Rates continue to rise in November despite muted demand

Airfreight rates on major east-west trade lanes continued to pick up in November as weather conditions, e-commerce demand and capacity constraints helped push up prices (see dashboard at end of article).

The latest figures from the Baltic Exchange Airfreight Index (BAI) – taking into account both spot and contract rates – show that in November forwarders paid an average of $6.15 per kg on services from Hong Kong to North America, up from $5.80 per kg in October.

Rates from Hong Kong to Europe increased to $4.64 per kg in November compared with $4.26 per kg in October.

Price increases between October and November are usual as demand ramps up for the peak season, although this year’s demand expectation for the peak season have been weak.

Nevertheless, airfreight rate data provider TAC Index said that this year’s prices in November were boosted by e-commerce demand ahead of Black Friday and Cyber Monday and disruptions to capacity ranging from wars to earthquakes and volcanoes to recent record snowfall in Anchorage.

Indeed, monthly rates from Hong Kong to North America are now at their highest level of the year so far, while to Europe prices are at their second highest.

Prices also continued to rise as the month progressed – rates to North America ended the month at $6.66 per kg, while to Europe they stood at $4.88 per kg.

The increase means rates on the route to North America are just 0.6% down on a year ago, while to Europe they are 13% down. This compares to a peak difference of around 40% on both routes in the summer.

However, the lower price difference is perhaps a reflection of rate declines last year rather than a sudden surge in pricing this year.

It’s not just from Hong Kong that prices have increased. The overall Baltic Air Freight Index rose by 3.3% in the final complete week of November, taking the gain for the month to 12.2% and cutting the year-on-year decline to 17.2%.

TAC said that outbound rates out of Shanghai gained 8.3% week on week with higher rates to Europe as well as to the US putting it now ahead year on year by 9.7%.

While e-commerce demand may be surging and rates on the up, overall cargo volumes remain weak. 

The latest figures for October from Xeneta show that demand was up just 2% compared with September, far behind the usual increase of around 6% between the two months.

WorldACD agrees that demand is subdued and reckons the improving year-on-year volume comparisons are as much to do with last year’s weakness as they are to do with improvements this year.

“More than halfway through the market’s traditionally buoyant final quarter, there are few signs of a strong peak season, with demand patterns so far broadly mirroring last year’s disappointing fourth quarter and only moderately ahead in overall tonnage terms,” WorldACD said.

The analyst said that rate rises from Asia to the US may also be caused by bellyhold capacity constraints.

“That Asia Pacific to North America rates are up significantly despite a fall in tonnages, may reflect several factors, including operational disruptions caused by severe snow at Alaska’s Anchorage Airport and continuing limits on passenger bellyhold capacity between China and the US.