Global air freight rates drifted lower during February – but in what looked increasingly like the calm before the storm that arrived with some intensity from the start of March.

Given large scale flight cancellations across the Middle East and significant disruption to ocean shipping, there looks to be plenty of potential volatility ahead – and likely spikes in rates.

But looking back, the global Baltic Air Freight Index (BAI00) drifted only modestly lower by -4.2% over four weeks to Monday March 2, leaving it slightly below where it was by -1.3% from 12 months earlier..

There were without doubt some serious ongoing geopolitical tensions throughout the month – plus renewed uncertainty about trade patterns after the US Supreme Court ruled Donald Trump’s tariff regime unlawful.

But overall the monthly price trends for February were not far out of line with previous years – with first a modest rise in rates, typical of the so-called ‘mini-peak’  before Chinese New Year; then a quiet spell during the holiday period; then a slow pick-up as factories started to spool up again.

All of this was well reflected in daily BAI Spot rates out of Hong Kong during February – with first a rising trend ahead of the CNY period; then a flattening out in the second week; then a gentle series of falls through the second half of the month.

BAI Spot from Hong Kong to Europe was at $34.60 per kilo on January 30 but had slipped to $31.05 by February 27. Likewise, BAI Spot from HK to the US West Coast drifted down from $35.29 per kilo to $31.09 over the same period. And HK to the West Coast from $33.81 to $30.50.

Meanwhile, the full index of outbound routes from Hong Kong (BAI30) – reflecting the whole spectrum of spot and forward contract business going through – slipped -8.1% over four weeks to March 2, leaving it lower by -6.9% year-on-year.

Outbound Shanghai (BAI80) was a little firmer, dropping -5.7% MoM but leaving it still comfortably ahead by +8.8% YoY.

.

Rates out of Europe were also holding up well, with the index of outbound routes from Frankfurt (BAI20) shedding only a modest -0.2% MoM to leave it lower at -7.2% YoY.

And outbound London Heathrow (BAI40) was continuing to look the strongest of the major outbound indices with a gain of +6.0% MoM leaving it ahead by a healthy looking +19.9% YoY.

Rates out of US, however, continued to languish well below the highs of previous years, with the index of outbound routes from Chicago (BAI50) losing another -6.9% MoM to leave it down some -24.7% YoY.

All of that, however, was beginning to look like ancient history within the first few days of March – following the decision of the United States to support Israel in launching massive military strikes on Iran. And then Iran responding with attacks on the US and its allies in the Middle East, notably in the Gulf – resulting in large-scale closures of air space across the region.

Various local carriers such as Emirates, Etihad and Qatar Airways have become important players in global air cargo – causing an immediate impact on capacity, particularly for Asia-Europe cargo, about 50% of which typically goes via the Gulf, but also for wider global supply chains.

The impact was immediately apparent in BAI spot rates not only out of Hong Kong but also out of India – which both started to rise in the first three days of March, with many players already expecting bigger increases to follow.

Given the pace of events, it was of course difficult to predict the overall extent and duration of the impact. But some types of shippers, such as in the garments sector on the Indian subcontinent, were said to be affected immediately – leaving them searching for scarce air freight capacity through alternative routes but at much higher rates.

With Iran making attacks on Gulf oil and gas infrastructure there were also potentially severe implications for jet fuel prices – which had already risen an average of over +10.1% globally over the month to February 27, according to Platts data.

Prior to the renewed conflict in the Middle East – and the renewed spectre of further disruption to trade, together with higher energy prices and higher inflation – from a macro perspective markets had generally begun the year on a positive note. 

Markets were still fretting about the sheer scale of capital expenditure related to the AI theme by big US players like Alphabet, Amazon and Meta – and how realistic are the return on investment (ROI) expectations. But the huge capex spend was of course also bringing benefits to many including US semiconductor manufacturers like Nvidia, Broadcom and AMD.

Since the start of 2026, this boost was also extending to the equity prices of key manufacturers in Asia like TSMC of Taiwan as well as Samsung and SK Hynix of South Korea – also reflected in the continuing strength of air cargo rates out of Taiwan and Seoul.

That said, the South Korean equity market – which had jumped about +50% in the first two months of the year – was also the most immediately hard-hit by events in the Middle East, giving back -20% in just the first three trading days of March, led lower by steep falls on Samsung and SK Hynix.

