Record air freight rates recorded on ex-China routes

Record air freight rates recorded on ex-China routes

There has been no slowdown in demand for medical equipment that is using up all air cargo space out of China. Photo credit: Shutterstock.com.

Air freight rates out of China are at their highest levels ever as massive global demand for personal protective equipment (PPE) from countries battling the coronavirus disease 2019 (COVID-19) continues unabated.

The demand is so strong from Europe and the United States that Chinese factories manufacturing the vital medical equipment will remain open through the May 1-5 Labor Day holidays, forwarders have told JOC.com.

Rates this week from Shanghai to Europe reached $8.79 per kilogram, up an incredible 253 percent year over year, while Shanghai-US rates were up 175 percent, according to data assessed by TAC Index. To place the prices in context, the average weekly air freight rate from January 2018 to mid-March 2020 was $2.71/kg on China-Europe lanes and $3.47/kg on China-US routes.

On top of the sustained heavy demand for PPE, available cargo space has been drastically reduced with the continued suspension of passenger flights on both the China-Europe and trans-Pacific trades, leading to a market environment Freight Investor Services (FIS) has described as “mayhem.”

“The air freight market sits atop ballooning demand for medical equipment at eye-watering markups being absorbed by end-users — governments,” FIS noted in a market update this week, adding that some “on-the-street” rates were as high as $14 to $16/kg.

Online rate platform Freightos shows air cargo rates at record highs out of China, with demand for critical supplies high and limited capacity pushing rates up 25 to 30 percent over the previous week for the second consecutive week.

“The emergency supplies are driving the market and the charter prices in a way I have never seen before,” said Edoardo Podestà, chief operations officer for air and sea logistics at Dachser. He told JOC.com that air freight rates, particularly from South China, were at their highest-ever levels and demand was so strong he was having to find capacity from several sources.

“Next week looks like the busiest week we have had so far, mainly for PPE,” said Podestà. “We have eight charters confirmed and a lot of other cargo on commercial capacity, and besides our regular capacity, we are buying extra capacity as well.”

Markets going crazy

Marco Reichel, Shanghai-based regional business development manager/Asia-Pacific for Crane Worldwide Logistics, said air freight and PPE demand out of China was “currently going crazy” in a highly volatile market.

Brian Bourke, chief growth officer for SEKO Logistics, is predicting peak demand for air freight in the next week ahead of the Labor Day holidays.

“We do expect that some factories will work through the holiday or only shut down for part of the period,” Bourke told JOC.com. “However, we also expect there to be significant closures still, which adds to the rush around air freight.” 

How long the heavy demand for PPE will continue to drive the air freight depends on when coronavirus infections begin to decline in the major markets of Europe and the US.

Podesta is expecting demand for air cargo to slow when stocks of masks and PPE become available in Europe, with shipments shifting from air to rail and even sea freight, although there was little certainty around when that would happen. 

“At this stage, with few notable exceptions, the booking and demand visibility we have is two to three weeks maximum,” he said. “Ultimately, these urgent air freight shipments will become less and less and will then stop. My personal guess is that this will start happening more and more during the month of May.”

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.