PPE ‘mayhem’ continues to push China air cargo rates

By Damian Brett

Air cargo rates out of China increased again last week as demand for the transport of personal protective equipment (PPE) continued to surge.

The latest figures from TAC Index show that average air cargo rates from Shanghai to North America last week increased by 9.7% on a week earlier to reach $7.59 per kg — the highest level recorded since the index started in March 2016.

The index also reached record levels from Shanghai to Europe last week where there was a 1.6% increase on the previous week to $8.79 per kg. However, the rate of increase has slowed.

Derivatives broker Freight Investor Services (FIS) said that “on-the-street” spot market rates were as high $14-$16 per kg from China.

Prices from Hong Kong remained high, but not at the level reported out of China. Rates from Hong Kong to Europe were flat week on week at $4.66 per kg, which is near record levels.

From Hong Kong to North America there was a 5.1% drop in prices to $5.16 per kg.

FIS said that the prices out of Shanghai are driven by demand to transport medical equipment.

“The continued mayhem surrounding PPE ex.China drives the price,” the derivatives broker said. “The airfreight market sits atop ballooning demand for medical equipment at eye-watering mark-ups, being absorbed by end-users (governments).”

It added that the outlook beyond coronavirus outbreak was uncertain.

“The post-Covid environment is, as a result of the PPE ‘bubble’ and projections for recession and a two-year airline recovery cycle, impossible to forecast.

“Price and volume ‘bull-whipping’ are common go-to to try to explain forward volatility. However, any analysis will rely on the unforeseen; will there be a Covid-19 resurgence? How long will the ‘Big Lockdown’ actually last? What will consumer demand be like on the other side? How will airline capacity react, and how confident will passengers be to fly?”

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