August air cargo rates rise as more hikes expected in next 2 months

AFTER hitting an all-time low in July, August air cargo rates recovered slightly, curbing the slide that had taken pricing down to levels last seen in the 2009 global downturn.

But demand increased with the approach of the peak season, according to Drewry's East-West Air Freight Price Index, a weighted average of rates across 21 east-west trades, which gained 2.7 points in August to 96.9 points.

The modest rise in the index took its value back up to levels last seen in May. But rates have a long way to go before they reach heights achieved at the end of 2012. The main driver of the index's recovery was the trade from Asia to North America.

International demand inched ahead 0.7 per cent year on year, and compared to June, volumes were unchanged. In the seven months to July traffic levels have broadly flat lined, showing a small year-on-year fall of 0.1 per cent, symptomatic of a continually fragile market.

Nonetheless, Drewry expects the recovery in air cargo volumes to continue through the second half of the year, supported by strengthening demand growth in the mature markets of North America and Europe. According to Danske Bank, European freight forwarders are also anticipating stronger growth, as its forward looking confidence index surged to 78, some 28 points above its growth threshold.

Semiconductor sales have been accelerating in recent months, providing an encouraging indicator of future air freight demand. The Semiconductor Industry Association reported that worldwide demand jumped five per cent year on year in July, up from the two per cent growth in June.

Drewry expects air freight rates to continue to rise through September and October, fuelled by new product launches, tighter capacity conditions and improving demand for Asian manufactured goods in North America and Europe.

Despite the rise in air freight rates, Drewry's East-West Airfreight Price Multiplier slipped 0.7 points to 11.3, bringing the measure down to seasonal norms. The primary driver was the continuing recovery in container shipping rates which rose another eight per cent on East-West trades in August, narrowing the price differential between the two modes of transport.