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VOLUME XXI
September 14, 2023
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March 18, 2021
Bargain hunters beware: No time to shop for airfreight deals
Finding cargo space on air freighters is a challenge from Johannesburg to Japan
Eric Kulisch, Air Cargo Editor Follow on Twitter Thursday, March 18, 20210 325 6 minutes read
Businesses requiring air transport to move goods are putting on their big boy pants as they accept the harsh reality of the air cargo market in 2021: If you want to play, you have to pay.
Volatility and uncertainty are the watchwords for the air cargo sector, but analysts and logistics professionals say extremely tight capacity and elevated freight rates are here to stay for the rest of the year, with none of the usual doldrums until the fall holiday rush. And finding aircraft with cargo slots is a big challenge all over the world, not just on the major trade lanes connecting China, North America and Europe.
High retail and industrial demand for shipping is putting pressure on the international airfreight sector, which is still about 20% below normal capacity because passenger jet traffic is heavily restricted.
Air cargo carriers are prioritizing customers willing to pay a premium for faster service. At the head of the line are e-commerce shippers, automakers that need components to keep assembly lines running, pharmaceutical manufacturers and retailers like Peloton (NASDAQ: PTON) with disgruntled customers waiting weeks for high-value products on backorder.
Reserving cargo slots with an airline resembles trying to buy tickets to a Beyonce concert before it sells out or trying to buy a home in a hot seller’s market. To beat the competition, you have to move fast and pay top dollar.
“There are not that many lane-pairs these days that are easy to get freight on because the capacity is just not there,” said Benno Forster, head of airfreight operations and procurement Americas for logistics giant DB Schenker. “If you get an offer for a freighter and don’t grab it now, in two hours it’s gone. That happens sometimes in peak seasons, but now it’s kind of daily business.”
Chinese factory production slowed coming out of the Lunar New Year holiday, but the price dip and slight capacity influx appear to be temporary. Logistics providers say rates are starting to climb again out of Shanghai and Shenzhen and likely will trend up the rest of the month. Short-term market softness belies the fact that rates are still two to three times higher than historical standards and transport supply is very low.
In the past two weeks, global airfreight volume increased 14% and capacity eroded about 3.5%, according to World ACD, which compiles market data from airlines. On a global basis, year-over-year, rates are 84% higher than a year ago, it said.
It’s easy to focus on export trade from the world’s manufacturing epicenter, China, to North America and Europe, but industry experts say the shortage of airlift combined with soaring rates is being felt in nearly all trade lanes.
In Asia, demand and rates are especially strong from Taiwan, Singapore, Vietnam, Korea, Japan and Thailand. San Francisco-based freight forwarder Flexport said in a customer update that the yield difference between those markets and China is approaching $4 to $5 per kilogram.
Logistics service providers increasingly are taking more risk to secure space for customers by chartering full planeloads but are confident they will be filled. Flexport, for example, said it has inaugurated a twice-weekly dedicated freighter service from Taipei, Taiwan, to Los Angeles and six weekly controlled freighter flights from Seoul, South Korea, to Los Angeles.
“There has been a huge spike in demand and air rates from both Japan and Korea, and I assume much of that is automotive-related,” said Brady Borycki, executive vice president for global business development at Wen-Parker Logistics.
The highest rates in air cargo at the moment are for shipments originating in South Korea, with demand for COVID-19 diagnostic kits and sea/air transfers contributing factors, World ACD said. Some companies report the rate from Tokyo to John F. Kennedy Airport in New York is as much as $8 per kilogram on some airlines.
Forster added that the capacity squeeze is also significant for Australia and South Africa.
Qantas is operating freighters, but most of its passenger fleet is grounded. Many all-cargo operators are reluctant to offer charters to Australia now because of limited backhaul cargo, the need for multiple crews and tight COVID restrictions, he noted. The Australian government has tried to alleviate the situation for domestic exporters by subsidizing airfreight service with several carriers and logistics companies.
Passenger service to Johannesburg is mostly shut down and the few freighters that fly there are completely full.
