Air Freight Rates Continue to Rise Amid Concerns Over Load Supply Fluctuations

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Global air freight rates rose 2% last week as the market grapples with a potential supply shock on the Trans-Pacific, according to data from TAC Index, the market’s leading air freight rate tracker. The global Baltic Air Freight Index (BAI00) rose 2% in the week ending November 10, leaving the index just 3.7% below its level 12 months ago, according to the latest data from the TAC Index.

Although observers initially viewed this as a normal development as the market enters peak season, the supply picture has changed dramatically following the fatal crash of a UPS cargo plane in Louisville.

Baltic-Airfreight

MD-11 Supply Shock

The crash has led to the grounding of all MD-11 cargo aircraft operated by major carriers such as FedEx, Western Global and UPS.

Market sources warn that the move could have a significant impact on capacity in the coming days, particularly on the Transpacific routes where the majority of the MD-11 fleet operates. The sudden shortage of widebody aircraft is expected to put upward pressure on freight rates during the peak season.

Asia: Hong Kong Accelerates, Shanghai Slows

In the Asian market, the freight rates are clearly differentiated:

•    Hong Kong (BAI30): The index of routes originating from Hong Kong increased sharply by 3.7% week-on-week (WoW), narrowing the gap from the same period last year (YoY) to only -1.2%. Spot rates from Hong Kong to both the US and Europe recorded an increase.

•    Shanghai (BAI80): In contrast, the index originating from Shanghai decreased slightly by 0.2% WoW, down 2.5% YoY. Overall freight rates from China to the US actually decreased last week, although rates to Europe still increased.

•    Other markets: Taiwan and Vietnam continued to record increases. Meanwhile, the Korean and Thai markets have seen mixed results: rates to Europe are more stable than to the US (at least before the MD-11 incident).

Europe and the US: London Breaks Out, Chicago Still “Tracing the Bottom”

•    Europe: Transatlantic rates to the US continue to rise for the second consecutive week. Notably, the index originating from London Heathrow (BAI40) made a dramatic comeback, jumping 15% WoW after a sharp decline last week, returning the index to positive growth (+0.1%) year-on-year. In contrast, the index from Frankfurt (BAI20) fell 6.8% WoW.

•    North America: The US rate pattern is quite mixed, with increases on routes to Europe and South America, but decreases on routes to China and Korea. The Chicago-based index (BAI50) edged up 2.4% WoW but is still languishing at a multi-year low, down 26.8% year-on-year.

Logistics experts advise shippers to keep a close eye on capacity in the coming days as the real impact of the MD-11 fleet shortage begins to seep into the market.

Source: Phaata