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Air freight rates continue slide, especially ex-PVG

Shanghai to Europe prices fell last week by more than 30%, as the scramble for PPE continues to fade, with average China to Europe prices dropping by almost 19% as a whole.

Average air freight rates on the main east-west intercontinental trades continued to drop last week, especially from Shanghai to Europe, as the scramble for personal protective equipment (PPE) continues to fade.

Figures from the latest weekly market update yesterday from Freight Investor Services (FIS) indicate that overall China to Europe prices dropped by almost 19% ($0.90) in the previous seven days to US$3.85 per kilo, while China to US average prices fell by almost 4% ($0.20) to $4.98.

Like the previous week, the China-Europe price drop was exacerbated by further large corrections from Shanghai (PVG), with Shanghai to Europe prices down last week by more than 30% ($1.65) to $3.70. That followed a fall the previous week of Shanghai to Europe prices of almost 24% that contributed to a decline of almost 20% on China-Europe prices as a whole.

Elsewhere, air freight prices from China and Hong Kong were more stable last week, with average HKG-EUR rates falling by just over 4% to US$3.99 per kilo. And although PVG-USA prices fell by around 7% last week, a little more than China-US rates as a whole, to $4.66 per kilo, their decline was far from the 30% drop on PVG-EUR lanes. HKG-USA remained relatively unchanged at an average of US$5.29 per kilo, down just 4 cents.

According to Peter Stallion, aviation and freight derivatives specialist at FIS, customers are still holding back from long-term contract renewals and block-space agreements (BSAs) “as the market continues its sharp slide into normal pricing levels”. This follows a rapid increase in air freight prices ex-China in April and May, to levels often exceeding US$10 per kilo, amid a frenzied search for uplift.

He highlighted that “a number of airlines, including Cathay Pacific, have gone public about pulling the plug on passenger-freighters, as achievable prices converge on operating costs. This isn’t surprising considering the inefficiency of these aircraft in moving cargoes, and the time it takes to load thousands of boxes through cabin doors and onto seats.”

That is consistent with observations from various other cargo sources, including charter brokers and freight forwarders. For example, DSV told Lloyd’s Loading List last week that “the pax freighters have dropped off to a great extent”, with fewer ‘passenger freighters’ operating as demand and pricing for charter freighters had dropped in recent weeks. It said the passenger freighters “came in handy when the charter prices were high and have added much-needed capacity as well as direct routes to destinations otherwise not currently serviced by freighters”.

DHL Global Forwarding told Lloyd's Loading List last week: “As the COVID-19 crisis in some parts of the world is calming down – especially in Asia and Europe – demand for dedicated charter flights to transport PPE and other medical supplies on some trade lanes is decreasing.” And Kuehne + Nagel said: “We can confirm the decreased demand (for COVID-19 related charter flights) reflecting the slowing down in global demand for PPE and reduced passenger freighters operations.”

Source: Lloyds Loading List

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