Ex-China air freight rates rise further

5/4/2020

Air freight rates from Hong Kong to key markets in Europe and North America have risen strongly in the past week after slipping back in comparison with the booming rates out of Shanghai and other mainland airports, as shippers seek out less expensive ways to source capacity from China.
But despite average rises of 14% (US$0.65 per kilo) on Hong Kong to Europe routes to $5.31/kg and of 26% (US$1.37 per kilo) to $6.71 on Hong Kong to USA routes, prices ex-Hong Kong remain well below those out of Shanghai, according to the latest trading update from Freight Investor Services (FIS).

The price rises ex-Hong Kong come alongside almost equally significant rate growth from Shanghai to the USA, “with individual origin-destination airport pairs climbing towards the $12/kg mark”, FIS noted. As it stands, the full market price has risen to $9.10/kg, up almost 20% or $1.51 this week.

“Additional growth into the US has lifted China to USA up $1.44, up 22.29% from the previous week,” FIS noted. “China to Europe still climbs, however, a few price drops into Europe have helped to flatten continued rate growth ex-Shanghai.” 

According to Peter Stallion, aviation and freight derivatives specialist at FIS, “the relatively ‘cheaper’ rates out of Hong Kong have appeared to attract transhipment volume”. He said much of his organisation’s explanation for the “rate bump” this week would be anecdotal, but noted: “It wouldn't be too much of a stretch to suggest shippers moving non-medical goods might be using the spread between Hong Kong and Shanghai as a geographic arbitrage opportunity.”

he continued: “Shanghai’s price rises remain meteoric; however it remains quite clear that most of this is still atop the PPE price balloon. North America now sits relatively apart from the rest of the world in terms of virus cases, deaths and subsequently its relief effort.”

In other supply chain news, he highlighted that Volkswagen’s plant in Wolfsburg just reopened on the back of Germany’s new quarantine-easing measures, noting: “Whilst workers battle with the new normal of face-masks, anti-septic and work-place distancing, automotive logistics procurement teams might have to battle with new normal of very high airfreight pricing.”

Meanwhile, underlying all of this, he noted that “after the capitulation of US oil prices last week, WTI crude prices continue to bump around in the $10-20 range whilst demand is incredibly low”.