China airfreight rates continue to surge

By Damian Brett

Airfreight rates out of China have rapidly increased over the last week, but thoughts are now turning to the impact of lower consumer demand in Europe and the US.

The latest TAC Index figures show that average airfreight rates on services from Shanghai to the US last week increased by 29.7% on the prior week to reach $4.71 per kg. On services from Shanghai to Europe there was a 17.7% week on week increase to $3.19 per kg.

From Hong Kong to the US there was a 10.4% week on week increase to $3.70 per kg and from Hong Kong to Europe prices were up 10.8% to $2.86 per kg.

The price increases come as factories in China continue to ramp up production following the extended New Year break and passenger airlines have slashed capacity as result of lower demand.

It is estimated that flight cancellations have removed more than 5,100 tons of capacity from China per day on average.

Peter Stallion of air cargo derivatives broker said that freighter operators looked set to benefit from the lack of bellyhold capacity.

However, he warned that with Europe and the US now introducing social distancing measures, consumer demand could weaken.

“The dramatic shift in price generated by a severe lack of belly freight capacity, lifting pent up cargo-throughput that was previously bottle-necked in Asia, will be a welcome reprieve from the pain freighter operators endured in 2019.”

He added: “Even with events such as the 2015 US west coast port strikes in recent memory, COVID-19 has now become an exceptionally disruptive event for supply chains globally.

“Upstream problems have now become downstream problems, as imports from Asia will now hit slack consumer demand in Europe and North America.”

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