Logistics providers and carriers report supply challenges for air transport from the U.S. to Asia, Europe and Latin America, with very high load factors and bookings being made five to seven days ahead of desired transit to secure slots. Flexport said that shipments face rolling backlogs to destinations such as Chile, Brazil and Argentina, and constrained airlift to Central America.
Forster said shipment volumes from the U.S. to Asia — a trade lane that typically has a 70% imbalance that favors inbound freight — has jumped in the past couple months. He attributed the big change to the need for automotive supplies in China.
Air export rates from Europe to Asia, and North and South America, are double what they were in recent months with limited capacity. Carriers report high load factors from major hubs in Europe, mainly due to shipments of automotive, industrial and pharmaceutical products, logistics providers say. The time from booking to uplift is up to 10 days, unless shippers upgrade to express service. Demand out of Europe has increased by more than 30% since the start of the year, with searches for bookings at their highest level since April 2020, according to digital market WebCargo.
Nonstop demand
Record retail sales and unusually high cross-border trade since last summer have been fueled by several pandemic trends: a shift in consumer spending to goods people need, or can enjoy, at home as they shun services and experiences, such as going to the movies; companies still trying to replenish depleted inventories resulting from closed factories and urban lockdowns at the start of the COVID outbreak; and difficulty maintaining stock levels to feed the e-commerce beast, which grew more than 40% in the U.S. last year.
Hot products include sports equipment, digital devices, hot tubs, outdoor firepits, patio equipment, digital devices and office chairs — anything that can be used at home or outdoors for work and leisure.
And demand drivers seem to be gaining momentum.
The U.S. government has begun disbursing $1,400 checks (more for families) as part of its COVID emergency aid plan, which puts money in people’s pockets that can go to more e-commerce orders. Pharmaceutical companies are producing more doses of COVID-19 vaccines, many of which will be shipped by air.
Ocean shipping capacity is so tight that it is taking shippers weeks to reserve a container to move their goods, and many ports are so crowded that vessels have to wait at anchor a week or more for a berth. Container shipping rates are setting records and are up more than 200% from a year ago from China to the U.S. West Coast. Some shippers report paying $6,000, or more, for a forty-foot box, while rates to Europe are in the $10,000 range. Last week, the National Retail Federation raised its forecast for U.S. container imports to 23.3% year-over-year for the first half of 2021.
Expensive and unreliable ocean shipping is forcing many companies to switch to air where possible, especially for goods that have a short shelf life or will decrease in value over time. Logistics providers, such as Kuehne + Nagel, say there is renewed interest in sea-air services, which involve an ocean voyage to a transshipment hub like Dubai, deconsolidation and transfer to the airport for onward transit by air.
Market intelligence firm International Data Corp. is forecasting smartphone shipments will grow 13.9% year-over-year in the first quarter and 5.5% for the full year, pushed by pent-up demand and interest in 5G devices. It also estimates that strong demand for PCs is expected to carry forward into 2021, with shipments growing 18.2% to 357.4 million units and a stronger-than-normal compound annual growth rate of 2.5% for the 2020-2025 period. Manufacturers tend to ship a huge share of both products by air.
The Logistics Managers’ Index shows the cost of freight transportation, warehousing and inventory are all projected to keep growing, even if some incremental ocean and air capacity enters the market.
Meanwhile, Goldman Sachs recently upgraded its estimate for U.S. GDP growth to 7% for 2021, and the Organization for Economic Development doubled its global growth forecast to 6.5%.
“Looking out over the next few months, we see a scenario where capacity could get even tighter and spot pricing could continue to accelerate,” Bruce Chan, vice president of global logistics at investment bank Stifel, said in the March 5 Baltic Air Freight Index newsletter. “Assuming that consumer, and especially e-commerce driven activity persists, and that the industrial recovery continues, more brick and mortar activity and more produce and seafood demand could further tighten capacity as vaccination efforts march forward and life gets back to normal.”
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
March 18, 2021
BASF to increase prices for polyurethane systems products in North America
WYANDOTTE, MI, March 15, 2021 – BASF will increase prices for polyurethane systems
products in North America by $0.13/lb for orders shipping on or after March 30, 2021, or as
contracts allow.
