The market looks to have reached its traditional peak across all ex.Asia lanes, China to USA continues its losses, already pricing below January 2018 prices at $3.44 now versus $4.31 the same time in 2018. China to Europe drops off of its previous gains, down 11 cents to $3.12.

Shanghai (finally) comes off of its peak price trend, down 22 cents to $2.97 into Europe, with a slight and somewhat unusual bump in Shanghai to USA rates, up 4 cents. Shanghai to USA still remains well below 2018 levels, as do all trans-pacific routes. 

Given this is the only expected movement of air freight prices for quite some time, both forward curves show little change. Q4 19 and Cal 19 correct to the front month prices, up 7 cents to Europe and down 6 cents to USA. Jan and Feb 2020 prices are on course to change as the scale of price decline becomes clear over the next few weeks.

Market Comment 

With prices well and truly off of the pace as we enter the second week of December, some of the facts are sobering. To start off on a positive, and on the basis of TAC Index prices over the last 4 years, Shanghai has maintained the price strength it has been building over the past 4 years, reaching a high of $3.19 versus $3.15 in 2018, and $3.44 in 2017.

Most China to US airfreight business tells a different story. In a dramatic and cataclysmic drop off in peak pricing, the 2018 record peak of $5.28 (19th November 2018) has dropped off 30%, down to $3.65 (4th November 2019). China to Europe saw an attempt to save the fortunes of carriers, with the price peak occurring rapidly and violently (2018 saw an increase in price from September to November of 19.16%, whereas 2019 saw a 37.44% increase in price, albeit from a lower initial level).

And the line remains the same for most in the market, "we remain optimistic, but we also think the market will be flat at best, although we almost certainly have no idea what is going to happen". What is clear, is a dramatic shift in the pricing of long term contracts, with prices being dumped to secure necessary volumes (particularly those carriers with a mix of freighters and passenger aircraft).

All of this is shaping up to be a viscous entry into 2020 as businesses are forced to contest on an uncertain spot market. Derivative hedge strategies to secure the volume and price held on long term contracts in 2020 are gaining very rapid traction at all sides of the market, from airlines through to shippers. In fact, the painful truth of the 2019 market is all of a sudden spilling out (hopefully in the festive spirit of honesty and giving, however more likely in a scheme to lower contract prices), indeed spilling over into January as we face the wrath of shippers in the annual tender cycle.

And given our report volatility ticker looks more like a seismograph measuring a Richter scale category 10 earthquake, any sort of prediction beyond the ever lasting prevalence of market volatility might indeed appear foolish.

Basket USD/KG CHANGE CHANGE % MTD VOL %
CHINA - EUR 3.12 -0.11 -3.41% 3.18 23.19%
CHINA - USA 3.44 -0.09 -2.55% 3.49 24.90%
Blended USD/KG CHANGE CHANGE % MTD VOL %
PVG/EUR 2.97 -0.22 -6.90% 3.08 29.99%
HKG/EUR 3.27 -0.01 -0.30% 3.28 33.21%
PVG/US 3.33 0.04 1.22% 3.31 30.08%
HKG/US 3.54 -0.24 -6.35% 3.66 35.90%
Global USD/KG CHANGE CHANGE % MTD VOL %
Air Index 2.39 -0.01 0.87% 2.40 44.29%
Lane Pairs Spread Ratio
CHINA - EUR vs USA 0.30 11.26%
HKG vs PVG - EUR 0.09 35.94%
HKG vs PVG - USA 0.49 7.21%

Forward Curve

FIS AFFA, CHINA - EUROPE | USD/KG
  BID ASK VALUE CHANGE
Dec-19 3.10 3.18 3.14 0.00
Q4 19 3.10 3.18 3.14 0.07
Cal-19 3.10 3.18 3.14 0.07
Jan-20 2.78 2.90 2.84 0.00
Feb-20 2.68 2.88 2.78 -0.02
Cal-20 3.05 3.15 3.10 0.00
FIS AFFA, CHINA - USA | USD/KG
  BID ASK VALUE CHANGE
Dec-19 3.40 3.48 3.44 0.00
Q4 19 3.40 3.48 3.44 -0.06
Cal-19 3.40 3.48 3.44 -0.06
Jan-20 3.21 3.35 3.28 0.00
Feb-20 3.30 3.50 3.24 0.00
Cal-20 3.20 3.40 3.30 0.00

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