Air freight weekly market update
Trading Update
Shanghai to Europe (up 7 cents) strengthens in line with strengthening on the entire lane, however volumes and prices out of Hong Kong take a hit.
AGRs 1 and 2 loose a collective 11 cents as the region absorbs the economic impacts of disruption.
The forward curve reflects front-month changes in sentiment, with China to Europe SEP19 gaining 1 cent in line with higher spot prices, and China to US losing 7 Cents.
Market Comment
At what would normally be seen as the historical entry point for Q4 prices, the market is reacting unpredictably.
China to Europe pricing gives the market a grain of hope that rates are on their way up into the traditional Q4 pricing hike. However trans-Pacific rates remain flat or negative.
For those locked into a slack/peak BSA pricing system, the profitability and commercial sense of the rates that would have been negotiated in Q1 have begun to erode. All the while rates for freight contracts in emerging markets in South East Asia remain highly uncertain.
Thrown into the mix this week, the unpredictable effect of fuel pricing increases on costs passed through into carrier's fuel surcharges and base airfreight rates. Given the violence of this increase (with Brent Crude Oil (a key benchmark for jet fuel hedging) climbing as much as 20% in a few minutes on Monday) the pass-over into linked markets (air, container freight) is somewhat inevitable. This will also cause problems for the ever popular ACMI dry leases currently flying rotations across the Pacific, damaging margins and cashflow.
To address a looming crisis, it's a convenient time to note that FIS can assist with fuel hedging with respect to jet or bunker fuel costs, via cleared markets on ICE. An on-going assessment of fuel prices will become a feature of this report as we approach 2020.
| Basket | USD/KG | CHANGE | CHANGE % | MTD |
| CHINA - EUR | 2.46 | 0.04 | 1.65% | 2.41 |
| CHINA - USA | 3.16 | -0.11 | -3.36% | 3.21 |
| Blended | USD/KG | CHANGE | CHANGE % | MTD |
| PVG/EUR | 2.33 | 0.07 | 3.10% | 2.26 |
| HKG/EUR | 2.59 | 0.00 | 0.00% | 2.56 |
| PVG/US | 2.96 | -0.18 | -5.73% | 3.09 |
| HKG/US | 3.37 | -0.03 | -0.88% | 3.33 |
| Airfreight Route (AR) | Description | PREVIOUS | USD/KG | CHANGE |
| AGR 1 | HKG to LAX & ORD & JFK | 3.49 | 3.46 | -0.86% |
| AGR 2 | HKG to LHR & FRA & AMS | 2.79 | 2.71 | -2.87% |
| AGR 3 | HKG to SIN & BKK & PVG | 1.1 | 1.13 | 2.73% |
| AGR 4 | PVG to AMS & FRA & LHR | 2.27 | 2.33 | 2.64% |
| Forward Curve - Indicative Update | ||||
| CHINA - EUROPE | USD/KG | ||||
| BID | ASK | VALUE | CHANGE | |
| Sep-19 | 2.41 | 2.50 | 2.46 | 0.01 |
| Oct-19 | 2.43 | 2.51 | 2.47 | 0.00 |
| Nov-19 | 2.51 | 2.60 | 2.56 | 0.00 |
| Q4 19 | 2.85 | 2.89 | 2.87 | 0.00 |
| Cal - 19 | 3.04 | 3.14 | 3.09 | 0.00 |
| Cal - 20 | 3.44 | 3.54 | 3.49 | 0.00 |
| Forward Curve - Indicative Update | ||||
| CHINA - USA | USD/KG | ||||
| BID | ASK | VALUE | CHANGE | |
| Sep-19 | 3.17 | 3.40 | 3.28 | -0.07 |
| Oct-19 | 3.40 | 3.80 | 3.55 | 0.00 |
| Nov-19 | 3.53 | 3.69 | 3.61 | 0.00 |
| Q4 19 | 3.54 | 3.62 | 3.58 | 0.00 |
| Cal - 19 | 3.40 | 3.50 | 3.45 | 0.00 |
| Cal - 20 | 3.88 | 4.04 | 3.96 | 0.00 |