March 18, 2021
BASF to increase prices for polyurethane systems products in North America
WYANDOTTE, MI, March 15, 2021 – BASF will increase prices for polyurethane systems
products in North America by $0.13/lb for orders shipping on or after March 30, 2021, or as
contracts allow.
March 18, 2021
Arsenal Acquires Applied Adhesives NEW YORK, NY and MINNEAPOLIS, MN. March 15, 2021 – Goldner Hawn, LP (“Goldner Hawn”) announced the sale of Applied Products, Inc. (“Applied Adhesives”), a leading manufacturer and value-added distributor of adhesive products and thermal product solutions in North America, to Arsenal Capital Partners (“Arsenal”). The terms of the transaction were not disclosed.
Applied Adhesives is a comprehensive provider of adhesive solutions for the packaging, paper converting, graphic arts, bottle labeling, product assembly, and woodworking industries. The company is a value-added distributor of hot melt, water-based, and reactive adhesives as well as dispensing equipment. Applied Adhesives serves as a critical supply chain partner to leading adhesive manufacturers and formulators by offering reach and high service levels to an expansive customer base. Since Goldner Hawn partnered with Applied Adhesives in 2017, the company has completed five acquisitions.
“We are grateful for the outstanding support Goldner Hawn has provided us over the past four years,” said John Feriancek, President and Chief Executive Officer of Applied Adhesives. “As we look toward the future, we are thrilled to partner with Arsenal. With its backing, we will continue to execute on our growth initiatives and strive to be the adhesive solutions partner of choice for businesses throughout North America.
Chad Cornell, a Partner at Goldner Hawn, added, “It has been a pleasure for Goldner Hawn to partner with Dan Horner and Brian Webb in growing Applied Adhesives, both organically and inorganically, more than tripling its size during the course of our investment, and John has proven to be a fantastic successor to Dan and Brian. He led a number of successful add-on acquisitions for the company and is the right leader to continue Applied Adhesives’ growth. We wish John, his team, and Arsenal all the best in Applied Adhesives’ next chapter.”
Roy Seroussi, an Investment Partner of Arsenal, commented, “We are delighted to partner with John and his team and excited to have Dan continue on the board. Arsenal brings decades of domain and technical expertise in the adhesives and sealants market, and we are excited to support Applied Adhesives’ organic and acquisition growth initiatives and continue to build the company as a leading value-added distributor.”
Applied Adhesives represents Arsenal’s third platform investment in the adhesives and sealants market, following Arsenal’s former investment Royal Adhesives & Sealants and its current investment Meridian Adhesives Group.
BlackArch Partners served as the exclusive financial advisor to Applied Adhesives and Goldner Hawn, with Faegre Drinker Biddle & Reath LLP serving as legal advisor. Kirkland & Ellis LLP served as legal advisor to Arsenal.
About Applied Adhesives Founded in 1971, Applied Adhesives provides innovative and cost-effective solutions to customers throughout North America via the company’s manufacturing capabilities and its partnerships with the world’s premier adhesive and thermal product manufacturers. For more information, please visit us at www.appliedadhesives.com. About Goldner Hawn Goldner Hawn was founded in 1989 in Minneapolis, Minnesota and has been a source of private capital to leading lower middle market companies for the past 30 years. With an investment philosophy centered on the principle of partnership, Goldner Hawn is looking to back management teams of businesses with $5 million to $20 million of EBITDA in industries including industrial manufacturing, value-added distribution, consumer products and services, and outsourced business services. Goldner Hawn has made over 40 platform investments in companies with total transaction values approaching $3 billion. For more information, please call 612-338-5912 or visit www.goldnerhawn.com.
About Arsenal Capital Partners Arsenal is a leading private equity firm that specializes in investments in middle-market specialty industrials and healthcare companies. Since its inception in 2000, Arsenal has raised institutional equity investment funds of $5.3 billion, has completed more than 200 platform and add-on investments, and achieved more than 30 realizations. Arsenal invests in industry sectors in which the firm has significant prior knowledge and experience. The firm works with management teams to build strategically important companies with leading market positions, high growth, and high value-add. Visit www.arsenalcapital.com.
