Global air freight rates rose in November according to the latest data from TAC Index – with a number of seasonal factors, longer term trends and short term events conspiring to drive prices higher. The overall Baltic Air Freight Index (BAI00) calculated by TAC rose +6.0% over the four weeks to December 1, leaving it a little lower – though by only -3.3% – from where it was at the same time last year. Longer-term factors driving up rates include capacity constraints due to production delays and a shortage of new feedstock to convert into dedicated cargo freighters – with many existing freighters reaching advanced age and needing replacement. This problem was highlighted dramatically in November by the fatal crash of a UPS cargo plane in Louisville, Kentucky – resulting in the whole fleet of aging MD-11 freighters being grounded for safety checks. Although the MD-11s – operated by FedEx and Western Global as well as UPS – represent a fairly modest proportion of total market capacity, their grounding came at a tricky time when the market traditionally enters peak season and capacity is stretched. This year’s story of on-off trade wars – with new trade barriers and higher tariffs particularly between China and the US – had led some to expect there may not be much of a peak season this year. However, evidence so far suggests that although direct bilateral trade between the US and China may have fallen, overall volume levels have not been affected – with Asia-Europe and intra-Asia activity rising sharply as well as to and from the Middle East and Africa, according to the latest air cargo volume statistics from IATA. Despite an end to the de minimis exemption for small packages and higher tariffs, US imports do not seem much changed either – if arriving via different places. The latest data on air cargo rates appear to show the first stage of peak season – ahead of Thanksgiving in the US – went very much as usual. And with every prospect that the second stage – ahead of Christmas in Europe – would continue in the traditional pattern. BAI Spot rates out of Hong Kong certainly rose strongly through the month. HK to US East Coast spot rates were already spiking in October and rose further from HK$44.46 per kilo on October 31 to HK$54.04 by December 1. HK to US West Coast surged from HK$41.36 to HK$51.32 over the same period. Meanwhile, HK to Europe spot rates jumped from HK$37.91 per kilo on October 31 to HK$48.03 by December 1. The overall index of outbound routes from Hong Kong (BAI30) – reflecting the full spectrum of spot and forward contract rates on all routes being paid – gained a more modest +7.8% over the four weeks to December 1, leaving it slightly lower at -3.4% YoY. However, that underlying jump in spot rates probably points towards a further surge in the overall index over the remaining three weeks until Christmas – as occurred in both the previous two years. Meanwhile, the outbound index for Shanghai (BAI80) gained +6.6% month-on-month – to leave it ahead by +2.4% year-on-year. Rates from other regions were more mixed. Out of Europe, the index of outbound routes from Frankfurt (BAI20) dipped -8.6% MoM – to leave it languishing at -17.0% YoY. By contrast, outbound London Heathrow (BAI40) surged +21.8% MoM to push it ahead by +7.1% YoY. From the Americas, the index of outbound routes from Chicago (BAI50) gained a more modest +2.4% MoM – to leave it still languishing at – 17.1% YoY. However, the latest numbers were also showing some significant gains on rates for various other lanes added to the data set in recent months by TAC – including from Taiwan and Seoul in North Asia, and from Bangkok and Vietnam in South East Asia. So far at least, the evidence suggests that this year’s turbulent geopolitical developments and severe trade tensions do not appear to have hit overall volumes or rates much – though the patterns of trade may have shifted significantly. With crude oil prices down by 20% or more over the past year, one might also think the robust market might be translating into surging profits too for air cargo carriers. However, a tightening diesel market has also been driving the ‘crack spread’ wider to nearly double last year’s level – and keeping jet fuel prices up, according to the latest figures from Platts. ‘Goldilocks’ – or the three bears? Meanwhile, from a macro perspective investors were focusing on two potential ways markets may develop going forward. One: whether there would be a continuing ‘Goldilocks’ outcome – where easing inflation, falling interest rates and further fiscal stimulus will help ease the global economy through a relatively pain-free slowdown. Or two: whether the bears will prove right for one of three potential reasons – that the boom in AI becomes a bubble that bursts; that labour market weakness might lead to a more serious downturn; and/or whether sovereign debt problems will de-rail economic growth and lead to recession. On the AI side, markets suffered another bout of selling in mid-late November before rebounding again – though remaining nervous about the sheer scale of investment getting concentrated in the sector. Bitcoin and other cryptocurrency assets also plummeted sharply last month by 30% and more from their October highs. On the labour market side, markets were fretting in part about a potential rise in lay-offs caused by the adoption of AI – though figures on that remain mixed so far. On sovereign debt, worries were continuing about the sustainability of mounting debt levels in various major economies – notably France and the UK. However, most players continue to view this as a chronic problem – not yet a critical one – with continuing ‘wiggle room’ for governments and central banks to navigate. In the short term at least, air freight markets seem unperturbed.

