Market Comment

In a sudden reversal of rate growth over the past two weeks, prices have gone into the red. This may represent a natural market correction for carrier oversupply to meet slack demand. However rates are still held up above 2018 levels, going against common market sentiment that the rates should slip given demand has retracted year-on-year in Q1 2019.

The severity of price drops are however uncharacteristic, given 2017 and 2018 both showed rate growth throughout April.

Interestingly this still fits the forward curve projections for both lanes.

Opportunities

The Air Freight Forward Agreement is gaining traction as an instrument to prevent opportunity cost when clients opt for block space agreement buying/ selling over the spot market or Index Linked Agreements. Financially settled contracts give clients access to cash flow that would otherwise be locked out, without risk of a physical commitment.

Basket USD/KG CHANGE CHANGE % MTD
CHINA - EUR 2.63 -0.15 -5.40% 2.69
CHINA - USA 3.53 -0.09 -2.49% 3.54
Blended USD/KG CHANGE CHANGE % MTD
PVG/EUR 2.56 -0.22 -7.91% 2.68
HKG/EUR 2.69 -0.09 -3.24% 2.70
PVG/US 3.41 -0.27 -7.34% 3.52
HKG/US 3.64 0.08 2.25% 3.55

'Airfreight routes (AGRs)' provide us with tradeable routes in conjunction with baskets, by maximising volumes along regional tradelanes. AGRs calculate the average of several correlating arrival points noted by their airport codes

Airfreight Route (AR) Description PREVIOUS USD/KG CHANGE
AGR 1 HKG to LAX & ORD & JFK 3.56 3.55 -0.28%
AGR 2 HKG to LHR & FRA & AMS 2.8 2.71 -3.21%
AGR 3 HKG to SIN & BKK & PVG 1.09 1.08 -0.90%
AGR 4 PVG to AMS & FRA & LHR 2.88 2.63 -8.68%

Forward Curve - Indicative Update

HKG/CN - EUROPE AGGREGATE LANES - USD/KG
  BID ASK VALUE CHANGE
Mar 2.85 2.95 2.90 0.00
Apr 2.88 2.98 2.93 0.00
May 2.88 2.98 2.93 0.00
Q2 19 2.90 3.00 2.95 0.00
Cal - 19 3.04 3.14 3.09 0.00
Cal - 20 3.44 3.54 3.49 0.00
HKG/CN - US AGGREGATE LANES - USD/KG
  BID ASK VALUE CHANGE
Mar 3.28 3.38 3.33 0.00
Apr 3.17 3.27 3.22 0.00
May 3.18 3.28 3.23 0.00
Q2 19 3.30 3.40 3.35 0.00
Cal - 19 3.91 4.01 3.96 0.00
Cal - 20 4.12 4.22 4.17 0.00