News / Too many Gulf carriers flying out of Shanghai for China's liking?

© Serhii Akhtemiichuk

Airfreight rates continue to fall, with May seeing the lowest level since March 2020, the spot market down 40% year on year, according to Clive Data Services, part of Xeneta.

Data from Accenture’s Seabury this morning shows global capacity up 2% on 2019 levels, although it notes “large regional differences”.

“Asia-Europe direct capacity is still hampered by the Russia-Ukraine conflict, with Asia-Gulf-Europe as an alternative,” wrote director Marco Bloemen.

According to the chart, capacity from Asia to the Gulf in the second half of May was up 25% on 2019 levels, suggesting that Gulf carriers are helping cargo avoid Russian airspace. However, there have been indications that China is increasingly concerned over the number of flights operated by Gulf carriers out of Shanghai.

Peyton Burnett, MD of the TAC Index, said: “I am hearing rumours that Middle Eastern carriers’ operations out of Shanghai are coming under scrutiny from the Chinese. They allowed them to increase flights during Covid, but [they] now want to protect their own carriers more.

“We want to see where the aircraft are moving to, but we think capacity will be coming out of Shanghai, which will put rates up. We’ve already seen rates out of Shanghai increase in the past week.”

The TAC Index revealed rates out of Pudong rose 1.4%, week on week, to June 12, while globally, dynamic load factors were five percentage points lower in May, year on year, to 55% noted Clive.

Niall van de Wouw, Xeneta’s chief airfreight officer, said carriers and forwarders were restless.

“There are a lot of ambitious forwarders in the market that want to grow – but they cannot grow with their current customer bases because the airfreight demand is not there, so they are looking to take a bigger share from someone else.

“At the same time, we see a lot of shippers going to market now because they want to refresh their rates and benefit from the different conditions to three to six months ago. Challengers for their business – not the incumbent freight forwarders – smell a chance to buy volumes and are going in and offering low rates.

“And, whether they get the business or not, the overall rates drop, because shippers often stick with their current provider but expect them to adjust their rates accordingly to this lower market level,” he said.

The outbound South-east Asia market experienced the largest year-on-year rate fall among major lanes in May. Its spot air cargo rates to the US and Europe fell 68% and 62%, respectively. North-east Asia (excluding mainland China) to the US saw cargo rates slump 60% from a year ago. However, China to the US saw just a 31% decline, below the industry average of a 40% fall.

“Shippers are the dominant players in the market right now, as freight forwarders and airlines are nervous of missing or losing the volumes actually offered in the market,” explained Mr van de Wouw.

“It’s a time of ‘stick or twist’ for airlines and forwarders. Do they become more short-term driven and flick the ‘let’s-just-buy-the-volumes’ switch, or do they sit it out? If companies become trigger-happy, using such tactics, we could see more downward pressure on the air cargo market than the actual changes in demand/supply.”

He said carriers had reported a slow market in May, but the market was getting increasingly anxious, with hopes for an uptick in the peak season “dwindling”.

To hear more about this, and the China/ Gulf carrier rumours, listen in to the next Loadstar Podcast, with Peyton Burnett and Alex Lennane, out next week.