Latest BAI figures inspire mixed feelings

The latest Baltic Exchange Airfreight Index (BAI) just released (in early November) suggests that rates outbound from Asia accelerated in October, but not by enough to change expectations for a muted peak season – so writes Bruce Chan, director and senior research analyst covering global logistics and future mobility at investment bank Stifel.

Global uncertainty, not least in the airfreight industry, are seeing management teams continue to temper expectations for the upcoming peak season, Chan considers, these same executives pushing out their forecast timeline for freight recovery.

Over recent weeks equities markets have also largely reflected that sentiment, he suggests.

There is more positivity from some large freight forwarders, including Kuehne + Nagel, which recently pointed to a pick-up in airfreight rates out of China (specifically Hong Kong and Shanghai) and which might be attributable to ramped-up activity on the part of Chinese e-commerce providers.

But, conversely, on a recent earnings call C.H. Robinson suggested that, while it was hopeful for improved market conditions, it saw no evidence of green shoots in global forwarding demand.

In fact, said Chan, “The limited corroboration of fundamental demand inflection and commentary from domestic transportation and logistics companies suggests that the increase in activity could be specific to a few shippers or product categories.”

The BAI air cargo data offers evidence that sequential air freight rates rose healthily from August to September on major Asia-outbound lanes and that that trend continued in October, but not to a level that suggests a fundamental shift in the market, Chan opined.

“Therefore, based on what we’re seeing today, we continue to believe that demand will remain muted, capacity broadly abundant, and, while we may see some signs of episodic tightening from week-to-week or from lane-to-lane, the overall peak won’t offer much to write home about,” he advised.

Chan concluded: “Our conclusion is that there is a discernable late-season uptick in rates and, while it is more pronounced than normal, it hasn’t yet risen to a level that suggests a major shift in the market or in sentiment.”

The view from TAC Index

Neil Wilson, editor of TAC Index, which acts as a source of independent global airfreight data, also offers an interpretation of BAI data amid other economic and industry indicators.

He sees that global airfreight rates maintained a firm tone during the month, while the overall Baltic Air Freight Index (BAI00) was up another 2.9% over the four weeks to 30 October.

Market activity continued to be led by e-commerce, with some forwarders said to be scrambling for capacity at rising spot prices, having failed to secure it previously through forward contracts and block space agreements (BSAs).

Despite global stresses and oil price fluctuations causing uncertainties, Wilson is of the opinion that, “Overall, the outlook for air cargo demand looks positive and the outlook for capacity and jet fuel prices doesn’t too scary either, which could make for a good peak season spell, albeit absent any further big geopolitical events.”