The China to USA route begins a very sharp slide into weaker territory, down -22.44% in one week to a still relatively high level of $7.12. China to Europe, supported by price strength out of Hong Kong, drops out a shallower 6.97% or 55 cents. 

Much of the US negative price trend has been driven by a huge $3.25 drop from Shanghai to USA.

On the forward curves, the front months reflect negative sentiment, June 20 down 35 and 55 cents respectively. This drags down through the rest of Q2, which the US tradelane shedding 93 cents of its mid-point.

Interestingly, a new bid of $2.80/kg on for 2021, China to USA, has dragged down CAL 21 by 17 cents - on prospective trade wars between China and USA. CAL 21 China Europe gains 2 cents on tightening of the spread, bid now at $2.70.

Market Comment 

A new month, a new day, and whole host of cascading impacts as prices begin their long crash back to some semblance of normality. The Airfreight market is on the cusp of the unknown - whilst the container freight market sees a positive price tick linked to a volume rush, businesses need to keep an eye out for false positives given container capacity is heavily restrained to cope with original slack demand.

In theory, this should open up an opportunity for air freight to take up shipments that need to move, and can't risk being rolled. For this to happen the price of this service needs to become more competitive.

And interestingly, we were asked recently, what the ramifications are for the volatility of this market and a rapidly dropping transacting air freight price. Airline's continue to push the passenger-freighter model, whilst the achievable margin for these flights shrink rapidly. Boeing enters into a legal tussle with Volga-Dnepr of intent to buy B747-8F equipment, a direct result of an unpredictable market drastically altering the outlook for a key airline and a market-leading manufacturer.

In our view, unless an airline (and a customer) is willing to enter into a 36-month charter agreement to book off a sustainable profit over a very long period of time (not including what might happen with fuel price increases), the guarantee you need to be able to secure assets is only possible through systematic hedging.

The danger for the physical market, as always, is ending up on the wrong side price history as we look back at this market in a few years time. Whilst air cargo has been touted (by us) and many others as a key element in airline fortunes over the next 2 years, the question remains as to how meagre or plentiful these fortunes might be.