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.

Air freight rates dropped a little in February, as they often do in the period during and just after Chinese New Year, but remained comfortably ahead of last year. The global Baltic Air Freight Index (BAI00) calculated by TAC Data fell -5.4% in the four weeks to 3 March, but remained ahead by some +10.1% from 12 months before. The data is interesting given huge uncertainties about future levels of global trade – with stiff new tariffs planned on goods imported to the US, plus an end proposed to the so-called  ‘de minimis’ exemption for parcels worth less than $800.  The uncertainty about the end of de minimis – which was announced and then rapidly postponed as US customs ports became overwhelmed – led to some cancellations of e-commerce flights, sources reported. This also followed a rush of ocean container shipping activity, with imports rising 41% in January at the major US west coast port at Long Beach – as shippers rushed to move goods ahead of new requirements coming in. Container shipping rates have since fallen sharply, with further uncertainty created by a plan announced through the US Trade Representative to impose port fees of $1 million-plus per ship per visit for any ships manufactured in China arriving at US ports. Some view this as potentially good news for air freight rates – if shippers then decide to move more via air cargo instead. During February, however, air cargo sources reported spot rates were continuing to trend lower on the big lanes out of China – though that was not unusual for the time of year. Sources said the market had been weighed down a bit during February by downward pressures due to the issues with the proposed changes on de minimis, though this seemed to be abating as we entered March. The index of outbound routes from Hong Kong (BAI30) fell -6.9% in the four weeks to 3 March – but was still well above levels of the year previously with rates higher by some +13.4% YoY. Outbound Shanghai (BAI80) was lower too MoM by -5.6%, but also comfortably higher still YoY by +12.3%. Out of Europe, rates over the month were also quite firm, with the index of outbound routes from Frankfurt (BAI20) almost unchanged at -0.6% MoM and also still in positive territory YoY by +15.3%. Outbound London Heathrow (BAI40) was lower MoM by -17.3%, but also still ahead YoY by +5.4%. From the Americas, the index of outbound routes from Chicago (BAI50) edged up +0.3% MoM – leaving it still slightly lower by -4.0% YoY. Markets spent the month digesting a barrage of announcements on trade issues from the newly re-elected US President Donald Trump, trying to work out what might be mere threats or bluster or ‘machine gun diplomacy’ for negotiating purchase – and what may be serious, as well as what the effects may be.  The speculation about how Trump viewed the use of tariffs focused on four main possibilities:  First, that Trump saw he could make threats as potential ‘bargaining chips’ to achieve essentially non-financial ends, such as curbing illegal migration. Second, that Trump viewed tariffs as a potentially important revenue raising tool – that might help him cut taxes elsewhere. Third, that tariffs could be used for strategic defense purposes – to protect vital domestic industries such as steel production. And fourth, that tariffs could be used as a mercantile tool – to help rebalance big trade imbalances, in particular the massive deficits on trade the US has been running for many years with both China and the EU. Some commentators fretted that big tariffs would lead inevitably to retaliation and trade wars, hitting global trade and growth – with the impact disproportionately outside the US on more open trading economies such as in Europe and the UK, where trade is a much higher proportion of total economic activity.  Others were focused more narrowly on how an end to the de minimis exemption alone might have a massive effect on the way trade is conducted – with supply chains altered to accommodate onerous new reporting requirements and new fees to be paid. Within the cargo industry itself, however, leading players continue to query how much of a change will be forthcoming – given the huge logistical challenges in trying to implement a new system of checking every single package – plus the potential impact on inflation in the US. On the wider threat of a potential trade war, many market players remain optimistic that – after both China and the US have suffered to some extent from the effects of increasingly tense rivalry in recent years – perhaps a deal might be done after all, not least given Trump’s vaunted credentials as a dealmaker. In the short term, perhaps the most surprising development in markets so far on 2025 has been the largely unexpected strength in European equities – which started the year with stronger gains than the US. Perhaps this simply reflects the fact that US equity values were already relatively high, trading at historically high price earnings (P/E) ratios prior to the new presidential term starting.

