Executive Briefings

Air Cargo Rates Expected to Start Rising on Runs to North America, Europe

Airfreight rates from Asia to North America and Europe are expected to rise through to the end of the year following four months of stable pricing, according to the recently expanded Sea & Air Shipper Insight report published by shipping consultancy Drewry.

Drewry’s East-West Air Freight Price Index, a weighted average of airfreight rates across 21 East-West trades, rose 0.7 points in September to 103.7 points. The increase in pricing brought the index up to within just 0.1 points of April’s high and 3.8 points above last year’s level, indicative of the recovery in airfreight over the past 12 months.

Drewry is expanding its airfreight market coverage by more than doubling the number of airport-to-airport rate benchmarks that it publishes every month. Drewry introduced the first independent multi-trade air cargo freight rate benchmarks into the market in December 2012 with rates on 21 trades. From the October 2014 issue of Sea & Air Shipper Insight the number of airfreight price benchmarks has been increased to 48.

The expanded coverage of airfreight price benchmarking reveals that rates did not rise as much as expected, given the anticipated boost of new consumer electronics products coming onto the market.

“Given the anticipated tailwinds from new product launches through September, the sluggish expansion in the index suggests some softening in underlying demand relative to capacity,” said Simon Heaney, senior manager of supply chain research at Drewry. “However, we expect pricing to rise on key origin Asian routes into North America and Europe as the trade ramps up for end-of-year peak season.”

The rise in airfreight pricing relative to much weaker container shipping rates served to increase the differential in pricing between the two modes. Hence, Drewry’s East-West Air Freight Price Multiplier, which measures the relationship between the cost of shipping by air relative to sea on East-West trades, gained 0.5 points in September to x13. This still left the multiplier index well above the seasonal norm of x11.

“In the short term, Drewry expects capacity availability to tighten through peak season by comparison with recent years,” added Heaney. “However, as the trade moves into next year the outlook appears more uncertain with overall trade growth expected to slow.”

Sea & Air Shipper Insight combines data gleamed from Drewry’s proprietary research and extensive databases with other third-party data to give shippers a comprehensive overview on the important market changes, ranging from macro-economic trade indicators, freight transport supply and demand, and freight rates.

Source: Drewry

Drewry’s East-West Air Freight Price Index, a weighted average of airfreight rates across 21 East-West trades, rose 0.7 points in September to 103.7 points. The increase in pricing brought the index up to within just 0.1 points of April’s high and 3.8 points above last year’s level, indicative of the recovery in airfreight over the past 12 months.

Drewry is expanding its airfreight market coverage by more than doubling the number of airport-to-airport rate benchmarks that it publishes every month. Drewry introduced the first independent multi-trade air cargo freight rate benchmarks into the market in December 2012 with rates on 21 trades. From the October 2014 issue of Sea & Air Shipper Insight the number of airfreight price benchmarks has been increased to 48.

The expanded coverage of airfreight price benchmarking reveals that rates did not rise as much as expected, given the anticipated boost of new consumer electronics products coming onto the market.

“Given the anticipated tailwinds from new product launches through September, the sluggish expansion in the index suggests some softening in underlying demand relative to capacity,” said Simon Heaney, senior manager of supply chain research at Drewry. “However, we expect pricing to rise on key origin Asian routes into North America and Europe as the trade ramps up for end-of-year peak season.”

The rise in airfreight pricing relative to much weaker container shipping rates served to increase the differential in pricing between the two modes. Hence, Drewry’s East-West Air Freight Price Multiplier, which measures the relationship between the cost of shipping by air relative to sea on East-West trades, gained 0.5 points in September to x13. This still left the multiplier index well above the seasonal norm of x11.

“In the short term, Drewry expects capacity availability to tighten through peak season by comparison with recent years,” added Heaney. “However, as the trade moves into next year the outlook appears more uncertain with overall trade growth expected to slow.”

Sea & Air Shipper Insight combines data gleamed from Drewry’s proprietary research and extensive databases with other third-party data to give shippers a comprehensive overview on the important market changes, ranging from macro-economic trade indicators, freight transport supply and demand, and freight rates.

Source: Drewry