Preliminary rate data for the month of May on two headhaul air cargo trade routes suggests that air freight prices have dropped markedly.

According to the Airfreight Price Index, published monthly by Drewry, demand has softened substantially compared with the same time one year ago. 

"Initial indications point to a year-on-year decline of around 12%." said Martin Dixon of Drewry. "That follows a 4% year-on-year decrease in April."

In March and to some extent in April, rates had been buoyed by the launch of Apple’s iPad3, evidence that airfreight pricing is subject to short term changes in demand, he added.

He told Lloyd’s Loading List.com that over the past year, airfreight rates on Asia-US and Asia-Europe routes had trended downwards due to falling demand, and (until recently) rising capacity supply.

"As the latter is driven in part by developments in the passenger market, capacity does not readily adjust to cargo market changes, and over the past year passenger and cargo markets have been moving in different directions, hence the over-capacity and impact on freight rates."

He underlined that some adjustment to cargo capacity had taken place since the start of the year with airlines grounding some freighter capacity while a number of all-cargo operators had been forced out of the trade altogether.

"IATA, for example, estimates that Asia Pacific cargo capacity had contracted 4.1% in the year to April. Looking forward, the removal of some freighter capacity would help stabilise freight rate levels but continuing weak demand, particularly between Asia and Europe, will keep any rate recovery in check." 

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