Forwarders: Airfreight rates to normalize unevenly

Despite a significant decline since their peak in March and April 2020, airfreight rates in many regions remain high, and are stabilizing unevenly across lanes. “You have already seen some rates which are nearly back to pre-pandemic levels,” said Stanislas Brun, senior vice president of global air freight at GEODIS. “If you look at North America to Europe, we are not so far anymore.” [caption id="attachment_93797" align="alignright" width="450"] Cargo loading of a British Airways aircraft. Photo Credit: Stuart Bailey / British Airways[/caption] However, rates for cargo headed in the opposite direction — from Europe to North America — remain quite high due to a lack of bellyhold capacity. According to data from the TAC Index, rates from Frankfurt (FRA) to North America were at $3.83 per kg in mid-June 2021, down from their peak of more than $4 in March 2020. Before April 2020, ex-FRA routes headed for North America tended to hover between $1.50 and $2.50 per kg. Cargo bound for South America from Europe is also contending with elevated rates, according to Brun. Data from aggregator WorldACD confirmed rates for cargo on the Europe-South America route spiked between March and April of 2020, from just over $2.50 to nearly $7 per kg. Rates appeared to begin to decline in September 2020, but had risen back to $6.72 per kg as of May 2021. Other trade lanes have experienced these same dramatic increases and leveling at elevated numbers. Cargo moving from Hong Kong (HKG) to North America rarely left the range of $3 to $4 per kg pre-pandemic, but jumped to $8.47 per kg in May 2020. In March 2021, rates approached pre-pandemic levels, falling to just under $5 per kg. They have since lept back to $7.98 per kg. Lanes from the U.S. bound for India are also highly constrained, and thus expensive, according to Stephane Soulagnat, airfreight procurement manager at Bollore Logistics. “If you want to go from the U.S. to India, right now, you're still going to have to fly either through Paris, Frankfurt or Amsterdam,” he said. “And that's even if there's a little bit more capacity, the demand for the last leg to or to India, will still be constrained.” Data from WorldACD showed rates from the U.S. to India at $3.26 per kg in May of 2021, a 19% increase from the previous month. Summer may also temporarily impact rates. “We foresee [very] heavy demand,” Brun said, adding that the second wave of COVID vaccine shipments and large swaths of Europe reopening for shopping will create spikes in demand that will affect rates. “We believe consumption will restart heavily, which will also increase demand, and capacity remaining tight will increase rates,” he said. Rates could stay high through at least 2022, according to Brun, though it depends on the route. “I believe [rates will stay high] longer than 2022,” because of factors like the difficulties of distributing vaccines, pandemic regulations and countries remaining closed, he said. “The rate will remain quite high until 2023 at least.” The hub system used by most of the world’s major carriers will also cause bottlenecks as capacity does return, according to Soulagnat. “Today, if you look at the way the airlines do work, they use a hub system where they bring cargo to their main hub and then disseminate to other places. You're going to create a bottleneck to those places.”

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