[160420.EN.AIR] Forwarders Find Air Freight Rates Soar 20 Times Normal Levels

AIR cargo capacity and space has been contracting, triggering massive increases in freight rates from five to 20 times the normal with booked flights being cancelled at the last moment, according to chief executive of mid-sized Canadian forwarder.

"We've been through four major space contractions, the last one when Japan announced a 14-day quarantine and the Japanese and Hawaiian carriers contracted their schedules heavily," said subsidiary of Kuehne + Nagel subsidiary Commodity Forwarders' vice-president Chris Connell.

"You book, plan, cancel, book another flight; sometimes three times in an hour," he said, but so far, using freighter lift has been more straightforward, as all-cargo schedules have been reliable, he added, reported London's Loadstar.

Large forwarders have been able to charter freighters to secure necessary lift, but for those that don't have the volumes say finding capacity has been a challenge.

"Capacity is probably the biggest problem today, primarily for air cargo but also for ocean freight," said Team Worldwide executive vice-president Bob Imbriani.

Capacity shortages is worst on China routes, he said. After belly capacity plummeted freighter charters were filling some of the gaps, but some of this capacity was subsequently turned to the north Atlantic when passenger traffic collapsed in that arena.

In response to surging rates, shippers have resorted to asking multiple forwarders, as well as charter brokers and airlines, for quotes, which has increased uncertainty about capacity and the amount of freight in need of lift, said Mr Imbriani.

Forwarders reported that lift was still available, but at massively higher prices, as contract rates had virtually disappeared.

"There is space out there. We're able to get it, but at a much higher price point," Mr Connell said.

In its market update of April 1, Freightos noted rate hikes of up to 30 per cent out of China over the previous two weeks, while some express rates between the US and Europe had surged 100 per cent.

In some cases it is useful to have dense cargo on routes out of China, which helps airlines optimise payload, given that much of their traffic at the moment consists of face masks and other medical cargo, which tends to be volumetric, Mr Imbriani said.

And airlines give space to customers that have supported them before, forwarders reported.

"Having a relationship with the airline, the ability to pay up front and the ability to deliver the freight are important," Mr Imbriani said.

However, the rates charged these days have priced some commodities out of the market - several types of perishables cannot absorb the elevated cost.

Many consumer goods are not flying any more either.

"The retail sector has been decimated globally, so there is not much moving in the retail space. Most of the goods still moving have shifted from air to LCL ocean as timing is no longer an issue," Mr Connell said.

Demand has collapsed across a number of sectors.

"Dropped e-bookings last week indicate that non-essential items are either being priced out of the mode or scaling back in response to falling consumer demand," Freightos wrote in its April update.

According to Clive Data Services, air freight volumes dropped 48 per cent in the week of March 23-27.

With manufacturing activities and retail largely in limbo in North America and Europe, the outlook for demand is bleak, which should ease the pressure for forwarders to scramble for lift. In any case, they do not have to worry about another schedule collapse, which augurs more stable times ahead in terms of capacity fluctuations.

Mr Connell expects April to be a slow month, but at least his company should be able to operate in a more efficient manner in a smaller market, instead of being inefficient in a frantic market, he said.

Source : HKSG / Photo : Research Gate.