Date: 10.10.2023

Air freight may have turned a corner

Airfreight rates, as measured on the Baltic Air Freight Indices*, ticked up through September on major Asia-outbound lanes, giving credence to the possibility of a peak season in 2023, with rates ex Hong Kong up 7% and ex Shanghai a whopping 34%.

According to the most recent reading of the BAI*, Hong Kong to Europe and Shanghai to Europe monthly rates rose 7% and 34% month on month (mom), though these increases follow what have been consistently low rates all year.

*The Baltic Air Freight Indices (BAI) reflect weekly transactional rates for general cargo and includes a headline index – the BAI Index – which is a weighted average of 17 underlying destination basket routes, as well as six outbound indices. 

The leading driver is the continuing rise of eCommerce business out of southern China, which was reflected in the index for outbound Hong Kong routes, which is still the biggest by volume in global air cargo – and despite the 7.3% rise over the month, year on year (yoy) it is down -32.3%. 

TransAtlantic rates were relatively flat, while rates from, Hong Kong to North America and Shanghai to North America increased 8% and 11%, in September versus the previous month. 

Out of Europe, the index of outbound Frankfurt rates rose only slightly, by 2.7% mom, leaving the yoy decline at -42.6%; and outbound London also edged up, but only a modest 4.5%, to leave its annual a long way lower, at -48%.

While recent increases are positive and could suggest a stabilising market, rates are still well-below where they were last year and where they started this year, and supply continues to enter the market. 

According to IATA, capacity (as measured by available cargo tonne kilometers, or ACTKs) was up more than 11% year on year in July, the last available reading and it does appear that passenger belly capacity is continuing to re-enter the market, which will put pressure on pricing. 

Average fuel prices are up in September and account for roughly half of the overall rate increases on certain lanes, with the sudden devastating middle-east developments, likely to drive prices up further, even if just in the short-term.

We do not see much likelihood for any significant peak season this year and with inflationary pressure and energy prices continuing to put a strain on consumer spending, the possibility of any significant recovery is unlikely. 

As capacity and inventories both come back into balance, core demand should once again become the primary determinant of air cargo rates, but for now, we expect a modest rise in pricing through the end of the year, although well-below last year.

For valuable, special and time-sensitive cargoes there has never been a better time to use air freight, with extremely competitive rates and really interesting service and route combinations.

As the market becomes more dynamic, we work ever closer with our network and carrier partners to monitor capacity and route opportunities, especially those which include regional airports and particularly our Birmingham International Hub, which offer significant time and cost benefits. 

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