Rates from Hong Kong and Shanghai to Europe and North America all dropped in June compared to May
Rates from Hong Kong and Shanghai to North America were both up in June from a year ago, while those to Europe were up ex-Hong Kong and down ex-Shanghai compared to June 2020
Hong Kong and Shanghai rates to North America are now up 117% and 110% against the 2018 and 2019 blended average
Global rates are expected to remain high until next year in view of the protracted return of long-haul belly capacity as business travel remains slow
Intercontinental air freight rates cooled in June compared to the preceding month, but they remain higher than pre-pandemic levels and are likely to stay elevated through to next year, according to a new The Baltic Exchange report.
The Baltic Air Freight Index (BAI), which reflects weekly transactional rates for general cargo as provided by freight forwarders, showed that rates from Hong Kong and Shanghai to Europe declined 8.3% and 9.3%, respectively, in June compared to May. And Hong Kong and Shanghai to North America rates both dropped 9.4% and 16.6% in June month-on-month.
On a year-over-year basis and against the Covid backdrop, there has been a general increase on North American-bound lanes and a decrease on Europe-bound lanes last month. The discrepancy is likely a result of sharper demand recovery and more significant/earlier supply chain bottlenecks in North America. The BAI shows that Hong Kong to North America and Shanghai to North America both went up—40% and 34%, respectively, in June 2021 compared to June last year. Meanwhile, Europe-bound lanes were up only 4.5% year-on-year ex-Hong Kong and down 13% ex-Shanghai.
And finally, global rates are now significantly higher this year compared to pre-pandemic levels. Hong Kong and Shanghai rates to Europe are up 62% and 64% versus the same period, respectively. And Hong Kong and Shanghai rates to North America are up 117% and 110% against the 2018 and 2019 blended average.
“Suffice to say, things remain universally expensive relative to a normal operating environment—neither brain science nor rocket surgery, but also a situation that we do not expect to correct until global supply normalizes,” said Bruce Chan, report author and vice president of global logistics at Stifel.
Looking ahead, Chan said rates are expected to remain high until next year amid the protracted return of long-haul belly capacity as the appetite for business travel remains muted, especially with the resurgent Covid Delta variant.
He added that “there are structural factors that may keep rates higher than before, including the global rise of e-commerce and the fractalization of supply chains in search of labour, capacity, and production diversification.”
Several large freight forwarders have also now declared air charter to be a permanent part of their service offering—not just peak capacity infill.
In addition, retailer inventories remain near historic lows, ocean capacity remains under pressure, and port terminal bottlenecks and trucking shortages are increasing hinterland lead times.
“These factors will be slow to unwind, in our view, and leave precious few alternatives to airfreight for shippers in need, especially if we see a Q4 peak. So, as little relief as the current lull offers to purchasers of airfreight capacity, we do expect things to get worse before they get better,” he said.