Air freight rates continue to rise

There are patterns underlying the trends in air freight demand and rates. Even within an overall trend of rising demand, for example, we still expect to see traffic peak during “peak season,” then subside through December, January, and February, rise to a brief mini-peak in the spring, then subside again slightly in the summer until the cycle begins all over again.

Rates, while obviously affected by capacity as well as demand, generally follow a similar pattern. But this year, according to UK-based freight consultancy Drewry, something unusual has happened.

Drewry said average rates were up 14.2% year-over-year in February, to US$2.84 per kilogram. No real surprise there, as it has been well documented that demand for air freight has been increasing strongly for the last eighteen months, while capacity has been increasing at a much slower rate. However, the usual fall-off in rates from January to February didn’t happen this year. Instead, rates were up 2.9% month-over-month. According to Drewry, “This was only the second time in six years the index has increased month-on-month in February, indicative of the underlying strength of the market.”

While it is possible that the timing of the Chinese New Year had some impact, the month-over-month increase is nonetheless indicative of both continuing strong demand and of capacity discipline by carriers. Regarding the latter, Cargo Facts is not sure whether carriers are disciplining themselves – attempting to retain pricing power by resisting the temptation to bring on more capacity – or whether that “discipline” is more the result of there simply being no more capacity available to be added.

Looking ahead, Drewry said it “expects the index to soften in March, although it should remain above the comparable 2017 level as a result of strong demand.”

Whether the trend of rising demand will continue, and for how long, and whether additional capacity will become increasingly hard to find, will be subjects of considerable discussion at Cargo Facts Asia 2018. Join us in Shanghai, 23 – 25 April to hear top executives from all branches of the air freight industry address these and other questions. For more information, or to register,  visit www.cargofactsasia.com.