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Air cargo contracted rates are likely to be at low level in 2020

THE baseline price of air freight ACMI and block-space agreements are anticipated to be negotiated to a level below that of four years ago, in spite of confidence that the industry will undergo a recovery in 2020

Air cargo contracted rates are likely to be at low level in 2020

THE baseline price of air freight ACMI and block-space agreements are anticipated to be negotiated to a level below that of four years ago, in spite of confidence that the industry will undergo a recovery in 2020

17 January 2020 - 19:00

THE baseline price of air freight ACMI and block-space agreements are anticipated to be negotiated to a level below that of four years ago, in spite of confidence that the industry will undergo a recovery in 2020.

Speaking to London's Air Cargo News, Peter Stallion of air freight derivatives broker Freight Investor Services (FIS) said that contracts tended to be negotiated based on current market prices, rather than future expectations.



'In our opinion they will likely be at their lowest for four years based on what we see in terms of current figures,' Mr Stallion was quoted as saying. '[Forwarders] will have a general analysis but it is not really actionable. If everyone is saying there might be a market recovery in the fourth quarter, how do you guess what that rate is going to be? You just don't know.'



Mr Stallion said that BSA rates began dropping in the third quarter of 2019 as airlines looked to secure volumes for the peak.



Figures from TAC Index show that current spot market rates on China/Hong Kong to Europe and China/Hong Kong to the US are down on both 2019 and 2018 levels, but are up on 2017.



The International Air Transport Association (IATA) expects air cargo demand to increase by 2.2 per cent this year.



FIS said that all major trade lanes show negative price movements compared with a week earlier. China to Europe has fallen by 15 cents and China to the US shed 14 cents, the derivatives broker said.



'Another sea of red, becoming all the more familiar to the air freight market in recent times. Although this is a seasonal norm, the price that core lanes eventually settle on will dictate much of the proposed optimism for the rest of 2020.



'Indeed, long-term contracts will rely on this eventual Q1 market bottom figure, with none of the support we saw in Q1 2019 holding up prices.



'Typically we expect volatility to continue, with any growth in volumes having a disproportionately severe impact on the open market rate. This whilst contract rates are being squeezed down at every level of the market from shippers through to airlines and everything in between.'


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