Chinese New Year boosts volume, but rates stay low

The airfreight frenzy that usually precedes the Chinese New Year provided a jolt to January volumes in the Asia Pacific market this year, partly because of the later-than-usual start of the festivities (February 19) and partly due to the West Coast port crisis in the United States. However, activity on this major trade route failed to change the direction in east-west cargo rates for the month, which continued falling through the month.

According the January report from Drewry’s East-West Air Freight Price Index, the price fell from US$3.50 per kilogram in December 2014 to US$3.23 in January, resulting in an index value of 99.6 points, the lowest level since May 2014. The Drewry index represents an average of airfreight rates, including surcharges, paid by forwarders to ship cargo heavier than 1,000 kilograms than on 21 major east-west routes.

“Air freight rates fell further in January following December’s retreat as pricing was hit by the post-peak season lull in trade,” the report found. “The index has slumped over 21 points since November’s all-time high of 120.8 points, but stands just above the reading for January 2014.”

While steep, the decline in prices, the report said, was still expected at this point in the season. “Drewry expects air freight pricing to have recovered temporarily through February, supported by tighter capacity conditions in the run up to Chinese New Year. However, thereafter we anticipate some softening in rates before capacity tightens with the onset of the Northern Hemisphere spring season in April. “

Meanwhile, the Association of Asia Pacific Airlines (AAPA) said that import-export activity among its member carriers rose by 7 percent in January, compared to the same month last year, in preparation for the annual two- to three-week factory shutdowns in China following the Lunar New Year.

The AAPA also reported that average international freight load factor continued to strengthen last month, recording a 1.3 percentage-point increase to 61.8 percent, with a 4.8 percent increase in capacity.

“Air freight markets continued to see good growth, reflecting sustained consumer demand from North America and Europe for Asia-manufactured goods,” said Andrew Herdman, AAPA’s director general.

China’s official New Year holiday finished on Tuesday, but many factories are not expected to return to full production until the first week of March.

Herdman said that the demand outlook for freight was generally positive, based on assumptions of continued growth in the global economy and low oil prices. “Nevertheless,” he added, “Asian carriers continue to face challenges marked by a competitive operating environment and the need to carefully monitor capacity in line with evolving market conditions.”