Global air freight rates rose strongly in October according to the latest data from TAC Index. The Baltic Air Freight Index (BAI00) gained a solid +7.6% over four weeks to November 3, leaving it not far below where it was 12 months earlier at -4.6% year-on-year. The latest data is not bad news for air cargo carriers after 12 months in which jet fuel prices were down a similar amount – about -2.6% YoY at end-October according to Platts data. That indicates profit margins should be close to last year’s healthy levels. Superficially, the numbers also look consistent with the beginnings of a typical peak season surge – which usually runs through to Thanksgiving on US lanes and on until Christmas in Europe. The numbers for the busiest lanes by volume out of China appear to support this normal seasonal profile. The index of outbound routes from Hong Kong (BAI30) gained +5.8% over four weeks to November 3, leaving it down only -4.5% YoY. Outbound Shanghai (BAI80) gained some +16.6% month-on-month, to leave it lower only -2.3% YoY. A closer look at the new Baltic Air Freight Spot (BAI Spot1) indices out of Hong Kong – now officially launched in partnership with TAC Innovation, and extended to include routes originating from India and Korea too – appear to confirm these trends in greater detail. BAI Spot from HK to Europe (which had already risen significantly in September) edged up only a little further from HK$36.21 per kilo on September 30 to HK$37.91 on October 31. But BAI Spot rates from HK to the US rose much more strongly during October – in line with a typical peak season trend, which sees rates rise fastest on Transpacific routes first and not until later on Asia-Europe lanes. HK to East Coast spot rates jumped from HK$37.85 per kilo on September 30 to HK$44.46 on October 31. HK to West Coast rose from HK$36.85 to HK$41.36. Rates out of Europe were also firming up in October, particularly on Transatlantic lanes – leaving them up close to +25% in dollar terms YoY. The index of outbound routes from Frankfurt (BAI20) gained +18.7% MoM to push it back into positive territory by +1.3% YoY. By contrast, outbound London Heathrow (BAI40) – which had gained significant ground in recent months – fell back sharply towards month-end to finish at -19.3% MoM and at -13.3% YoY. Rates from the US also continued to be softer than from elsewhere. The index of outbound routes from Chicago (BAI50) slipped another -1.5% MoM to leave it still languishing at -15.3% YoY – close to its lowest points of the past five years. Although recent numbers look consistent with the start of a typical peak season surge, sources continue to be cautious about how big a peak there will be this year for various reasons. For one thing, we will be comparing with very pronounced peak season spikes in both 2023 and 2024 – when rates shot dizzyingly high out of Hong Kong in particular through November and early December. Last year, demand was also elevated by a massive boom in e-commerce business. In 2025 that has been curtailed, at least on Transpacific routes, by the end of the de minimis exemption for small packages into the US – as well as higher tariffs (if nothing like so high as feared). As a consequence, some capacity has shifted from Transpac to China-Europe routes – as well as to other lanes from Asia, such as from Vietnam and Thailand, and from Taiwan to the US, boosted by surging trade in semiconductors and related equipment. BAI Spot rates out of Seoul in South Korea have also been rising in recent weeks. Despite the shifting patterns, it seems overall volume has remained close to or even a little above last year’s high levels – leading some observers to remark that fears of rampant ‘de-globalisation’ appear somewhat exaggerated. All this also indicates there should be a peak season spike again this year – though questionable how high it will go, and on which lanes most noticeable. Meanwhile, the macro outlook for the global economy continues to be cloudy and difficult to read. Overall growth has continued to slow – with Europe still weighed down by the ongoing Ukraine conflict and government debt worries in many countries (though not Germany). And China by problems in its construction and property sectors (only partially offset by stimulus measures). One source of relative strength has continued to be the US – although even there the economy would likely be contracting were it not for an extraordinary boom in one specific sector, namely AI. A mood close to euphoria in the AI sphere was stoked in particular by a series of mammoth deals announced recently by OpenAI, inventor of ChatGPT. These included deals with big chip makers Nvidia and AMD and data centre operators such as Oracle – aimed at giving OpenAI an unassailable lead in the race to dominate the space. All of this has further increased the dominance of big US tech companies in global equities. Tech now accounts for over one-third of total market capitalisation in the US S&P500 index – not counting another 10% or so broadly defined as ‘communication services’. Nvidia alone has become the first company ever valued in the market at more than $5 trillion. This has also, alongside a parallel boom in blockchain and cryptocurrency activity, stoked fears that all this looks a little like the ‘dotcom’ boom of the millennium period – which ended of course in a massive bust. So far, most investment professionals seem relaxed that valuations have not yet become over-stretched – with big players in AI led by Nvidia continuing to beat expectations on earnings – though not blind to the possibility that a bust may indeed come at some point, and perhaps soon. Meanwhile, markets are grappling with the need to invest vast amounts that seemingly insatiable demand from AI will require in terms of computer chips,

