The baseline price of airfreight ACMI and block-space agreements are expected to be negotiated at their lowest level in four years despite expectations of a pick up in 2020.
Speaking to Air Cargo News, Peter Stallion of airfreight derivatives broker Freight Investor Services (FIS) said that contracts tended to be negotiated based on current market prices, rather than future expectations.
“In our opinion they will likely be at their lowest for four years based on what we see in terms of current figures,” said Stallion. “[Forwarders] will have a general analysis but it is not really actionable. If everyone is saying there might be a market recovery in the fourth quarter, how do you guess what that rate is going to be? You just don’t know.”
Stallion said that BSA rates began shrinking as far back as the third quarter of last year as airlines looked to secure volumes for the peak.
“It is likely that over the past four years we are not going to see a lower rate because we are at a bottom of a market, but we don’t really know what is going to happen even in next few months.”
Figures from TAC Index show that current spot market rates on China/Hong Kong to Europe and China/Hong Kong to the US are down on both 2019 and 2018 levels, but are up on 2017.
Prices, however, did pick up rapidly later in 2017 as the market went through a period of rapid growth.
In its latest weekly market warp up, FIS said: “Volumes remain highly uncertain, e-commerce was strong in 2019 however this could not successfully drive up airfreight prices until well into the end of the year.
“The baseline price for ACMIs, BSAs and other long term contracts will be the lowest it has been for 4 years, encouraging volatility and increasing the risk-factor for the market as we move through 2020.”
However, there are also several positives – trade tensions between China and the US beginning to cool and an easing of protests in Hong Kong – and IATA has said it expects air cargo demand will increase by 2.2% this year.
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