Date: Monday, September 14, 2020
Source: American Shipper
China gave the airfreight market a headfake last week. It gave the impression capacity was tightening to the point that rates would seek higher ground for the rest of the year in response to peak season shipping.
Instead demand tailed off as Apple slightly delayed the launch of its iPhone 12, with capacity slightly exceeding actual volumes. It was a similar story in many markets, according to WorldACD, with yields inching down or staying flat.
It may seem that shippers are catching a break on rates under the circumstances, but consider that any pause comes during a year that has seen significant inflation because of the shortage of aircraft to fly goods, especially as manufacturing bounces back from production slowdowns associated with the coronavirus pandemic. In August, spot prices were 67% above the rate for 2019 and 22 points higher than in July. As of Sept. 7, spot pricing was 54% greater than a year ago, according to investment bank UBS.
But freight agents don’t expect the lull to last long. Ocean capacity is extremely tight and rates are at record highs. Chinese factories set to close for the Golden Week holiday in early October so retailers are pre-ordering supplies and booking more space the week afterwards. Apple and other tech companies will soon executive huge product launches, adding to high shipping demand for e-commerce and personal protective equipment.
Meanwhile, rates in other key markets such as Tapei, Singapore, Hanoi, Vietnam, Manila and Southwest Asia remain very strong due to limited capacity and increased demand as many shippers repositioned manufacturing at the height of the U.S.-China tariff wars, forwarder Flexport said in a weekly message to customers.