News #82 - Port strike suspension relieves air cargo pressure but peak outlook remains tight

The suspension of US port strikes until next year has helped relieve some of air cargo’s peak season capacity concerns but questions remain regarding just how busy the next few months will be.

TAC Index editor Neil Wilson said that there was a mixed outlook for how tight capacity would be during the peak season even before the strike was last week temporarily suspended until next year.

He told Air Cargo News that companies had been busy blocking out space on aircraft, which could mean there isn’t a spike in demand as companies have already planned the space they need, or that any spike would have a more pronounced effect on rates as there isn’t enough spare capacity to cater for spot market demand.

“With or without the strike there already was a lot of debate about how big the peak will be – given the amount of capacity already locked up in Block Space Agreements (BSAs) for months ahead,” he said.

“Some think the tight capacity might push spot prices very high, but others think a lot of that marginal demand is already priced in.”

Writing in a monthly column on the TAC website, he also explained that the market had been “flattish” in recent weeks, which was deflating expectations of an earlier and/or more pronounced peak season after a stronger-than-expected summer.

On the other hand, “there were also a number of other factors pointing towards higher rates, including some big orders for items like solar panels and mobile phones known to be coming through”.

Wilson said that overall airfreight rates were little changed last month, with the global Baltic Air Freight Index (BAI00) edging up 1.8% over the four weeks to 30 September, leaving it ahead of the same month last year by 7.5%.

The index of outbound routes from Hong Kong (BAI30) – still the world’s biggest airport for cargo volume – was up 0.3% over the month, leaving it ahead by 16.8% year on year.

Meanwhile, outbound Shanghai (BAI80) was up 2.7% month on month to leave it ahead 20.4% year on year.

While the worst-case scenario regarding the port strikes was avoided, research from rate platform Freightos showed there was some impact on airfreight rates.

Freightos head of research Judah Levine said that there may be some continued pressure on air cargo rates as importers continue to expedite some essential inventories until ocean operations stabilise.

He explained that the three-day shutdown was enough to create a “significant backlog of containers” at ports and approximately 50 vessels waiting at anchor across East Coast and Gulf ports.

Some experts have argued the backlog could take two or three weeks to clear, although port officials in New York said it should be just a few days.

Levine said the Freightos Air Index data shows Europe – North America air cargo rates have increased 4% to $1.77/kg since early September, possibly reflecting some shift of transatlantic ocean volumes to air.

“Transpacific air cargo rates did not climb much in the lead up to the strike, but once the strike started China – North America daily rates jumped to $7.07/kg from $5.91/kg the previous week,” said Levine.

“So rates may be increasing due to the strike and are climbing from an already elevated floor set by the surge of e-commerce volumes out of China that have kept rates around $6/kg –- even higher than rates get during the typical Q4 air peak season months – for most of the year.”

There was also a 30% increase in Dubai – North America rates to $3.12 per kg, compared with mid-September, which may also reflect modal shift.

“Rates for these lanes remained at about these levels though the end of the week, suggesting that pressure on air cargo rates from the strike may be sustained until ocean operations on the East Coast recover,” he said.

Source: https://www.aircargonews.net/business/supply-chains/port-strike-suspension-relieves-air-cargo-pressure-but-peak-outlook-remains-tight/

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