FIS Air Freight Report May 4, 2020

Trading Update

New for this week, Calendar year contracts for 2021 (Cal 21) have been added to cover forward contract interest.

Index prices keep climbing, with a consistent growth within the 10-25% range off of the back of persistent demand. China to Europe raises $1.09, largely driven by a big 50% price move on the Shanghai to Amsterdam OD pair. This lifts AGR 4 up $2.35.

China to USA extends its lead, mimicking the price gains of China to Europe early on in the capacity crisis, up $1.79 to $9.69/kg. Again, Shanghai to USA leads in terms of price, however Hong Kong is quickly catching up, with the US route up $2.10 this week.

As is becoming familiar, the entire forward curve raises into Europe and USA, with the biggest moves being a Front and June increase of $1.00 and $1.48 respectively. Pricing of CAL 21 interest lifts the end of the curve slightly, however, for the most part, the curve remains in backwardation.

Market Comment 

In a change from last week, our trading update will rightly dominate this weeks report, as much of the same news continues to persist across the entire market. Agility did surprise us by publishing (see below) that Ex.China overall capacity has, in fact, increased year-on-year. This might provide us with a helpful forecast as to rate drops at some point beyond June. 

Meanwhile, Airlines start to feel the pain as Q1 financials are released. The most infamous of which has been the proposed lay-offs of 12,000 British Airways employees, despite government loans to the other airlines within the IAG group. Handily Bloomberg has set up a tally of airline bailouts giving us an insight as to how slanted the 2020-2021 playing field might be. The New Zealand government has committed to subsidise export lift in the form of its International Airfreight Capacity Scheme (IFACs). Supposedly this is a 'market-led' initiative, without providing wisdom as to how this might affect cargo rates. Meanwhile, Anchorage has seen some more operational risk, after a bomb scare on Saturday 2nd May, temporarily closing the airport.

In the physical market, steps have been taken by forwarders to establish a long physical position covering the Q3-Q4 period (including charter-leases). The price at which air freight will settle is as of yet highly uncertain, putting any long physical stance at risk as we push through Q2. Meanwhile, OPEC+ has swung into action to drastically reduce oil supply, joined by major shale oil producers Chevron and Exxon. This is prospectively bullish for the future oil price, however as of yet, crude prices continue to bump around below the $30 mark.

Basket	USD/KG	CHANGE	CHANGE %	MTD	VOL %
CHINA - EUR	8.21	1.09	15.31%	8.21	86.16%
CHINA - USA	9.69	1.79	22.66%	9.69	71.83%
Blended	USD/KG	CHANGE	CHANGE %	MTD	VOL %
PVG/EUR	10.45	1.52	17.02%	10.45	110.06%
HKG/EUR	5.98	0.67	12.62%	5.98	73.18%
PVG/US	10.56	1.46	16.04%	10.56	92.72%
HKG/US	8.81	2.10	31.30%	8.81	76.95%
Global	USD/KG	CHANGE	CHANGE %	MTD	VOL %
Air Index	6.09	0.80	7.71%	2.27	49.63%

Forward Curve - Indicative Update

FIS AFFA, CHINA - EUROPE | USD/KG
	BID	ASK	MID	CHANGE
May-20	6.00	8.50	7.25	0.75
Jun-20	4.00	8.00	6.00	0.50
Q2 20	4.80	8.25	6.53	0.58
Jul-20	4.00	7.00	5.50	2.00
Q3 20	2.70	5.00	3.85	0.50
Cal-20	2.60	3.50	3.05	0.15
Cal-21	2.90	4.05	3.48	0.00

FIS AFFA, CHINA - USA | USD/KG
	BID	ASK	MID	CHANGE
May-20	5.50	10.00	7.75	1.00
Jun-20	4.00	9.95	6.98	1.48
Q2 20	3.00	8.30	5.65	0.35
Jul-20	3.00	7.00	5.00	0.00
Q3 20	3.00	4.50	3.75	0.00
Cal-20	3.05	3.40	3.23	0.00
Cal-21	3.10	4.10	3.60	0.00