Air freight rates were little changed overall in September according to the latest data on industry price trends collated by TAC Index. The global Baltic Air Freight Index (BAI00) calculated by TAC was a tad lower by -0.6% over four weeks to September 29, leaving it down by -8.1% from where it was 12 months before – at a time the market was being driven by a booming e-commerce sector and about to enter a pronounced peak season rise. The relatively firm tone to the market was notable given continuing escalation in geopolitical tensions, with no sign of an end to wars in Ukraine and the Middle East. Plus serious disruption to some of the most important trade relationships in the world, notably between the US and China. The overall index of outbound routes from Hong Kong (BAI30) – reflecting the full spectrum of spot and forward contract prices paid – was up +2.9% over the four weeks to September 29, leaving it lower by -5.7% YoY. However, the new BAI Spot indices out of Hong Kong – which have been in public trials since the start of July – revealed an interesting dispersion in rate trends between different lanes. Spot rates from HK to the US East Coast softened from HK$38.59 per kilo on September 1 to HK$37.85 on September 30, despite a rise towards month-end. From HK to the West Coast spot rates eased from HK$36.45 to HK$36.35 over the same period. But from HK to Europe spot rates rose markedly – from HK$32.64 per kilo on September 1 to HK$36.21 on September 30. The index of outbound routes from Shanghai (BAI80) showed a similar pattern – edging up +0.3% MoM to leave it at -9.7% YoY. There were perhaps some particular factors driving rates higher towards month-end – including the impending Golden Week festival in China as well as the major super-typhoon Ragasa disrupting supply chains. But overall out of Asia, rates from other locations such as Vietnam and India were still languishing a long way lower YoY – with increases in capacity this year helping hold rates down despite significantly higher volumes. There were also declines on some new lanes added recently to the TAC data, such as from Seoul to the US – though stronger numbers from other locations such as Taiwan, where sources suggest volumes have increased sharply this year, led by rising exports of computer equipment. From Europe, rate patterns were also firm on various new lanes added by TAC this summer – such as to India and Mexico – and still up YoY on Transatlantic lanes as well as to Japan. Nevertheless, the full index of outbound routes from Frankfurt (BAI20) declined by -6.2% MoM to leave it at -12.6% YoY. After a strong run in recent months, outbound London (BAI40) was also lower by -7.2% MoM to drag it back into negative territory at -1.6% YoY. From the Americas, rates were still firm both to Europe and to South America – but still a long way lower YoY to China and other destinations in Asia such as Seoul. The index of outbound routes from Chicago (BAI50) declined another -9.9% MoM – leaving it languishing at -14.7% YoY. Another lane recently added where rates remained strong was from Mexico to Europe – still solidly ahead YoY. That said, signs of disruption were evident all across the market. For instance, in its latest quarterly earnings call FedEx admitted ‘headwinds’ cutting revenues by a cool $1bn on Transpacific routes, hitherto its most profitable lanes – following higher tariffs and end to the de minimis exemption for small packages into the US. FedEx said it had responded by cutting capacity on Transpac by 25% this year, including a 10% cut in the latest quarter, and was now focusing more on Asia-Europe instead. This would concur with reports that China-US e-commerce activity dropped as much as 40% between April and July – offset by growth on lanes to Europe and elsewhere. There were also signs of China hitting back where it can against higher US tariffs. Back in 2016, the US accounted for 41% of soybean imports to China. This had already fallen to 20% by 2024 following higher tariffs imposed during the first Trump administration – with the US increasingly displaced by supplies from Brazil. Nevertheless, those exports still accounted for some $12.8 billion in revenues for US farmers in 2024. According to various reports, China has still placed absolutely zero new orders for US soybeans from the US for 2025 and ‘26 – pointing to a significant potential hit for US agriculture. In air cargo, following the end of de minimis into the US, Chinese exporters in the key e-commerce sector seem to have been switching sales efforts successfully to other markets – notably to Europe but also to the Middle East, Africa and South America. How long this strategy will continue to work remains to be seen. The European Union and the UK have also been looking at tightening their rules on de minimis. Chinese exporters also seem to have been taken by surprise by the sudden decision of Poland to close its border from September 12 to rail imports from the East. That followed joint military exercises between Russia and Belarus and violations of Polish air space by the Russians. The decision led to a massive tailback in rail traffic from China – possibly contributing to the recent rise in spot rates from China to Europe. From a macro perspective, markets continued to mostly shrug off these geopolitical concerns as well as various worries about inflation, interest rates, growth – and the sustainability of government debt levels in major developed economies. Talking points on the month included worries about debt levels in particular in the UK – where the government is struggling to stay within borrowing limits set by Chancellor Reeves; and in France, where a third government in less than a year appointed by President Macron fell after failing yet

As what is traditionally the quiet or ‘low season’ of the year continued over the summer, air freight rates changed relatively little in August. The global Baltic Air Freight Index (BAI00) calculated by TAC Data edged up by +1.2% over the four weeks to September 1, leaving it lower by -5.9% from where it was a year before. Although the headline numbers didn’t move much, sources were reporting a lot of things as usual going on in the market. Most obvious, for instance, looked to be the potential impact of significantly higher tariffs announced in recent weeks on goods entering the US from various countries – ranging from Brazil and South Africa to Switzerland and India. Sources were also reporting significant shifts in the composition of demand for capacity between different sectors as compared with the previous year. Back in 2024, when the market enjoyed a firm tone most of the year, it was driven in particular by a boom in e-commerce. This year, e-commerce has continued to be active – but shifting away to some extent from Transpacific routes onto other lanes, such as to Europe and the UK, South America, the Middle East and Africa. This year, by contrast, sources suggest the market has been driven by more activity in other sectors – ranging from garments and pharma to electronics and semiconductors. There have also been recent reports of capacity constraints even causing delays in certain places – with both freighter and bellyhold capacity being fully utilised on some lanes, thus handing more bargaining power to carriers who prefer clients that enter longer-term block space agreements (BSAs). For these reasons, some foresee renewed upward momentum soon, predicting increases in rates across major lanes from early September – well before the start of