Vienna Airport has been recording air cargo volume increases of 30 percent in the last few months, especially in imports. Photo credit: Vienna Airport.
Freight rates out of China have plunged to levels not seen in months on the trans-Pacific and Europe trade lanes amid the seasonal slowdown in demand after Chinese New Year.
This week’s rate of $4.79 per kilogram from Shanghai to North America was down 62 percent from last week, while Shanghai–North Europe rates at $4.12/kg were 32 percent lower, according to the TAC Index.
However, data from air cargo analysts CLIVE Data Services show the drop in volume on China-Europe was roughly half of the decline that was recorded in previous years, which the analyst said could be attributed to China factories remaining open through the holidays, or factory staff receiving incentives to remain at work and clear order backlogs.
The chargeable weight from China to Europe during the week of Chinese New Year ending Feb. 19 compared to the preceding week declined by 30 percent, while in 2020 that drop was 61 percent, and in 2019 57 percent, CLIVE data show.
Another indication of just how elevated air freight rates are is that even with the significant decline over the past week, the rates remain far higher compared with last year — still up 90 percent on the trans-Pacific and 85 percent on China–Europe. Considering that available capacity will remain limited through 2021 and beyond, rates are unlikely to fall to pre-pandemic levels this year.
However, moving into March, it will become increasingly difficult to draw conclusions from the year-over-year comparisons. In late January 2020, airlines began to cancel flights to and from China in a bid to stop the spread of the coronavirus disease 2019 (COVID-19), while governments warned against all non-essential travel.
Half the available global air cargo capacity is provided by the below deck space on widebody passenger aircraft flying long-haul routes, but the majority of those aircraft were grounded from February as the pandemic spread. Air freight rates began to take off from mid-March, with the peak reached May 18 when trans-Pacific rates jumped to $12.27/kg and China-North Europe prices hit $11.18/kg.
Travel restrictions and quarantine measures have been extended into 2021, with Cathay Pacific, for instance, carrying 99 percent fewer passengers in January compared with the same month last year.
High rates to stay
Airlines will struggle to match capacity with highly uncertain passenger demand, and that will keep rates elevated.
“The prices will be high for at least the next nine months,” was the stark assessment of Manel Galindo, CEO of rate management solutions provider WebCargo in a TPM21 on-demand session. “We have seen many countries being locked down again, and that means less flights and a much more complicated 2021.”
This was a view shared by Glyn Hughes, director general of The International Air Cargo Association (TIACA), although he warned shippers during another TPM21 on-demand session to expect higher rates for up to three more years as airlines manage their capacity.
“The airlines have to resize their fleets based on expected passenger numbers, and you can’t operate the 2020 fleet at 2015 passenger volumes,” Hughes told JOC.com. “They have to keep their optimal level of load factor to make the operations economically viable.”
Also on the rates remaining high page was Edoardo Podestà, chief operations officer for air and sea logistics at Dachser. “We expect rates to remain strong until at least May, however below the level we saw during the couple of weeks before CNY,” he said.
Jan Kleine-Lasthues, chief operating officer for air freight at Hellmann Worldwide Logistics, said there were two reasons for the decline in air cargo rates – less demand after Chinese New Year, and less cargo shifting from space-constrained ocean to air. But he warned that this situation was unlikely to last. “Our expectation is that the rates and demand will increase again in March,” he said.
Europe hubs under pressure
While rates remain volatile, Europe’s airports are struggling to cope with months of high cargo volume combined with staffing disruption from COVID-19 mitigation measures.
Timo Stroh, head of global air freight at Dachser, described the current air freight situation as “tense,” with delays being seen at some of the major hubs as well as at secondary airports.
“All cargo aircraft are heavily utilized, and the number of passenger freighters, which require more time and manpower to unload compared to freighters with only aircraft pallets, is increasing,” he told JOC.com.
“Although the general global air cargo volume has not changed significantly, air cargo activity is concentrated in major airports such as Paris, Amsterdam, Brussels, and Frankfurt, as these are the gateways and consol hubs for freight forwarders,” Stroh added. “Airports such as Luettich, Maastricht, Leipzig, or Hahn, where the airlines have landing or take-off rights, are also the focus of cargo activities.”
Thomas Mack, global head of air freight at DHL Global Forwarding, said delays were being seen at some hubs because of rising volume as well as staffing issues among ground handlers.
“We are observing delays at Frankfurt and Amsterdam, among others, due to increased traffic and staff shortages on the side of ground handlers, mainly caused by COVID-19 and staff layoffs last year,” he said.
While Vienna Airport in Austria is not reporting any delays, Michael Zach, vice president of sales and finance, ground handling and cargo operations, said its air freight facilities were seeing a significant rise in demand.
“Although there is a decline in belly cargo due to the lack of passenger aircraft, we have been recording increases of up to 30 percent for months, especially in import cargo,” Zach said.
Contact Greg Knowler at [email protected] and follow him on Twitter: @greg_knowler.
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