Air freight rates declined in the first half of January – as they usually do after the end of peak season – and then rebounded a little, particularly on the busiest lanes out of Asia, in the runup to Chinese New Year (CNY). The global Baltic Air Freight Index (BAI00) calculated by TAC Data fell -14.6% over four weeks to 27 January, though was still ahead by +8.7% from 12 months earlier, with sources citing a continued firm tone to the market. Following another quiet week through CNY to 2 February, the index was still ahead by +6.7% YoY. After a modest rise during the weeks both before and through CNY, the index of outbound routes from Hong Kong (BAI30) had shed -7.2% over the four weeks to 2 February, leaving it ahead by +7.2% YoY. Outbound Shanghai (BAI80) saw a slightly bigger drop of -12.9% MoM to the same date, leaving it narrowly up +1.0% YoY.  From major outbound hubs in other regions, the market was also firmer than a year before. Out of Europe, the index of outbound routes from Frankfurt (BAI20) shed some -17.6% MoM to 2 February, but was still comfortably ahead by +18.0% YoY. Outbound London Heathrow (BAI40) was up +3.1% MoM and even further ahead YoY by +23.7%. From the Americas, the index of outbound routes from Chicago (BAI50) slipped -14.0% MoM but was also still a little higher YoY at +5.1%. The firmer tone of the market reflects a significant rise in cargo volumes over the past year, which the market accommodated without rates escalating too severely – partly by adding extra capacity. Hong Kong, which remains the world’s biggest airport by cargo volume, handled some 4.9 million tonnes in 2024 – an increase of +14% YoY, boosted by more bellyhold capacity made available through rising passenger traffic. Shanghai’s Pudong airport also registered an increase in cargo volumes of some +9% YoY, taking its total up to 3.4m tonnes. One of the biggest gainers by volume in 2024 was Changi airport in Singapore, which saw a rise of +14.6% YoY, taking its total to just under 2m tonnes, boosted partly by extra Sea-Air activity to evade disruption in the Red Sea, sources said.  Sources were also reporting big increases in volume from other locations out of Asia, including from India, Vietnam and Thailand – as shippers continued to diversify supply chains.  Dimerco, a big international freight forwarder, highlighted in a recent report a surge in air cargo volume out of Taiwan too, which is a major supplier of semiconductors including AI chips as well as AI server stacks. From Europe too cargo volumes were rising last year. Frankfurt saw a +6.2% increase, taking its total up to 2.1m tonnes. And London Heathrow rose +10.4% taking its total to nearly 1.6m tonnes, its best year since 2019. Other big airports in Europe also registered increases, with Schiphol in Amsterdam rising +8% YoY to take its cargo volume to 1.5m tonnes. One of the biggest gainers was Liege in Belgium, which saw a rise of +15.6% YoY pushing its volume up to 1.2m tonnes. The healthy volume numbers underpin what has been an optimistic tone in the sector, though with expectations that such high recent growth rates must surely fall at some point. Not least due to worries about the impact of higher tariffs and potential trade wars following the re-election as US President of Donald Trump. One of the first moves of the Trump administration, in addition to announcing tariffs on goods from Canada, Mexico and China, was to suspend access to the Section 321 customs de minimis entry process for small shipments of under $800 from those countries.  Such shipments are often e-commerce packages, which have been the biggest driver of air cargo market growth in the past year or so – led by Chinese shippers like Temu and Shein – giving rise to fears that rates could suddenly drop.  However, a crackdown on de minimis was not completely unexpected – and indeed had already attracted bipartisan support in the US Congress, so seemed likely to go through whoever was President. E-commerce players have had some time to plan for it, with sources optimistic the market can absorb some higher costs – if at the expense of higher inflation in the US. While waiting to see which new tariffs would actually be pushed through, markets have continued to focus on various investment themes, not all of which might chime with the notion of a new era of American dominance.  The urgent need for more electricity and infrastructure to support it – driven to a significant extent by the rise of AI – is seen as playing particularly well for Schneider Electric, for instance, a French-based company which saw its share price surge in the past year (until a sell-off in late January). Likewise, the use of GLP-1 drugs developed by the Danish corporation Novo Nordisk would appear to have enormous potential – not least in the US, where nearly 12% of adults have diabetes and 40% are classified as obese. The same drugs are thought to promise various further benefits from improved kidney function to cardiac health to protection against dementia.  So plenty of potential for sales in the US – so long as they do not get embroiled in a trade war between the US and the EU.  The biggest theme in the market for some time has of course been AI, viewed as a massive new driver for the whole economy from software to autos.  Until recently, this has been seen as an exclusive preserve of the US, led by AI chip maker Nvidia and its big clients among the US tech titans. That was until the sudden emergence last month of DeepSeek, backed by the hitherto little-known Chinese hedge fund High-Flyer, led by Liang Wenfeng.  The market’s sudden realisation that DeepSeek may offer highly effective and much lower-cost competition sparked a dizzying fall in the Nvidia share price in

