Airfreight prices on major east-west trade lanes remained stable in July — albeit at a high level — and expectations are that pricing will remain elevated this year.

The latest figures from the Baltic Exchange Air Freight Index (BAI) show that in July average airfreight rates from Hong Kong to North America were static compared with a month earlier at $7.90 per kg and up 59.3% year on year.

From Hong Kong to Europe there was a small $0.24 increase on June to $4.58 per kg, while compared with a year ago prices are up 44.5%.

And from Frankfurt to North America average prices in July were flat compared with the previous month at $4.10 per kg but they increased 9.9% compared with last year.

The settling of prices over the summer months is to be expected as demand tends to slow ahead of the third-quarter peak season.

However, prices remain far above pre-pandemic levels: In July 2019 average Hong Kong to North America prices stood at $3.44 per kg and from Hong Kong to Europe the average price two years ago stood at $2.67 per kg.

And expectations are that a return to pre-covid pricing levels is not likely this year as it seems increasingly unlikely that belly capacity will return to previous levels any time soon.

Writing in the Baltic Exchange monthly market summary, Bruce Chan, vice president of global logistics at investment bank Stifel, said that as well as a lack of belly capacity, ocean shipping supply chain disruption and heightened air cargo demand would also help push up prices.

He said: “Does a protracted return of long-haul belly capacity mean that rates will stay high until next year? We think yes.

“And we think rates have another leg up as we move into back-to-school season. Recall that there was no back-to-school season in 2020; retailer inventories remain near historic lows, ocean capacity remains under pressure, and port terminal bottlenecks and trucking shortages are increasing hinterland lead times.

“These factors will be slow to unwind, in our view, and leave precious few alternatives to airfreight for shippers in need, especially if we see a quarter four peak.”

After announcing its latest quarterly results, Kuehne+Nagel (K+N) said that it also expects airfreight capacity shortages to last into next year.

The forwarder's chief executive Detlef Trefzger said that Asian exports continued to grow strongly while passenger belly capacity was short of previous levels.

He doesn't expect a return of belly capacity to previous levels globally until 2023 or 2024.

K+N would therefore utilise charters and block space to meet demand.

FedEx also indicated it is not expecting a full recovery in air cargo capacity until 2024.

The express giant said that trade volumes have surpassed pre-pandemic levels and are on course for the fastest year of growth in over a decade.

It said that global air cargo capacity remained down 10% year-on-year in April as a result of lower bellyhold capacity.

FedEx expects air cargo capacity to remain constrained at least in the first half year and capacity recovery to be slow and possibly episodic. A full recovery is not anticipated until 2024.

The company also believes that “favourable” pricing internationally should continue through fiscal year 2022.

Peter Stallion, head of air and containers, Freight Investor Services, added that the return of belly capacity could also result in rates see-sawing.

“As rates come off – and passenger-freighters become less viable – we may also see another rebound in rates as capacity goes offline, and then comes back online, as demand and prices recover,” he explained.

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