the traditional peak season – and sharper spikes possible out of some markets such as South India. In South East Asian markets such as Bangkok, Singapore and Kuala Lumpur, there were already reports of transhipment congestion causing delays of 7-12 days. And in Africa – where there are limited freighter options on many lanes – sources also reported bottlenecks that could result in 6–9 day delays. All of this was before taking account of the fact that, although rates may be lower YoY, fuel costs have fallen even more. According to Platts data, jet fuel rates dipped -4.3% in the month to August 29 and were lower by -10.7% from the previous year’s average – implying that although air freight rates might have fallen, margins were probably just as high if not higher for carriers. Looking at regional activity in more detail, rates on the busiest lanes out of China were little changed last month. The new BAI Spot rates from Hong Kong – which recently moved from private to public trials – shifted down slightly to Europe from HK$32.66 per kilo at the end of July to HK$32.19 on August 29. HK to the US East Coast went up a tad from HK$37.34 to HK$38.55. HK to the US West Coast was also higher – up from HK$35.46 to HK$36.41. The overall index of outbound routes from Hong Kong (BAI30) – reflecting the full spectrum of spot and forward contract rates being paid – gained +3.1% over the four weeks to September 1, leaving it down by -8.1% year-on-year. Outbound Shanghai (BAI80) showed a similar trend, gaining +3.0% MoM to leave it lower by -7.5% YoY. Rates from some big hubs out of Europe were down over the month of August – though remain relatively stronger versus the same period in 2024. The index of outbound routes from Frankfurt (BAI20) dipped -2.2% MoM – but was lower by only -5.4% YoY. Outbound London Heathrow (BAI40) enjoyed another strong month, gaining +1.8% MoM – to leave it still ahead by a healthy looking +18.3% YoY. Meanwhile, from the US, the index of outbound routes from Chicago (BAI50) looked weaker over both time frames – down by -11.3% MoM and by -5.9% YoY. Reflecting the continued growth of other parts of the market, in addition to new private trials underway for more BAI Spot routes from India and South Korea, TAC Freight also added some 22 new lanes to its weekly data sets over the past two months. Additions in July included new routes to and from Australia, Brazil, Mexico, India and South Africa. In August, further additions included routes from North Asia to Mexico; from Taiwan – a world leading producer of semiconductors – to both Europe and the US; from Bangkok and Seoul to the US; plus both ways between the US and UK. From a macro perspective, equity markets continued to mostly shrug off various worries – ranging from renewed fears that the boom in AI may run out of steam to worries that US President Donald Trump may take his interference in the independence of the Federal Reserve a step too far. Markets worry about the Fed in particular on the basis that pressure from Trump to lower interest rates in the short term may result in higher rates longer term – as the US struggles to fund its gargantuan fiscal deficits and debt levels. They are also mindful that large portions of US debt are owned by foreigners, particularly from countries like China and Japan as well as the UK – who could decide to take their money elsewhere. Hitherto, the attraction of the US has been underpinned by the dollar’s status as the world’s undisputed leading reserve currency – given not least the lack of any obvious alternative – although the dollar’s share of total reserve assets has been slowly shrinking. It is notable, however, that the value of some assets seen as ‘store of value’ alternatives to ‘fiat’ currencies like the dollar – such as gold and cryptocurrencies like bitcoin – have risen strongly this year (though flattening out in recent months). It seems the Trump administration, under Treasury Secretary Scott Bessent, is aiming to turn interest in crypto

Air freight rates were little changed overall during the month of July, with the global Baltic Air Freight Index (BAI00) calculated by TAC Data edging up +1.5% over the four weeks to August 4. That left it lower but only marginally by -1.8% over 12 months. The relatively muted movement in rates was not unusual for a period when air cargo often enters its ‘low season’. Typically, extra capacity gets added in the bellyhold of passenger planes at this time of year – with more planes flying as people take summer holidays, particularly on Transatlantic routes. The extra capacity tends to help keep overall rates down. The extreme uncertainties of earlier this year – on the outlook for tariffs and trade – had also clearly abated to a significant extent. Nevertheless, sources were still reporting an ongoing reshuffling of supply chains by shippers and capacity by carriers between different lanes. Shippers, sources said, were trying to anticipate upcoming changes to trade terms, such as the removal of the de minimis exemption for packages entering the US from all countries – due to take effect from August 29. There was therefore also considerable variation in price patterns through July between different lanes and outbound locations. That said, on traditionally the busiest lanes in the market from China to the US and to Europe, there was relatively little movement in rates overall. The new BAI spot rates from Hong Kong – which went from private to public trials from the start of July – were barely changed over the month. BAI Spot rates from Hong Kong to Europe eased lower from HK$33.88 per kilo on June 30 to HK$32.62 on July 31. To the US East Coast, they edged up from HK$36.38 to HK$37.34. And to the US West Coast rates hardly moved, starting July at HK$35.81 and ending at HK$35.46. The overall index of outbound routes from Hong Kong (BAI30) – reflecting average rates achieved across the full spectrum of spot and forward contract cargo – was also little changed over the four weeks to August 4, dipping a tad by -0.1% month-on-month to leave it lower by -8.2% year-on-year. Outbound Shanghai (BAI80) was a tad up by +0.1% MoM, to leave it lower too but by only -3.2% YoY. Some sources suggested the relative strength in these rates reflected some shippers moving cargo more quickly before the end of de minimis – and the continuing risk of much higher tariffs between the US and China. Others, however, suggested China rates were also being buoyed up to some extent by a reduction in capacity – and movement of planes to other lanes such as from Vietnam, Thailand and Malaysia. The tracking of changes in capacity has been made much more accurate through