The air cargo market has become “turbulent” once again, as freight rates ‘skyrocket’ after the grounding of many passenger flights in Asia that has left shippers scrambling to book limited spots on cargo planes as China’s industrial production restarts, according to industry insights. Deep flight cuts in response to the corona virus outbreak have made the market more dependent on freight haulers.
Reduced passenger demand in Asia has led to capacity cuts of between 50% and 70%, according to reports. Due to reduced capacity, Italy has already been cut off, with both Qatar and Turkish said to be grounding flights, while more belly capacity cuts are expected.
Forwarders are anticipating ad hoc air freight rates of $10 per kg, as shippers become desperate to release goods from China with little or no belly capacity. However, they were at pains to note that they themselves were not taking additional margins from the high prices.
Forwarders noted the extraordinary prices for charters, citing $600,000 per freighter to Europe – or $6 per kg.
Rates started to rise about two weeks ago, with China-Europe gaining 3% and mainland China-US up between 12% and 19% to some $3 per kg, according to Freight Investor Services and the TAC Index. Hong Kong-US rose more than 5% to $3.20.
In mainland China, the number of freighter arrivals has increased in recent weeks as factories resumed production. China’s aviation regulator said the number of freighter flights was expected to reach 870 this week, up from 788 in the week starting February 17.
According to news reports, while Chinese factories are still only about 60% operational, one of the biggest issues is lack of raw materials for factories in South-east Asia.
Intra-Asia rates have hit an “abnormal” high – with rates ranging between $4.50 and $5 per kg from Shanghai to destinations such as Singapore, Bangkok and Yangon, higher than what is being currently charged on European routes, according to forwarders.
Meanwhile, intra-Asia sea freight continues, with no issues on capacity or departures. The current demand for intra-Asian lanes is for manufacturing parts going to South-east Asia, but that is expected to remain balanced through the month.