Meanwhile, markets had also been responding enthusiastically to the landslide election victory of Takaichi Sanae in Japan – widely seen as market-friendly in the tradition of Margaret Thatcher and keen to extend the reforms of her predecessor Shinzo Abe.

On the other hand, Sanae is also notably keen to boost spending on what she sees as strategic industries such as AI and semiconductors, defence and shipbuilding – which could also add to pressures in the Japanese government bond (JGB) market given its huge existing debt levels.

Whatever happens in the Middle East will likely have repercussions both short term and longer term on the global outlook – and of course on air freight rates, which will continue to be a key barometer of market direction.

The market is currently braced for what could be an extended period of higher volatility – potentially driven, at least in part, by modal shifts from ocean to air freight with shippers increasingly desperate to get goods to market.

The post February was quiet in air freight – but looking like the calm before the storm appeared first on TAC Index.

Global air freight rates fell quite steeply for most of January – with the global Baltic Air Freight Index (BAI00) calculated by TAC Data dipping some -19.3% over the four weeks to January 26, leaving it lower by -6.1% over 12 months.

Such a steep fall in rates is not unusual for what is often a quiet period of the year following the peak season surge.

Nevertheless, the depth of the decline was slightly surprising given reports about the continuing resilience of demand – and constraints on air freight capacity. Plus a number of one-off factors impacting the market in January – from closure of air space over Iran to weather events in North America; and congestion, cancellations and delays to flights across Asia.

Some market participants were also on alert because of trends in ocean shipping rates, which rose higher and earlier than usual in January ahead of the so-called ‘mini peak’ before Chinese New Year – leading some to anticipate a similar effect on air freight rates.

With CNY taking place more than two weeks later this year in mid-to-late February, it was still very possible there could yet be a late rise in rates – into the sort of mini peak bounce that usually occurs.

And there were some signs that could indeed be starting to happen in the final week of January – with the BAI00 index gaining +4.1% over the week to February 2, cutting its four-week decline to only -2.2% and the YoY decline to only -3.0%.

Nevertheless, BAI Spot rates out of Hong Kong did fall steadily through January both to Europe and the US – before starting to firm up again towards month-end.

BAI Spot rates from Hong Kong to Europe went down from HK$39.24 per kilo on January 2 to HK$34.60 by January 30.

Spot rates to the US East Coast slipped from HK$43.39 to HK$35.29 over the same period. And spot from HK to the West Coast dipped from HK$41.69 to HK$33.81.

Meanwhile, the full index of outbound routes from Hong Kong (BAI30) – reflecting the whole spectrum of spot and forward rates being paid – fell some -8.9% over the four weeks to February 2, leaving it lower by -5.6% year-on-year.

Outbound Shanghai (BAI80) had fallen very steeply over New Year but also rebounded in late January, leaving it narrowly ahead by +1.1% over the four weeks to February 2 – and back in positive territory YoY at +8.9%.

Rates elsewhere out of Asia were also falling most of the month, though with some exceptions – such as out of Vietnam, where rates firmed up significantly in mid-late January (though still well down YoY).

And from Taiwan, where rates were rising sharply again towards month- end, and remaining well up on a YoY comparison – boosted by continuing strong trade in semiconductors related to the AI investment boom.

Out of Europe, rates were falling too though not so fast for most of January –and also enjoyed a significant bounce around month-end.

After a jump in the final week, the index of outbound routes from Frankfurt (BAI20) was narrowly up by +2.0% over four weeks to February 2, though still lower at -7.6% YoY.

Also after a big rebound over the final week, outbound London Heathrow (BAI40) ended the same four weeks up +13.9 % MoM, though also still lower YoY at -6.4%.

From the Americas, the index of outbound routes from Chicago (BAI50) was also up MoM by +5.6% – but still a long way down at -18.9% YoY.

From a macro perspective, markets began the year on strong form with equities rising again in the US, Europe and Asia – despite another wobble mid-month when NATO appeared set to fall apart over Greenland.

Market sentiment was buoyed by expectations of faster growth in the US – driven not least by the apparent determination of the Trump Administration to turbo-charge the economy ahead of mid-term elections.

Stimulus measures on the way in the US already included huge tax cuts following the so-called ‘Big Beautiful Bill’ of 2025. Plus expectations of more fuel being added to the fire through interest rate cuts to be pushed through by the successor to Jerome Powell at the Federal Reserve.

