Trading Update
Prices ex.Shanghai to Europe in a surprising and sharp move, up 23 cents, dragging up the China to Europe lane by 13 cents (helped by Hong Kong, up 4 cents only).
Shanghai to US shows strength, up 9 cents, counter-balanced by Hong Kong to US significantly down 14 cents. China to US results with a weaker price, down 3 cents. The Hong Kong vs Shanghai to US spread diverges considerably at -0.23 cents/ -13.41.
The China to Europe forward curve prices in more optimism as the two major trade lanes start to diverge, with front month prices up 1 cent, and the Q1 20 up 5 cents. Q2 is dragged up 2 cents. China to US continues its decline, with CAL 20 down 5 cents (albeit holding fairly flat across Q1/Q2).
Market Comment
Those presuming that the airfreight market would follow classic seasonal declines in price have been challenged this week as Shanghai lifts up the China to Europe route. AGR 4 shows how stark this increase actually is, up a huge $0.34. There are doubts as to how much momentum this price increase will have, although you might assign this increase to Chinese New Year, you would expect a bigger reflection of market buoyancy from China to US.
Although these price increases might damage the balance sheet of freight forwarders still locked into contracts that dragged through the 2019 market, any positive price movement helps raise the bar for the next round of contract prices between shippers, forwarders and airlines. As always, volatility prevails - several freight businesses have attempted to quantify potential risks that can crystallise later in the year. Overly generalised terms and strategies are however indicative of the flaws (and perhaps opportunities) in the freight market generally.
Fortunately for FIS we can finally offer access to end-to-end risk management markets for freight businesses, airlines, container carriers and everything in between, encompassing every possible avenue to minimise volatility and secure forward revenue.
