Supply Chain News / Air Cargo / Economic Development

Report: Airfreight Rates Retreat Over Chinese New Year

Higher pricing is anticipated in the spring.

April 1, 2014
Trans

Airfreight rates fell in February 2014 as factory closures over the Chinese New Year holiday period reduced cargo demand. So where might airfreight pricing head next given the uncertain outlook?

Drewry’s East-West Air Freight Price Index, a weighted average of airfreight rates across 21 East-West trades, slipped 2.7 points in February to 96.2 points. This represented the third consecutive month of falling rates, and followed a particularly sharp decline in January. The index is published in Drewry’s Sea & Air Shipper Insight.

Weaker pricing was anticipated for February, given an early Lunar New Year which closed much of China’s production capacity in the first half of the month. However, the failure of rates to respond to the volume boost witnessed in January underscores the weakness of a market hampered by oversupply and lackluster demand. The price index was held back by falling rates on trades from Asia to North America, while elsewhere pricing was largely stable.

The fall in both airfreight pricing and container shipping rates caused Drewry’s East-West Airfreight Price Multiplier to rise by a modest 0.7 points to 11.5 points. This represents a return to seasonal norms for the differential between air and ocean pricing.

Recent cargo demand development has been mixed. While the International Air Transport Association (IATA) reported encouraging cargo traffic growth in January, more recent anecdotal evidence suggests that the recovery did not continue into February.

According to IATA, global international cargo demand grew at its fastest rate since 2010 in January, leaping 5.2 percent year-onyear. But much of this growth was down to the timing of Chinese New Year which provided a volume surge prior to factory shutdowns over the two-week holiday period in early February. Little wonder that traffic receded in February.

Looking ahead, Drewry expects air cargo demand to recover slowly through 2014.

Air freight pricing is expected to recover through March and April when an uptick in seasonal demand is anticipated to buoy rates. The Northern Hemisphere’s spring season normally heralds an uptick in demand as high-end summer fashion apparel and more high tech consumer goods launches boost Asia-origin traffic. The prospect of further freighter capacity rationalizations are also expected to support stronger pricing.

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