a new version of the TAC Space capacity-tracking tool – now available and helping to identify more easily changes as they occur day by day on multi-leg routes. It is already being used by various major shippers, particularly for TransPacific lanes. Meanwhile, the popularity of the new BAI Spot methodology to track changes in the marginal price is already spreading to other locations – with private trials now underway from both India and South Korea, and demand developing for other lanes too. Out of Europe and North America, rate patterns were also relatively strong through the month. The index of outbound routes from Frankfurt (BAI20) slipped a bit but only marginally by -1.2% MoM, with gains on Transatlantic lanes offsetting falls to other locations, leaving it still ahead by +4.9% YoY. After some big gains in the previous month or so, outbound London (BAI40) was volatile intra-month but ended the four weeks to August 4 with a rise of +2.8% MoM leaving it well ahead by +28.3% YoY. From the US, the index of outbound routes from Chicago (BAI50) was also up by an eye-catching +18.7% MoM – recovering losses from earlier in the year to propel it too back into positive territory by +10.2% YoY. From a global macro perspective, equity markets continued to rise gently over the month in a relatively serene fashion – with the elevated political uncertainty of the first half of 2025 continuing to abate. That happened despite renewed threats from US President Donald Trump to impose swingeing tariffs on various trade partners – if not so high as in his ‘Liberation Day’ announcement earlier this year. The broad-based S&P500 index had ended July back firmly in positive territory for the year-to-date – and at roughly +17% over 12 months. And after a brief wobble at the start of August, it seems the market was now largely discounting the likely impact of that. The recovery in US equity markets has been driven by a resurgence in tech themes led by AI. Leading US stocks in the AI field such as Nvidia, AMD and Microsoft had been hit earlier in the year by the revelation of potentially challenging cut-price competition from Deepseek in China. But they have all recovered strongly since the start of May and continued to rise to new heights through June and July. Nevertheless, the strongest performing major global equity market this year remains the DAX index, which was still up around +30% YoY at the end of July as the market anticipates faster growth in Germany boosted by major new spending on defence and infrastructure. All of this has been further helped by the agreement on tariffs announced between the EU and US, with a rate of 15% being applied to European goods being seen as not so great – but not so damaging as it might have been. And far from a worst-case scenario. Tariff rates of 30% or more into the US are still being threatened against many other economies from Switzerland to South Africa. But Transatlantic air cargo markets rates have thus far remained relatively strong – though still a long way below the levels of peak season last winter.

June may have been a tumultuous period in terms of geopolitical developments. But global air freight rates were little changed over the month. In June, the conflict in the Middle East escalated severely – first with Israel mounting massive air strikes on Iran, then Iran responding and finally with the US getting involved as well.  During that period of turmoil, there were many delays and cancellations to air traffic in the Middle East. Crude oil prices surged – and jet fuel prices jumped nearly 20% month-on-month to June 20, according to Platts’ data, before falling back sharply after a ceasefire was declared on June 24. Yet the global Baltic Air Freight Index (BAI00) barely moved, drifting a tad lower by -1.1% over the four weeks to June 30 – leaving it down by -5.3% year-on-year. The overall pattern is not surprising perhaps given that some of the busiest lanes in air cargo – such as Transpacific and Transatlantic – do not traverse Middle East airspace, even though there is a lot of air cargo that also moves from Asia to the Americas via Middle East carriers. And the broader outlook for tariffs and trade between the US and China, and between the US and Europe, is of course not driven solely by events in the Middle East. Looking ahead, markets were also focusing on a series of important dates coming up. Notably: During June, rates on the busiest lanes out of Asia were little changed overall. The index of outbound routes from Hong Kong (BAI30) – reflecting the whole spectrum of spot and forward transactions from the biggest airport in the world by cargo volume – was lower but by only -2.7% in the four weeks to June 30, leaving it lower by -10.9% YoY. That said, the new BAI Spot indices – reflecting purely spot market rates reported for Hong Kong to the US East Coast and US West Coast as well as to Europe (which have moved from private to public trials from July 1) – did show significant volatility intra-month. BAI Spot rates were falling steadily in the first half of June, then flattening out mid-month –and then rebounding towards month-end. Meanwhile, overall rates from Shanghai (BAI80) showed a similar pattern to HK, falling by -5.0% MoM to leave that index at -7.6% YoY. Some sources have been suggesting the outlook might be a little more bearish given the withdrawal of some widebody freighters from Transpacific lanes following the US-China trade standoff earlier this year.  Others however suggest the market has continued in a pattern of complex interaction between supply and demand we have witnessed all year. Capacity, they suggest – particularly on Transpacific lanes, which are dominated by freighters rather than passenger bellyhold volumes – was continuing to adjust rapidly to the rise and fall of demand. Hence, in periods when demand has been strong, such as in the runup to President Trump’s announcement of higher tariffs on China, capacity has also been high – and then then cut back after the tariffs were announced. More latterly, after the 90-day US-China deal, it seems capacity has been restored to some extent, though not to previous levels – as e-commerce business, at least on China- US lanes, has still been impacted by an end to the de minimis exemption for small parcels. Providing more transparency on those capacity trends is TAC Space, with the beta edition of version 2 now available – providing significantly more detail on multi-leg routes. Meanwhile, rates from Europe remained pretty firm through June, led by Transatlantic lanes – which were still up by close to +20% YoY in late June – but lower YoY on other key lanes such as to China as