Peak season for air freight reached the end of its traditional period in December, with rates continuing to rise in the runup to Christmas and then tailing off as volumes dropped during the holiday period to New Year. The overall Baltic Air Freight Index (BAI00) gained a further +7.2% in the four weeks to 23 December, leaving it still a little lower by -3.1% from the level 12 months before, when there was a pronounced peak season spike.  Over New Year rates then fell back a little with the BAI00 index dropping -3.7% in the week to 6 January. Nevertheless, rates were still comfortably ahead of 12 months earlier – when there was a steep fall after the peak season spike – to remain up some +25.9% YoY. For most of 2024, the index rose steadily, creating what felt like a peak season which started much earlier than usual – with rates rising slowly and steadily – and then lasting much longer than the previous year.  With jet fuel prices down more than 20% over the year, according to Platt’s data, it thus turned into a much more profitable year for carriers than looked likely in early 2023 – when it seemed the industry had added rather too much capacity during the pandemic. In 2023, the market was in the doldrums much of the year, which arguably made many shippers complacent about capacity for peak season. That had to a sudden and dramatic surge during the final quarter as they scrambled to secure space. In 2024, some of the lessons of that chaotic period seem to have been taken on board – with shippers and forwarders planning ahead accordingly.  It was obvious for most of the year that overall demand was rising – led by a continuing boom in e-commerce, particularly out of China. Air cargo volumes, as tracked retrospectively by IATA, were showing 10% or so YoY rates of growth all year.  Capacity did increase significantly as well, augmented by some switching of freighters from less busy to more busy routes, such as away from Europe onto TransPacific lanes.  The overall index was led higher most of the year by activity on the busiest lanes out of China, with the index of outbound routes from Hong Kong (BAI30) up a further +5.3% MoM through 23 December – though still -7.1% below the steep peak season high of the year before. However, even after a fall over New Year of -11.1% in the week to 6 January, it was still up +14.0% YoY – reflecting what still feels like a firmer tone to the market than a year ago. Likewise, outbound Shanghai (BAI80) continued to rise until Christmas, up another +2.0% MoM to 23 December, though below the previous year’s peak by -6.2%. And although it then fell after Christmas by -6.8% in the week to 6 January, it was also still well ahead by some +37.6% YoY. Out of Europe, rates were in the doldrums most of the year, but finally began to surge in the final quarter – caused in part by rising demand and also by a fall in capacity, partly due to the loss of access to airspace over Russia. The index of outbound routes from Frankfurt (BAI20) surged +28.3% MoM to 23 December, putting it back in positive territory by +10.7% YoY. After a further surge of +19.8% in the week to 6 January, it was up +40.8% YoY as compared with the depressed levels of a year ago. Outbound London also gained strongly by +13.4% MoM to 23 December, pushing it up by some +31.6% YoY. After a fall of -5.8% in the week to 6 January, the YoY gain slipped back a bit to +19.4%. From the Americas, the index of outbound routes from Chicago (BAI50) also rose strongly by +8.8% MoM to 23 December, though still lower at -10.0% YoY. After a further surge of +16.3% in the first week of 2025, that YoY figure had flipped to a gain of +30.9% from the level of a year before. From a macro perspective, the outlook continued to be dominated by expectations for the return as US President of Donald Trump. In the short term, this was positive for US equities, particularly the Russell 2000 index – reflecting more the outlook for domestic US companies than the S&P500, which is seen more as an index of US global trading firms.  Other immediate winners were bitcoin and cryptocurrency markets – expected to benefit from a lighter-touch and more certain regulatory regime under Trump.  