Short term pain sees air freight market look to future

From the ground, the air freight market is a sea of red; becoming an all too familiar scenario in recent times. Although this is the seasonal norm, the price that core lanes eventually settle on will dictate much of the projected optimism for the rest of 2020. 

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

In a brutally volatile fashion, much of the illusion of immediate market growth has been smashed. There is however very long term positivity in market fundamentals, though much of this is approximate, dare we say wishful thinking.

We wouldn’t even try to provide an opinion as to when we think the market will bounce but US-China trade deals and the certainty of a few macro-economic events have provided a sense of potential growth. There is however no time-frame, it would seem that even though capacity has finally been properly adjusted to cargo throughput air freight market will be left to react as it always has, at very short notice.

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

Margin rates are at risk of narrowing, with a gamble being made that market price movements by H2 2020 will help widen margins to survivable levels.

Trading strategies still include Cal 20 contract hedging, following on from market wide aim to offset the unpredictable movement of the forward market in what might be a tumultuous year.