Asian air export rates fall

Airfreight rates on shipments moving from Asia to North America and Europe fell in June to their lowest levels since August 2009, according to a monthly index published yesterday by a U.K.-based supply chain consultancy.

The index, published by Drewry Supply Chain Advisors, hit 90.1 in June, nearly 20 points below the levels reached in March, and well below the 115 level hit last October. In June, the average rate on high-volume lanes was slightly under $3.70 a kilo. In October, the average rate exceeded $4.60 a kilo, according to the index.

Airfreight rates have been volatile month-over-month since November and actually held their own into the late winter and early spring even though demand out of Asia had been steadily declining since the end of 2011. Rates began plummeting in May as demand in Europe continued to weaken and the U.S. economy began to slow from a relatively robust first quarter.

The rapid plunge in rates is a scary reminder to market participants—especially air carriers—of the dark days of late 2008 and early 2009, when airfreight volumes collapsed along with the global economy in a manner that even the most grizzled industry veteran couldn't remember or imagine.

Compounding the problem of weak demand is an increase in below-deck, or bellyhold, capacity as airlines have put up more flights to accommodate an increase in passenger traffic. Belly capacity is already priced on an incremental basis because the aircraft has to fly regardless of whether or not freight is placed aboard. The additional aircraft deployments have only increased the supply of below-deck space, further depressing rates.

Martin Dixon, a research manager at Drewry, said rates are likely to remain weak for the rest of the year. Dixon added, however, that there may be a firming in the fourth quarter depending on the strength of the peak pre-holiday shipping season and the level of available capacity to meet whatever demand arises.