CIBC NotesEQUITY RESEARCH
September 26, 2021 Industry Update
Air Cargo Rates Near 2020 Record -- Transportation &Aerospace Weekly
Key Points
We have seen freight rates remain elevated given capacity constraints across various modes of transportation, and air cargo rates have been no exception. The spot Shanghai-North America rate recently hit US$11.43/kg, just US$0.84/kg off the record pricing we saw back in May 2020 when there was a spike in medical supplies being shipped from Asia. Similarly, the rate from Shanghai to North Europe was US$7.19/kg, a level not seen since last June. Looking at the Frankfurt-North America spot price, this is hovering around US$4.00/kg, more than double where it was just prior to the pandemic.
A key driver of this has been volumes exiting the sea freight market and being converted to air freight. With air freight capacity still constrained and air cargo volumes strengthening despite it being only September, rates could continue to move higher here as we enter peak season. Given the congestion on ocean shipping lines and at major ports, shippers are turning to air freight to restock inventory.
We continue to see this as a positive backdrop for Cargojet and Air Canada Cargo. FedEx recently noted it does not expect air cargo capacity to get back to pre-pandemic levels until 2024. For Cargojet, in addition to the acceleration in e-commerce penetration that is benefiting its domestic network, we expect a structural shift in tonnage moving to dedicated air charter carriers which bodes well for its ACMI and international charter operations.