The S&P500, however, still enjoyed another stellar year, gaining +24% during 2024 – leading some to wonder how much higher US equities can realistically go when the S&P already accounts for an incredible 75% or so of total global equity market cap. For some influential investors such as Howard Marks of Oaktree Capital, a big alternative investment firm, that valuation reflects the fundamental relative strengths of the US economy. As Marks wrote to investors recently: “[The US] benefits from a wonderful combination of free markets and the incentives they provide, dependable rule of law, stable government, highly functioning capital markets, strong higher education, reasonable levels of regulation, spirited entrepreneurship, and thus vitality and dynamism.” The US may eventually be overtaken by China as the world’s largest economy, Marks admitted, but that should not be surprising if China has almost four times the population. Compared with Europe, some would point out that the US also benefits from much more plentiful and cheaper commodities – notably energy – which are also key factors in its competitiveness and faster growth.  At the same time, many of those touted as potential losers from higher tariffs under Trump – such as US companies that rely heavily on imports from China – did not see their equity prices hit, at least not yet.  There are various possible explanations for this, including the fact that many US retailers, for instance, reported strong recent earnings. Plus the possibility

And despite worries about higher tariffs into the US and trade wars, with capacity still tight the outlook for air cargo may not look too bad  Air freight rates were up again last month as the market entered its traditional peak season period, with the global Baltic Air Freight Index (BAI00) calculated by TAC Data rising +4.6% in the four weeks to 2 December. The index was, however, still a little below the level of 12 months before – by -1.1% – when the market was heading into a pronounced peak season spike. Prospects for peak season and beyond were major talking points at the recent TIACA Air Cargo Forum, which brought together over 3,000 industry executives in Miami just after last month’s US elections.  Despite concerns about new, more severe tariffs imposed by a re-elected President Donald Trump – and how that might affect trade flows – the mood was sanguine if not upbeat about the outlook for air cargo, at least in public.  In an industry leaders’ panel session, Ashok Kumar of DB Schenker, for instance, said peak season would be big – if not quite as big as expected – and that he was “cautiously optimistic” about 2025. In another session, Delta Airlines Cargo president Peter Penseel said he thought the impact of the US election would probably be “not huge” – as he expected consumers to keep buying even if prices were hiked to some extent.  As various speakers noted, 2024 has turned into an unexpectedly good year.  The industry has already been anticipating some sort of crackdown on e-commerce conducted under the so-called de minimis exemption – which exempts items shipped into the US worth under $800 – as proposed by both Democrats and Republicans in Congress. But working out ways to navigate it.  While the other four speakers on his panel all gave 8 out of 10 ratings for the outlook, Penseel gave a full 10 out of 10 – emphasising how “very adaptive” the industry typically is in response to changing needs. And with capacity still looking very tight – due mainly to a low supply of new freighters – there seems good reason to stay positive. As for this year’s peak, it has indeed so far proved not as explosive as expected earlier this year – when a lot of capacity was being secured months ahead via block space agreements (BSAs). Spot rates have been rising strongly, sources report, but the rise in average rates achieved – as shown in the TAC data – has been held back by a relatively high proportion of ‘controlled capacity’ booked by forwarders planning ahead. Nevertheless, average rates on the biggest lanes – such as those out of Hong Kong, still by some distance the biggest airport for cargo volume – have continued to grind relentlessly higher. The index of outbound routes from Hong Kong (BAI30) gained a further +6.6% in the four weeks to 2 December, leaving it narrowly lower by -1.4% from the level 12 months before – when it was entering a steep peak season spike.  Rates to Europe, in particular, have been surging – driven partly by a loss of bellyhold capacity following the closure of air space over Russia, plus some switching of capacity to other lanes, sources say. By contrast, outbound Shanghai (BAI80) edged up only +1.7% MoM to leave it lower YoY by -0.7% – reflecting perhaps a very different mix of cargo that moves from there as compared with southern China. Rates on lanes out of India, Vietnam and Thailand also remain a long way above levels of a year ago – reflecting no doubt further movement of manufacturing out of China to other locations in Asia. How much further this can go – at least in the short term – is doubtful, however, given capacity constraints, sources suggest. Rates out of Europe were also trending up over the month, especially on Transatlantic lanes. The index of outbound routes from Frankfurt (BAI20) was up +11.6% MoM, finally lifting it back into positive territory YoY by +6.3%. Outbound London Heathrow (BAI40) was slightly lower by -1.6% MoM but also now well ahead YoY by +13.8%. From the Americas, outbound Chicago was up +4.7% MoM though still a long way lower YoY – by -18.0%. However, rates on certain lanes from the US, such as on Transatlantic routes to Europe, were rising strongly last month – as well as from Miami to South America, which is still well up YoY.  