well as to Japan. The index of outbound routes from Frankfurt (BAI20) edged up +2.6% MoM to remain ahead by +1.3% YoY. From London Heathrow (BAI40) rates continued rebounding strongly from low levels in early May, gaining a further +33.1% MoM to end the month at +31.5% YoY. Out of the US, rate patterns were more mixed – staying lower YoY to China and flattish to Europe but well ahead on lanes to South America, led by strong rates from Miami, which does the lion’s share of that volume. The index of outbound routes from Chicago fell by -0.9% MoM to leave it at +0.4% YoY. Other than the important trade issues, from a global macro perspective markets were also focusing on the sustainability of US debt levels post Trump’s ‘big beautiful bill’ on tax and spending – which pointed towards the federal deficit reaching an alarmingly high 6.2% of GDP in 2025, and adding a projected $2.4 trillion to US debt over 10 years. The bill led ratings agency Moody’s to downgrade the US credit rating by one notch from Aaa to Aa1. The dollar has also continued to fall against other major currencies – dropping from around $1.04 to the euro in early January to around $1.18 by the end of June, and from around $1.20 to the pound sterling to $1.37. Nevertheless, although long-term US bond yields did go up, equity markets have not been unduly affected – at least in the short term – despite considerable debate about the outlook. Those with a more sanguine view were pointing to the fact that US productivity and growth have consistently beaten forecasts throughout the years since Covid. And that higher interest rates also reflect in part expectations of stronger growth going forward. Plus the fact that higher rates arguably reflect a ‘normalisation’ of interest rates – at higher levels than in the ‘abnormal’ era of quantitative easing (QE), which has now finally come to an end. In the era of the new Trump administration, policy decisions and outcomes remain hard to predict. Which means that shippers, freight forwarders and airlines will all be on their toes and watching closely to see not only how events in the Middle East pan out, but also what happens when those dates for decisions on tariffs

It was another volatile month in May for air freight markets. The global Baltic Air Freight Index (BAI00) did not move much overall in the four weeks to June 2, gaining +1.2% to leave it lower by -5.4% from where it was 12 months earlier. But an array of countervailing trends led to a lot of intra-month volatility and dispersion in rate patterns on different lanes. And a continuing state of flux on terms of trade was still making it difficult for shippers, forwarders and airlines to plan ahead. Nevertheless, given the significant disruption to global trade this year – driven by the Trump administration’s moves to address global trade imbalances with threats of higher tariffs – rate levels continued to be relatively firm. Especially when compared with a year ago when the market was being driven by a boom in e-commerce – now de-railed to some extent by an end to the so-called de minimis exemption for smaller parcels entering the US. With jet fuel price levels also lower by some -18.3% over 12 months to May 30, according to Platts’ data, that should also mean the market has if anything become even more profitable for carriers. Rates on the busiest lanes out of China eased lower overall during May but not by much – with spot market levels first falling then rising sharply as the month went on. The index of outbound routes from Hong Kong (BAI30) – the biggest airport in the world for air cargo – edged up +0.9% in the four weeks to June 2 to leave it lower by -6.3% YoY. But pure spot rates from Hong Kong as tracked by the new BAI Spot indices – which are soon moving from private trials to public trials – were rising strongly towards the end of the month before flattening out at month-end both on TransPacific lanes to the US East Coast and West Coast as well as to Europe. Meanwhile, the index of rates out of Shanghai (BAI80) was also firmer in May – showing a healthy increase of +7.0% MoM, though also a decline at -5.3% YoY. Some sources said disruption to ocean shipping due to cancellations during the recent stand-off on tariffs between the US and China could lead shippers to turn to air cargo instead – causing a ‘Covid effect’ similar to the pandemic period when supply chains became severely snarled. Others, however, suggest customs issues are still causing some hesitancy on shipping to the US – holding back demand to some extent. With many block space agreements (BSAs) having been cancelled earlier this year due to uncertainties on tariff levels, it seems likely the market – at least short term – will be dominated and driven more by spot market activity. Complicating the picture was also a drop in capacity on TransPacific lanes – with carriers having shifted some aircraft to other routes in response to the US-China trade stand-off. Following the deal to cut tariff levels back to 30% for Chinese goods into the US and to 10% for US goods into China – at least for 90 days – sources reported some reversal of that trend, with capacity starting to be restored Meanwhile, other markets out of Asia which tend to be dominated by spot market activity did not seem to benefit from any short term drop in levels of US-China trade during the recent stand-off. According to TAC Freight data, rate levels out of both Vietnam and India for instance are now considerably lower YoY. Out of Europe rate patterns were mixed. The index of outbound routes from Frankfurt (BAI20) – the biggest airport by cargo volume in Europe – was lower by -4.0% MoM to leave it lower by -4.7% YoY. Meanwhile, the index of outbound routes from London Heathrow (BAI40) bounced back from very low levels in late April, gaining +26.3% MoM – putting it back in positive territory by +5.2% YoY. Out of the Americas, the index of outbound routes from Chicago (BAI50) went the other way, giving back most of the big gains from earlier this year during May, dropping -24.0% MoM – dragging it back into negative territory by -7.2% YoY. Rate levels on lanes from the US to South America – dominated by volume from Miami – continued to stand out from most other markets by being well ahead YoY, according to TAC Freight numbers. That said, after big increases on those rates over the past year, some sources are starting to say there are now indications of over-capacity emerging on lanes to LatAm. Meanwhile, TAC also announced the launch of data on a range of new lanes including 10 regional and 6 country to country routes, adding numbers for the first time on key markets such as Mexico, Brazil, Australia