Q4 Air Cargo Rates from China Excepted to Increase

According to the TAC Index, the air cargo rate from Shanghai to North America for the week of Aug 24th dropped 10 percent to $4.52/kg, but was up 20 percent year-over-year. This is drastically lower than the record high of $12.27/kg we saw in May when the US began to reopen after COVID-19 lockdowns, which was a 270 percent year-over-year increase.

Market demand is expected to remain steady until mid-September, and then increase going into the fourth quarter. The expected rate increases will be the result of continued limit of air cargo capacity, high demand generated by a return in customer spending, steady demand for personal protective equipment (PPE), and new tech product launches scheduled for late September.

43 percent of the global aircraft fleet is currently parked, according to aviation analyst Cirium. This represents close to 100,000 tons of aircraft belly capacity that is being unused. The International Air Transport Association (IATA) is not expecting passenger demand to return to pre-COVID-19 levels until at least 2024, as travel restrictions have been kept in place due to high levels of COVID-19 infection around the world. [1]

We are expecting that rates will remain high through Q4 into Q1 of 2021, due to the anticipation of Chinese New Year in February 2021. Canaan Group has good contract rates with KLM, Cathay Pacific, EVA Air, Lufthansa, China Airlines, and Korean Airlines, to name a few. There is limited capacity, so book your air cargo early.

Sources:
[1] Air cargo rates from China set for Q4 takeoff, Journal of Commerce.