23% drop in March airfreight business dwarfs February fall

A large cargo aircraft parked at an airport.

The latest data shows a steep decline for global airfreight demand in February and March, while prices surge because the takedown of passenger networks has created a shortage of capacity to move shipments by air.

Freight volume dropped 9.1% in February, on a seasonally adjusted basis, as the effects of the coronavirus mostly impacted the China market, according to the International Air Transport Association (IATA). For perspective, cargo volume in February was equivalent to that in mid-2016. The disease shut down Chinese production for much of the month and global export orders fell to historic lows. Asia-Pacific carriers fared the worst, with a 15.5% drop in volume.

An IATA official, in previewing the monthly results last week, suggested air cargo business could fall 20% for the year.

Meanwhile, U.K.-based CLIVE Data Services said freight volume plunged 23% in March, with half the amount of goods moved by air in the final week versus the same periods last year. The company uses current transaction data and volumetric analysis to determine market conditions, while IATA collects historical data from airlines. A month ago, CLIVE said global cargo weight (measured in gross weight or by a dimensional formula) fell nearly 9% in February.

The Hong Kong-Europe trade lane, where reported volumes in the last week of March were 26% higher than before the Chinese New Year started in late January, offers airlines a glimmer of hope that traffic can recover relatively quickly once economic activity returns to normal, CLIVE Managing Director Niall van de Wouw said in a statement.

Market watchers say airfreight rates continue to climb well beyond the typical fourth-quarter peak season, with carriers canceling long-term contracts and switching to spot contracts. But the surge appears to be losing momentum.

Rates for China to the U.S. are up 150% since the beginning of March, according to The Air Cargo Index, and are up 12.6% to $5.72 per kilogram week-over-week, London-based Freight Investor Services said. China-to-Europe rates have doubled since four weeks ago and on a weekly basis are up 21% to $4.58 per kilogram, the TAC Index and FIS respectively said in separate research notes. 

FIS said outbound China rate gains were heavily influenced by the Shanghai-to-Frankfurt lane, where prices jumped 56% from last week, FIS said. The freight derivatives brokerage said demand from Shanghai is outpacing that in Hong Kong, adding that rates in the region may be plateauing.

According to FIS, stable load factors from Europe to North America despite the shortage of freight space suggests that supply and demand are reaching equilibrium β€” especially with few orders for nonessential cargo such as apparel β€” and that no backlogs are developing.

β€œThe price percentage increase has almost halved week-on-week, indicating a lack of energy in the price going much higher,” said Peter Stallion, who heads the airfreight desk at FIS, in an email.