and South Africa. More broadly, despite some serious concerns about the “big, beautiful” tax bill proposed by Trump, the global macro picture was looking a little better in May than in April – when there had been a steep drop in equities and then a dramatic rebound after Trump backtracked on most of his big tariff announcements. The subsequent 90-day deal on tariffs between the US and China was then perceived as a material positive for markets – and a meaningful de-escalation that had reduced if far from eliminated the risks going forward. Markets now expect US growth will be slower, but earnings for most companies to be affected only modestly – paving the way for US equities to continue their rebound through May. Similarly, economic growth in China is also expected to be slower than before – not least after a 21% decline reported in exports to the US in April. China seems to have coped reasonably well to offset the impact of that by increasing exports elsewhere. It also enjoys plenty of scope to soak up excess production by boosting domestic demand – if it can find effective stimulus tools to achieve that. In the short term, European equities have been doing best –

During a period of high volatility and turmoil in markets, global air freight rates were generally trending a little lower in April – though with huge dispersion in the trends across different lanes. The global Baltic Air Freight Index (BAI00) calculated by TAC Data slipped -4.1% over the four weeks to April 28, leaving it still narrowly ahead by +0.8% year-on-year. The overall level of rates was still relatively strong as compared with 12 months earlier – when rates were high for the time of year, entering the summer season, and rising further driven by a boom in e-commerce.  Rate levels at or slightly above 12 months ago also continue to compare favourably with the continuing weakness in jet fuel prices. Jet fuel was some -14.6% lower on average year-on-year to April 25, according to the latest data from Platt’s. That should mean most carriers are still enjoying higher profit margins, at least for now. On the other hand, market sources were reporting spot rates falling much more than the index averages over the past month – and ending the month flat-to-down in the last couple of weeks of April on the busiest lanes out of China to the US and to Europe. The index of outbound routes from Hong Kong (BAI30) – still the biggest airport in the world by cargo volume – dropped -3.1% over the four weeks to April 28, dragging it into negative territory by -3.6% YoY. The index of outbound routes for Shanghai (BAI80) also fell – by -3.5% MoM to leave it at -4.8% YoY. After starting the year strongly during Q1, rates out of Europe had a much weaker month in April – though overall rates on Transatlantic lanes to the US still remained well up YoY.  The index of outbound routes from Frankfurt (BAI20) dropped -21.8% MoM – though leaving it still in positive territory by +7.9% YoY. Outbound London Heathrow (BAI40) dropped a similar amount – by -20.9% MoM – but was left languishing at -13.2% YoY, back below even its weakest levels of 2024. Rates out of the US by contrast ended the month strongly, bucking the downward global trend – at levels comfortably higher YoY not only to Europe and to South America but also to China, despite a sharp fall towards month-end.  The index of outbound routes from Chicago (BAI50) surged +35.7% MoM, pushing it up by +61.9% YoY – higher than at any point since 2023. At a macro level, market participants have been grappling with the potentially massive exogenous shock of a huge hike in taxes – caused by swingeing new tariffs on goods imported to the US proposed by the Trump administration. And likely effects on inflation and on business and consumer confidence. Equity markets initially sold off sharply in early April after Trump announced his tariff plans. Initially, the recently re-elected president did not blink – not until US Treasury bonds sold off sharply too, threatening to send the US economy into a potentially serious tailspin. After announcing a 90-day delay on most of the bigger tariff measures – except those on China of up to 145% – markets calmed down and recovered to some extent. Conditions then eased further after Trump backtracked more with exemptions for key imports such as mobile phones, computers and semiconductors – and more recently on auto parts. Nevertheless, the new US administration has clearly set its sights on a total reordering of the global trade system – to tackle what it sees as asymmetric trade barriers, particularly with China as well as with the EU – even if that comes at the cost of recession in the US. Many market participants continue to hope the higher tariffs – such as those on Chinese goods, which would likely cause a total collapse in US-China trade – are primarily a negotiating gambit. And hence remain hopeful deals will be struck at some point both with China and with the EU to negotiate the tariffs down and for trade to continue on more normal terms. Even if that does prove to be the case, however, continuing uncertainty remains the biggest problem for markets to gauge. For the air cargo sector in particular, all of this uncertainty continues to throw up huge challenges – and potential opportunities – as discussed at length during the recent IATA World Cargo Symposium, held during April in Dubai.  Not least of the challenges was the imminent end of the so-called de minimis exemption – which hitherto exempted packages worth less than $800 from duty into the US. After an initial attempt to abolish the exemption earlier this year led to chaos at US customs, there was a delay on implementation – set to expire on May 2. There were some expectations air freight rates might rise ahead of that deadline – if e-commerce shippers, for instance, rushed to move more product before the deadline expired. But there was little evidence of that in the latest TAC air freight rate data, with sources reporting spot rates remained weak. Sources also reported that some big shippers had already built up significant inventories of one to three months ahead – allowing a little time to cushion the blow of higher tariffs from China in particular while they developed alternative supply chain solutions. In the short term, there were also reports of significant cancellations in ocean shipping – and many so-called ‘blank sailings’ or ships with no cargo. Some were also viewing that as a potential opportunity ahead for air cargo to step in and get some of those cancelled shipments to market quickly – if and when trade conditions ease. Whatever happens next, it seems unlikely to be dull.