Further rises in the stock markets, however, also came with expectations of rising inflation as well as ongoing geopolitical concerns – with the dollar falling further, plus gold and silver prices surging (with gold up around +85% YoY at one point in late January).

At month-end, however, the boom in precious metals went abruptly into reverse. Suddenly, both gold and silver plummeted sharply following the announcement of Kevin Warsh as Trump’s nominee to be the next chairman of the Fed – Warsh being seen as arguably more orthodox and less accommodative on lower interest rates.

Bitcoin and other cryptocurrency assets and tokens – which had not enjoyed the same sort of surge as gold over the previous year – also fell sharply.

Energy markets on the other hand surged again during January, with crude oil rising from around $60 per barrel to over $70 at one point before also falling towards month-end. The intra-month rise was showing up quite quickly in jet fuel prices – with the global average for jet up +9.6% in the month to January 30 according to Platts data.

Rising jet fuel prices amid expectations of faster growth – and strong demand even amid trade tensions – are also continuing at a time when air cargo capacity continues to look pretty tight.

Towards month-end, news also came through that UPS – which suffered the fatal crash late last year that led to the grounding the world’s entire MD-11 freighter fleet – had decided to retire all of its aging MD-11s.

UPS announced plans to replace those planes with Boeing 767s, though that process would likely take some time to complete – given not least backlogs on new freighter orders and a continuing shortage of feedstock for conversions.

So the short term outlook for rates ahead of Chinese New Year may not look quite so bullish as some anticipated – but still pretty firm. And the medium to longer-term outlook for the market continues to look pretty tight.

The post Air freight rates fall in January – though outlook still robust in the runup to Chinese New Year appeared first on TAC Index.

2025 was certainly an unpredictable, volatile and at times chaotic year for global trade. Nevertheless, global air freight rates largely followed the traditional pattern – rising to a seasonal peak in the runup to Thanksgiving in the US and Christmas in Europe, then falling sharply as volumes dropped over New Year.

The global Baltic Air Freight Index (BAI00) calculated by TAC Data continued rising steadily through the first half of December before falling steeply in the final week after Christmas – ending the four weeks to January 5 lower by -15.0%.

That put the global index back below where it was the year before at – 11.4% year-on-year – though almost entirely due to a steeper than usual fall of -14.0% over the final week.

Indeed, given the scale of geopolitical tensions and disruption due to rapid and unpredictable changes in tariffs and trade patterns, it is remarkable how overall activity and rates diverged so little from previous years.

As we noted last month, direct China-US trade volumes may have fallen in 2025 – but that was more than offset by higher China-Europe, intra- Asia and other volumes elsewhere such as into the Middle East and Africa.

These changes showcased the incredible flexibility of the air cargo market to respond rapidly and switch capacity quickly to wherever it might be needed.

As the year unfolded, the industry was able to respond opportunistically as circumstances changed. Following the re-election of Donald Trump as President in the US, for instance, air cargo activity was initially boosted by shippers ‘front-loading’ ahead of Trump’s ‘Liberation Day’ announcement of severe higher tariffs against US trade partners.

Then, after markets initially plummeted and cargo volumes fell back, rates got a further bounce when Trump backed down – with shippers rushing to re-stock shelves when US tariff levels were lowered, at least short-term.

Meanwhile, there was much shuffling of supply chains – with many manufacturers moving towards ‘China plus one’ production and delivery systems, boosting intra-Asia trade in particular.

Following the end of the de minimis exemption for small packages into the US, the focus of e-commerce sales also switched more to Europe, the Middle East and Africa – and Asian markets, further boosting intra- Asia trade.

China’s success in adjusting to the challenge of Trump’s trade war was highlighted by figures suggesting its annual trade surplus weighed in at over $1 trillion for the first time.

With overall cargo volumes still rising according to IATA numbers, air freight rates were also underpinned by constraints on capacity. Both of the main manufacturers, Airbus and Boeing, remained way behind on scheduled deliveries – and there was a continuing shortage of feedstock for conversions, particularly of large widebody freighters.

This shortage of capacity was further exacerbated late in the year by the fatal crash of a UPS freighter – resulting in the whole aging fleet of about 60 active MD-11s getting grounded for safety checks, sidelining about 10% of widebody capacity from the market.

