IPC International Community magazine an association member publication
Issue link: https://iconnect007.uberflip.com/i/1497169
IPC COMMUNITY 19 SPRING 2023 pared to 2021, though capacity remains 8.2% below 2019 levels. Air freight accounts for less than 1% of total global trade by volume, but accounts for roughly 35% of global trade by value. It is an important transportation network for high value goods, many of which touch the electronics industry. Air freight rates are down significantly from their peak levels at the end of 2021. The Baltic Exchange Air Freight Index, which measures air freight rates per kilogram, reports rates on the Hong Kong/North America route are down over 100% from $12.72 in December 2021. Air freight rates on the Hong Kong/Europe route are down 61% from peak, and transatlantic rates are down roughly 56%. Air freight rates are down significantly over the last nine to 12 months but remain signifi- cantly higher than pre-pandemic levels. Trans- atlantic air cargo rates are still up 80% from pre-pandemic levels, while air cargo rates between Asia and both North America and Europe remain up about 75%. Rates should continue to drop in 2023, but high freighter fleet utilization and elevated fuel costs could keep prices above 2019 levels. Oil prices surged in the aftermath of Russia's invasion of Ukraine. The prices peaked around $115 a barrel during the summer of 2022, the first-time oil prices broke $100 per barrel since 2014, then declined after that in line with a broad macroeconomic slowdown. While oil prices have edged slightly higher with the reopening of China, I expect prices to decline modestly this year. Though prices will not return to pre-pandemic levels in 2023, prices will be down sharply from last year. Gas prices rose in tandem with higher oil prices in 2022 and strong economic activity, espe- cially in the first half of the year. In the U.S., gas prices peaked in May 2022 at a record-setting level, surpassing $5 per gallon. Gas prices are down about 33% from the peak and are off 3% over the last year. Jet fuel prices were also up in 2022, reach- ing their highest levels in 14 years. However, jet fuel prices remained high at the start of 2023, the result of tight supply and strong demand. Jet fuel prices rose to levels never recorded in January as China lifted its COVID- 19 travel restrictions and air travel picked up swiftly. Moreover, refinery outages and other capacity constraints have kept jet fuel sup- ply in check. U.S. jet fuel inventories ended 2022 at 34 million barrels, the lowest since 1990. The European Union's ban on Rus- Chart 3: Measuring air freight costs.