March 18, 2021
Arsenal Acquires Applied Adhesives NEW YORK, NY and MINNEAPOLIS, MN. March 15, 2021 – Goldner Hawn, LP (“Goldner Hawn”) announced the sale of Applied Products, Inc. (“Applied Adhesives”), a leading manufacturer and value-added distributor of adhesive products and thermal product solutions in North America, to Arsenal Capital Partners (“Arsenal”). The terms of the transaction were not disclosed.
Applied Adhesives is a comprehensive provider of adhesive solutions for the packaging, paper converting, graphic arts, bottle labeling, product assembly, and woodworking industries. The company is a value-added distributor of hot melt, water-based, and reactive adhesives as well as dispensing equipment. Applied Adhesives serves as a critical supply chain partner to leading adhesive manufacturers and formulators by offering reach and high service levels to an expansive customer base. Since Goldner Hawn partnered with Applied Adhesives in 2017, the company has completed five acquisitions.
“We are grateful for the outstanding support Goldner Hawn has provided us over the past four years,” said John Feriancek, President and Chief Executive Officer of Applied Adhesives. “As we look toward the future, we are thrilled to partner with Arsenal. With its backing, we will continue to execute on our growth initiatives and strive to be the adhesive solutions partner of choice for businesses throughout North America.
Chad Cornell, a Partner at Goldner Hawn, added, “It has been a pleasure for Goldner Hawn to partner with Dan Horner and Brian Webb in growing Applied Adhesives, both organically and inorganically, more than tripling its size during the course of our investment, and John has proven to be a fantastic successor to Dan and Brian. He led a number of successful add-on acquisitions for the company and is the right leader to continue Applied Adhesives’ growth. We wish John, his team, and Arsenal all the best in Applied Adhesives’ next chapter.”
Roy Seroussi, an Investment Partner of Arsenal, commented, “We are delighted to partner with John and his team and excited to have Dan continue on the board. Arsenal brings decades of domain and technical expertise in the adhesives and sealants market, and we are excited to support Applied Adhesives’ organic and acquisition growth initiatives and continue to build the company as a leading value-added distributor.”
Applied Adhesives represents Arsenal’s third platform investment in the adhesives and sealants market, following Arsenal’s former investment Royal Adhesives & Sealants and its current investment Meridian Adhesives Group.
BlackArch Partners served as the exclusive financial advisor to Applied Adhesives and Goldner Hawn, with Faegre Drinker Biddle & Reath LLP serving as legal advisor. Kirkland & Ellis LLP served as legal advisor to Arsenal.
About Applied Adhesives Founded in 1971, Applied Adhesives provides innovative and cost-effective solutions to customers throughout North America via the company’s manufacturing capabilities and its partnerships with the world’s premier adhesive and thermal product manufacturers. For more information, please visit us at www.appliedadhesives.com. About Goldner Hawn Goldner Hawn was founded in 1989 in Minneapolis, Minnesota and has been a source of private capital to leading lower middle market companies for the past 30 years. With an investment philosophy centered on the principle of partnership, Goldner Hawn is looking to back management teams of businesses with $5 million to $20 million of EBITDA in industries including industrial manufacturing, value-added distribution, consumer products and services, and outsourced business services. Goldner Hawn has made over 40 platform investments in companies with total transaction values approaching $3 billion. For more information, please call 612-338-5912 or visit www.goldnerhawn.com.
About Arsenal Capital Partners Arsenal is a leading private equity firm that specializes in investments in middle-market specialty industrials and healthcare companies. Since its inception in 2000, Arsenal has raised institutional equity investment funds of $5.3 billion, has completed more than 200 platform and add-on investments, and achieved more than 30 realizations. Arsenal invests in industry sectors in which the firm has significant prior knowledge and experience. The firm works with management teams to build strategically important companies with leading market positions, high growth, and high value-add. Visit www.arsenalcapital.com.
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