Air freight explodes as an “emergency go to”
The ability of passenger planes to carry cargo declined during the pandemic due to the drop in flights to Australia.
International demand for air cargo, measured in freight tonne-kilometers, increased 26% in August from a year earlier, according to the Association of Asia Pacific Airlines.
But due to limited abdominal space in airplanes, cargo capacity only increased by 17.8% over the same period.
Some steelmakers are putting essential materials on planes despite the high cost because there is no more space on the ships, said David Buchanan, chief executive of the Australian Steel Association.
“It’s ridiculous to do air freight for steel, but there is no choice,” he said. “We have members trying to get space outside of Japan right now – they can’t even get a container for a volume of steel.”
Stuart Asplet, director of ocean freight for Asia-Pacific for logistics group Geodis, said most businesses still depend primarily on shipping freight despite costs of over US $ 5,000 for a container of twenty feet from North Asia to Australia, with imports shifting to air freight as needed.
In addition, the credit ratings of Australian steel producer Infrabuild, which has more than 15,000 customers and is part of the GFG alliance of Sanjeev Gupta, have been downgraded by Moody’s Investors Service and Fitch Ratings due to concerns about its ability to secure new funding after the collapse of Greensill Capital.
Fitch, who lowered Infrabuild deeper into BB- junk’s territory at B and kept it on “negative watch”, said that while the steelmaker’s operational performance was strong, he feared he would struggle. to borrow money.
“Infrabuild’s reduced access to funding from traditional banks will likely increase its cost of funding due to reduced lender appetite and the higher perceived risks associated with entities related to GFG Alliance,” said Fitch.
He also warned that transactions with related parties of Infrabuild, including making prepayments to sister company Liberty Primary Metals Australia (which operates the Whyalla steelworks) in return for price discounts, had increased.
Fitch said the transactions reduced the company’s liquidity cushion if it was unable to refinance a $ 250 million syndicated loan facility on assets.
The facility is due to mature in October 2022. Infrabuild’s parent company, GFG Alliance, has spent months trying to secure new funding with US private equity group White Oak Capital, but has yet to announced okay.
Infrabuild’s liquidity and refinancing risks may also increase if the results of the UK’s Serious Fraud Office investigation into GFG Alliance are “unfavorable,” Fitch said.
Moody’s downgraded Infrabuild’s credit ratings from B3 to B2 and put the group under review for further downgrade, warning its liquidity could drop to “unsustainable levels” if it does not refinance the 250 loan facility. million dollars before it was due and had to use its cash flow to pay it off.
The rating agency said it could lower Infrabuild’s ratings further if it does not complete a refinancing within the next two months.