With jet fuel prices also a little lower – by an average of -4% over the year according to the latest Platts data – 2025 should thus have proved another profitable year for most carriers.

All of that said, spot rates did fall sharply in December after peak season reached its climax and then ended abruptly. BAI Spot rates from Hong Kong to the US East Coast, which had begun the month on December 1 at HK$54.04 per kilo, had dropped to HK$43.39 by January 2.

HK to the US West Coast also dropped precipitously from HK$51.32 per kilo to HK$41.69 over the same period.

Spot rates to Europe showed a similar pattern, falling from HK$48.03 on December 1 to HK$39.24 on January 2.

Over the month, the full index of outbound routes from Hong Kong (BAI30) – reflecting the whole spectrum of spot and forward contract volumes to all destinations – fell some -11.2% over the four weeks to January 5. However, it was not down that much from the year before – at only -3.9% YoY.

Outbound Shanghai (BAI80) dropped more steeply – after a big decline in the final week over New Year – to be lower by -24.3% MoM. But even after a fall of that scale, it was also not much lower YoY at -6.1%.

Rates elsewhere out of Asia – such as from Vietnam, South Korea and India – were also mostly falling back at year-end, and remained below the previous year’s levels YoY.

The most significant exception appeared to be Taiwan – a premier exporter of semiconductors – from where rates remained up YoY both to Europe and to the US.

By contrast, rates out of Europe generally held up well in December – though didn’t look so great on an annual basis. The index of outbound routes from Frankfurt (BAI20) actually gained +10.8% MoM. But was still a long way lower at -25.3% YoY – compared to what had been a much higher seasonal peak the previous year.

Outbound London Heathrow (BAI40) was down in December but not that much at -6.9% MoM – to leave it at -15.3% YoY.

Out of the US, rates also went down steeply in late December and were left a long way below the previous year’s peaks. The index of outbound routes from Chicago (BAI50) declined -29.6% MoM to leave it languishing at -33.9% YoY.

At a macro level, markets ended the year on a relatively positive note. The S&P500 index of leading US stocks gained over +17% YoY, but with the index dominated more than ever by the big US tech stocks such as Nvidia, Alphabet (Google), Amazon, Apple, Microsoft and Oracle.

Over the year, however, US equities were significantly outperformed by stock markets in Europe such as Germany – boosted by higher spending on defence and infrastructure – and even the UK (with both the DAX and FTSE 100 indices rising well over +20% YoY). And Japan’s Nikkei 225 index was up over +30% YoY.

These gains were also much greater in real terms versus the US considering a considerable slide in the value of the dollar last year, which ended -14% against the euro in 2025.

Meanwhile, as confidence sapped from the dollar as a reserve currency, gold soared by about +70% YoY – playing its traditional role as an alternative ‘store of value’.

Surprisingly perhaps, the same was not so much true of cryptocurrencies – despite greater legal certainty under the new regime in the US – with bitcoin first surging in early 2025 then falling back to end the year more or less flat.

Despite gains outside the US, markets continued to fret about the sheer scale of investment in the AI theme – and whether the AI boom had become a ‘bubble’ about to burst.

They were also rising worries about how much of a lead the US tech giants now held over competitors in China – which seemed to have diminished dramatically over the year.

In the short term at least, the air freight numbers seem to be showing plenty of demand for semiconductors from Taiwan. And with market participants positive about a further ‘mini-peak’ coming soon – ahead of Chinese New Year.

The post Air freight rates reach December peak then fall sharply to end a tumultuous year appeared first on TAC Index.

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.

The post Strong demand and tight capacity push rates up as air cargo market defies predictions appeared first on TAC Index.

Our data has become a benchmark for the industry, but historically, only larger, more highly capitalized businesses have been able to benefit from it. By launching our new pricing structure, businesses of all sizes can now use our data to improve their air cargo risk management. 

This lower price point gives more market participants the flexibility to enter into Index-Linked Agreements (ILAs), which enable fairness and efficiency in pricing for the entire market during volatile periods. ILAs rely on highly accurate, financially compliant and time-stamped indices – with full transparency on calculation methodologies – which we have spent nearly 17 years developing under the UK Financial Conduct Authority’s guidelines.

