in a critical space situation.
Trans-Pacific Charter Forecast: Available market intel indicates that 747 charter aircrafts are being pre-booked at the rate of $900K+ for the next several months, expectations are that the rates will climb towards the $1.5M mark for last moment charter bookings.
A $900K price point breaks down to about $9.00/kg when space is fully optimized on a 747 charter aircraft, which is much higher than the current market rate. In today’s conditions, shipping cargo loose, even at enormous volumes, is still usually more cost effective.
Still a Long Shot from Pre-Covid Volumes: IATA announced that airfreight volumes grew 2% in August, from July, but that year-over-year decline was still sharp. Asia-Pacific trade volumes have been impacted the most with a 18.3% decline. The Purchasing Manufacturers Index (PMI) increased by 5.1% YoY however, in an unlikely event, cargo volumes did not increase at the same pace. The reason behind this is that the lack of capacity and the unwillingness by importers to foot an airfreight bill. Instead the shipments are moving ocean freight despite delays in inventory replenishments.
Freighter Capacity on the Rise: While the belly capacity from passenger aircrafts have dropped by more than 70%, freighter capacity has increased by 28% going into the fall season. With more freighter aircrafts in rotation we are expecting to see improved transit times and overall geographical coverage.
For over 70 years, Laufer Group International Ltd. has been helping customers improve the way they handle their logistics. To see how we can help, or for any questions, contact Thomas Marano, National Director of Business Development, Airfreight & e-Commerce or contact your local sales representative.