Markets were volatile and fractious in March – not surprisingly perhaps given the outlook for higher tariffs in the US, risks of retaliation from elsewhere and the potential disruption to global trade and growth. Indeed, the US stock market completed its worst quarter for three years, with the S&P500 index sliding -4.6%. Nevertheless, global air freight rates were stronger again over the last month according to the latest data recorded by TAC Index. The global Baltic Air Freight Index (BAI00) calculated by TAC gained +7.1% over the four weeks to March 31 to leave it up a solid +5.1% YoY.  This was an impressively strong performance compared with last year – when air freight rates were surging due to the boom in e-commerce. Over the last year, jet fuel prices also fell an average of -7.8% according to data from Platts to 28 March. Higher rates combined with lower fuel costs should thus be boosting margins for carriers. The overall trend was led again by rising rates out of China both to the US and to Europe. The index of outbound routes from Hong Kong (BAI30) – the biggest airport in the world by cargo volume – gained +6.3% over four weeks to March 31, leaving it still narrowly ahead by +1.4% above last year’s high level. Outbound Shanghai (BAI80) did even better with a gain of +11.9% month-on-month to leave it ahead by +3.4% YoY. Rates out of Europe also enjoyed a mostly solid month. The index of outbound routes from Frankfurt (BAI20) gained +8.2% MoM to leave it ahead by an impressive +28.3% YoY. Outbound London (BAI40) did less well, but after a big drop mid-month recovered well to end March only down a tad at -0.1% MoM, and also still ahead by +2.6% YoY. Out of the Americas, rates were more mixed with the index of outbound routes from Chicago (BAI50) ending lower by -5.9% MoM, though also still narrowly ahead by +1.1% YoY. Sources were largely agreed about the main reason rates were rising overall, particularly in the last two or three weeks of the month – the primary driver being the likelihood of impending tariffs to be imposed in the US after April 2. The new Trump administration had already moved to introduce tariffs on certain key commodities such as steel and aluminium. And also on certain key trading partners with which the US runs large deficits – notably Mexico and Canada as well as China. From April 2, market participants were also anticipating the introduction of US tariffs across the board affecting all goods globally, as well as the potential for so-called ‘reciprocal tariffs’ in response to other non-tariff barriers like VAT – notwithstanding the fact many US states also impose such sales taxes.  All of this led to shippers rushing to move more products more quickly ahead of April 2.  Some anticipate that, if the new tariffs go ahead as anticipated, trade volumes could get hit and rates will then fall. Some sources said spot rates already started to soften on April 1, though whether that pattern continues remains to be seen. Looking ahead, perhaps the key issue market participants are grappling with is sheer uncertainty.  The erratic pattern of on-again, off-again announcements about tariffs coming out of the White House clearly seem to be a negotiating tactic aimed at keeping trade partners off-balance.  But this has also at times looked chaotic – with the new administration having to reverse tack more than once due to complexities in the supply chain it had not foreseen, such as within the auto sector. All of this has also make it more difficult for market participants – including airlines, forwarders and shippers – to plan ahead with confidence. And that’s before taking into account the potential responses of other trading partners – and all the uncertainties about that. In the meantime, a more pessimistic mood about the global economy has taken hold – with expectations of US growth falling, and euphoria around opportunities related to investing in artificial intelligence (AI) punctured by developments involving first DeepSeek and then Alibaba out of China. Against that, the European market has been lifted by developments following the election of Friedrich Merz as the new Chancellor of Germany – and plans to loosen fiscal rules in order to massively boost defence spending. Unlike the US, European equity markets were mostly up in the first quarter – led by the German DAX index, which gained well over +10% in Q1. All of that said, some market developments appear to be secular trends with such momentum they will continue regardless – if perhaps in different ways – whether or not tariffs and other trade barriers impact costs.  Foremost among these remains e-commerce, which is still rising globally – as sector specialist Brinkley Chan outlined to the recent TAC Innovation dinner held in Hong Kong in late March.  China may currently still enjoy a massive advantage on costs in e-commerce. But as Chan pointed out, any erosion of that – due to tariffs and other policy changes – may well lead to the movement of production to other regions such as Europe and South East Asia. And if so, that could of course also affect the level of freight activity – perhaps as soon as May or June of this year. The TAC dinner in Hong Kong also featured a timely contribution from Jin Yu Cheong, Baltic Exchange head in Asia, who outlined among other things the key importance of data and risk management tools – such as those provided by TAC – especially in turbulent times.