FIS Air Freight Report March 30, 2020

Trading Update

Prices continue a substantial surge from Shanghai, lifting both basket routes up. China to USA now at $5.72 (up 12.6%) and China to Europe up $4.58 (up 21.16% and now vastly higher than normal Q4 peak prices). Much of this Europe surge has been lifted by highly positive price movement from Shanghai to Frankfurt, up 55.9%.

Shanghai continues to gain in terms of price over Hong Kong, with spreads widening further to -1.14 and -1.75 for HKG vs PVG to EUR/USA. Although the overall Air Index has lifted, our Weekly Basket Volatility indicator has reversed slightly, with gains lower than the previous week indicating a potential market plateau. 

This plateau is shown in the final closing price for March 2020, dropping to closing value by 11 cents from China to Europe, and down a modest 4 cents from China to USA. April and May prices are lifted by 5 and 10 cents respectively, doubt as to the strength of the future market has made the next few months far less predictable.

Market Comment 

Top of our data analysis, and in line with a few of the publicly reported market rumblings, is our volatility indicator (top right of the PDF report). for the first time since the start of the price surge, week on week increases on APAC trade lane prices has slowed. We have also seen the first red on our report for a few weeks, with AGR 3 (an indicator of intra-asian freight price) dropping 10%. This might be the canary in the coal mine for a stabilization or drop in demand.

Publicly reported data from CLIVE data services has indicated stable load factors from Europe to North America despite the drop off of capacity, leading many to believe that demand is lining up with the lack of capacity. Much of this analysis relies on the 'lack' of a backlog in general cargo, pharmaceuticals remain in high demand however much of this will most likely be shipped from source to reduce cost.

Given how out of sync our March 2020 contract values ended up, this would suggest an over-optimistic approach from many supplying or reselling capacity, given the drop off in demand for cargo that would have made up the bulk of spring shipments. This includes garments, automotive parts, amongst others. The vast amount of blank sailings in the container world is another good indicator of this drop-off for everything that is not 'must-move' (see Loadstar article below).

This appears to be another very familiar inflection point where price interests start to reverse. Only time will tell, with a good indication available in the coming weeks. The spark is certainly there to drive air freight derivative volumes, businesses that wish to capitalise on these volumes to secure hedge their forward margins are welcome to contact us at any time.

Basket	USD/KG	CHANGE	CHANGE %	MTD	VOL %
CHINA - EUR	4.58	0.80	21.16%	3.29	77.88%
CHINA - USA	5.72	0.64	12.60%	4.31	69.76%
Blended	USD/KG	CHANGE	CHANGE %	MTD	VOL %
PVG/EUR	5.15	1.06	25.92%	3.49	103.35%
HKG/EUR	4.01	0.54	15.56%	3.08	60.32%
PVG/US	6.60	0.94	16.61%	4.70	103.08%
HKG/US	4.85	0.35	7.78%	3.92	55.02%
Global	USD/KG	CHANGE	CHANGE %	MTD	VOL %
Air Index	3.94	0.58	15.21%	2.27	49.63%

Airfreight Route (AR)	Description	USD/KG	CHANGE	CHANGE %	MTD	VOL %
AGR 1	HKG to LAX & ORD & JFK	5.05	0.61	13.74%	3.96	35.00%
AGR 2	HKG to LHR & FRA & AMS	4.29	0.89	26.17%	3.13	31.00%
AGR 3	HKG to SIN & BKK & PVG	2.07	-0.23	-10.00%	1.76	26.33%
AGR 4	PVG to AMS & FRA & LHR	5.14	1.21	30.79%	3.47	74.00%

Forward Curve - Indicative Update

FIS AFFA, CHINA - EUROPE | USD/KG
	BID	ASK	VALUE	CHANGE
Mar-20	2.99	3.59	3.29	-0.11
Q1 20	2.99	3.59	3.29	-0.11
Apr-20	2.70	3.30	3.00	0.05
May-20	2.60	3.15	2.85	0.05
Q2 20	2.65	2.80	2.73	0.00
Cal-20	2.56	3.16	2.86	0.00

FIS AFFA, CHINA - USA | USD/KG
	BID	ASK	VALUE	CHANGE
Mar-20	3.71	5.00	4.31	-0.04
Q1 20	3.71	5.00	4.31	-0.04
Apr-20	3.00	4.00	3.50	0.10
May-20	3.00	3.90	3.45	0.10
Q2 20	3.00	3.40	3.30	0.00
Cal-20	3.05	3.40	3.18	0.00