Our Founder and Managing Director, John Peyton Burnett, believes this is a major milestone in broadening access to sophisticated air cargo risk management information tools. “We are determined to democratize access to TAC Index’s high-quality transactional data for pricing on major air cargo routes,” said Burnett. “Our new subscription model should help many more market participants to gain an accurate understanding of the market movements that matter to them, and to ultimately optimize their businesses through more effective risk management.”

Cameron Honarvar, Director of Finance, adds that the new subscription model is the latest example of how TAC Innovation is delivering leading risk management information services to the air cargo industry. “At TAC Innovation, we’re actively looking at the challenges facing the air cargo industry. We’re blending data science, blockchain and software expertise to create more tools to make air cargo risk management more efficient for all,” said Honarvar. 

The post Opening up market data: our new subscription fee model explained appeared first on TAC Index.

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, data centres and sheer power generation capacity.

By some estimates, capital spending required by AI-related activity could reach $7-8 trillion over the next five years – a huge proportion of investable capital available. That promises to be great news for all sorts of companies standing to benefit from that capital investment – but could also crowd out investment from other areas. And that’s before considering whether it will indeed become a bubble – and what the fallout might be.

For now, however, this seemingly insatiable demand for semiconductors and data centre capacity looks a tremendous source of greater demand for the air cargo sector.

1. The BAI Spot indices are the first-ever daily spot air freight indices developed under the UK Financial Conduct Authority’s (FCA) benchmark guidelines, using the Baltic’s established methodology with panellist assessments to ensure greater data integrity and market confidence.
   Developed with input from leading airlines and freight forwarders, BAI Spot provides a daily, independent assessment of spot air cargo rates.
   The indices are designed for settling index-linked physical contracts (ILAs), price benchmarking, and risk management solutions (such as futures and derivatives), offering stakeholders a credible and consistent measure of market performance. ︎

The post Air freight rates on the rise ahead of traditional peak season – as AI drives markets appeared first on 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 again to pass austerity measures needed to bring spending in check.

Debt-to-GDP levels are indeed worryingly high in the UK (at nearly 104%, according the latest IMF figures) and higher in France (at just over 116%). That said, debt-to-GDP is even higher in a number of other major economies such as Japan (247% and counting), Italy (nearly 133%) and also the US (at over 122%).

Indeed, excluding smaller economies such as Switzerland and Norway, the only major developed country with lower debt-to-GDP than the UK is Germany (at just over 70%) – a figure set to expand as Germany massively boosts spending on defence and infrastructure. Hence not surprising perhaps that markets do not seem over-perturbed by current headwinds.

Turning back to air cargo, rates may be firm in the short term but expectations remain mixed for the peak season ahead.

Despite the impact of higher tariffs and the end of de minimis, overall demand seems to remain strong – especially on Asia-Europe routes. And capacity ahead still looks tight – with deliveries both of new passenger planes with bellyhold space and of dedicated freighters well below pre-pandemic levels and unlikely to rise anytime soon.

On the other hand, the recent firmer tone could also have been exaggerated by the impact of the super-typhoon, Golden Week and the rail closure through Poland – which has now been reopened. As always, time will tell.

The post Air freight rates steady – despite geopolitical tensions and fractious trade relationships appeared first on TAC Index.

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 to the advantage of the US with a two-pronged strategy. First, by providing greater legal certainty for investing in the sector – through the recently passed Genius Act. And second, by leveraging investor interest in stablecoins such as USDC that are tied to the dollar to enhance the attractions of US debt.

It seems a clever approach – though relying to a large extent on confidence in the architecture of crypto markets, which are still a work in progress.

Meanwhile, air freight markets will be gearing up for the start of peak season as usual – though with a very different backdrop in terms of the outlook for (and reality of) higher tariffs from many markets into the US. To optimise performance, it seems players will need to remain as nimble and flexible as ever.

The post Air freight rates maintain a steady holding pattern through August appeared first on TAC Index.

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.

The post Air freight rates change little in July – amid reshuffling supply chains and capacity shifts appeared first on TAC Index.

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:

• July 9 – when a 90-day pause on higher US tariffs on goods from the EU and multiple other countries was due to expire;
• July 14 – when the pause on EU retaliatory tariffs against the US was also due to expire;
  and:
• August 10 – when the 90-day deal to delay super-high US-China tariffs was due to expire.

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 and trade terms fall due in July and
August.

The post June is another tumultuous month – but little movement in air freight rates appeared first on TAC Index.