February airfreight rate volatility creates risky environment for forwarders

A recovery in airfreight volumes to pre-pandemic levels in February, combined with continued year-over-year capacity shortages, stand to negatively impact gross margins for freight forwarders by 8% to 10% on some trade lanes. The volume recovery alongside capacity shortages caused pricing instability in February, according to Robert Frei, business development director at TAC Index. He said in a joint statement with CLIVE Data Services that volatility, “given the much higher pricing levels than a year ago, is having a major impact” on yields. The large deviations in rates across various trade lanes present risks for freight forwarders, Frei noted, because adding required capacity on the Shanghai-to-Europe trade lane — which was up by 7% from 2020 levels — could cause an “immediate loss” of gross margins. “This presents a very risky environment for freight forwarders,” Frei said. January and February usually make for difficult comparison months due to the impact of the Chinese Lunar New Year holiday, and the 2020 comparison is made even more difficult due to the leap year and Chinese factory closings early in the COVID outbreak, according to CLIVE Data Services managing director Niall van de Wouw. Even so, in terms of chargeable weight, air cargo was only 1% lower in February 2021 compared with the same month in 2019, and was up by 2% from February 2020, CLIVE reported for the month — marking a “virtually completed” recovery to pre-COVID volumes. Capacity was still lower compared with both 2019 and 2020 levels, however, with CLIVE reporting that airline initiatives to get the most use possible from available capacity contributed to increases in the dynamic load factor to 69%, up 5% compared with February 2019 and 9% with the same month in 2020. Even despite February’s CNY holidays and the month being three days shorter than January, volumes increased 7% and capacity rose 5% from January 2021. Freight forwarders have worked to mitigate the pricing volatility where possible through carrier partnerships and charter arrangements. Ahead of the Lunar New Year holiday this year , Flexport Executive Vice President Neel Jones Shah told Air Cargo World that capacity from North Asia to the U.S. was virtually nonexistent, but that Flexport has made arrangements to secure capacity on trans-Pacific routes through its partnership with Atlas . “We fly Shanghai (PVG) to LAX several times a week, and we also fly Hong Kong (HKG)-LAX, and starting from March 1, HKG-Taipei (TPE)-LAX several times a week,” Shah said.

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