Airfreight rates are expected to remain elevated and volatile for some time as the outlook for demand remains uncertain and capacity remains constrained.
Writing in a Baltic Exchange market update, Bruce Chan, vice president – global logistics at investment bank Stifel, said several issues are contributing to "persistent, elevated levels."
"On the demand front, restocking activity has been a major driver of global freight recovery across all modes, including air. Inventory to sales metrics remains near record lows in international consumer markets, particularly in the retail economy."
He added that the capacity situation in ocean freight "has not been helping" too as carrier capacity consolidation, a lack of available containers, and hinterland bottlenecks have produced higher prices and significant delays, "driving more incremental demand" into the air and placing further pressure on capacity instead.
Chan said that the lack of bellyhold capacity would drive the high rates as passenger airlines will only slowly re-introduce international widebody services.
“By the second half of 2021, we do anticipate passenger flights to resume, especially as vaccinations pick up,” he said. “But we caution against over-exuberance, as the first flights to come back are likely to be short-haul,
domestic, and leisure, which align less favorably with cargo.
“Core long-haul international travel and the belly capacity that comes along with it will be slower to return, in our view, so capacity relief for cargo should lag the recovery in airline passenger activity.”
08 Jan 2021
As the New Year dawns, air freight volatility remains rife
It’s a new year and a fresh start, but there are few signs of abating pressure on global air freight rates. The overall BAI index rose to 3,155 this week—an increase of over 100% year-over-year. The last few weeks recorded the highest absolute readings since the air freight capacity trough in Q2 of 2020, even as the traditional peak season subsides.
The overall BAI index rose to 3,155 this week—an increase of over 100% year-over-year.
Several issues are contributing to persistent, elevated levels. On the demand front, restocking activity has been a major driver of global freight recovery across all modes, including air. Inventory to sales metrics remain near record lows in international consumer markets, particularly in the retail economy. And the capacity situation in ocean freight has not been helping, in our view. On the water, carrier capacity consolidation, a lack of available containers, and hinterland bottlenecks have produced higher prices and significant delays, driving more incremental demand into the air and placing further pressure on capacity.