Looking ahead to the positive macro outlook many expressed at the TIACA meeting in Miami: What may not have been expressed directly but implicitly was a general feeling about Trump’s intentions on tariffs and trade – namely, that Trump is nothing if not a dealmaker, and hence that his campaign threats of 10-20% tariffs across the board, and 60% on China, would probably prove no more than an opening gambit. Some describe this as an ‘escalate to de-escalate’ strategy – often adopted as a negotiating stance by Trump. Only time will tell.  Initial market reactions to the election result were positive, with promised tax cuts for corporations, deregulation measures and a more liberal energy policy on fossil fuels all helping drive a strong rally in equity markets, as well as in alternative assets like bitcoin and other cryptocurrencies. That said, there are also worries going forward that Trump’s policies could stoke inflation, lead to higher interest rates, and further enlarge the huge US federal deficit – as well as hitting global trade and growth. So far, signs are that Trump will not go softly-softly on trade and will play hardball – indeed, threatening since the election to slap 25% tariffs from day one even on ‘friendly’ countries like Canada and Mexico, plus 10% more on China.  In the short term, there has been some excitement in India that their market in particular may benefit – as it was not identified initially as a target for new tariffs. On the

Air freight rates were up again last month, with the global Baltic Air Freight  Index (BAI00) calculated by TAC Data rising +8.1% over the four weeks to 4 November, leaving it ahead by +10.9% over 12 months. October thus delivered another in a series of solid gains this year, especially on big export lanes out of Asia to Europe and North America. Though not as spectacular as some had been expecting – for a period when the market enters its traditional peak season in the runup to Thanksgiving and Christmas holidays. Indeed, some big forwarders now say there may be less of a peak season spike than they were expecting back in the summer, when a lot of forward capacity was being booked via block space agreements (BSAs).  Kuehne+Nagel, for instance, said in its latest results statement that it now anticipates the peak to be ‘more muted’ than it expected earlier this year.  According to CEO Stefan Paul, this is due to customer ‘front-loading’ of volumes in order to avoid potential disruption – plus an easing of conditions in the sea-freight market and postponement of the threatened US dock strike.  That said, air freight rates were still rising last month on the big lanes out of China – led by higher spot rates, market sources said – and that was despite some reported shifting of capacity from other regions to busier routes from Asia, particularly onto TransPacific lanes. The index of outbound routes from Hong Kong (BAI30) was up +8.2% over the four weeks to 4 November, leaving it ahead by +10.2% YoY. Outbound Shanghai (BAI80) was up more – by +12.6% MoM to leave it up by an even more impressive +22.4% YoY.  Rates on other lanes out of Asia, such as from India, Vietnam and Thailand, also remain a long way ahead of 2023 levels. Out of Europe, where the market has been somewhat in the doldrums, there were also finally some gains in October – though rates do remain slightly lower YoY on lanes to the US, as well as still significantly down both to China and to Japan. Boosted by a big spike over the final week of the month, the index of outbound routes from Frankfurt (BAI20) gained +10.9% MoM, cutting its decline to only -3.2% YoY. Also boosted by a sharp rise in the final week of October, outbound London Heathrow (BAI40) jumped +15.3% MoM – lifting its gain to a much healthier looking +17.4% YoY above what had been pretty depressed levels 12 months ago. Meanwhile, from the Americas, the index of outbound routes from Chicago bucked the rising global trend with a decline of -18.4% MoM – leaving it still in negative territory YoY at -15.1%. Overall rates from the US are not down so much but do remain lower YoY both to Europe and to China – though significantly up on lanes to South America. From a global macro perspective, the air freight data arguably still reflects a market where European economies appear to be caught in a ‘doom loop’ scenario – of low to zero growth; high government debt-to-GDP levels (that they can’t reduce without growth); but a loss of competitiveness in key sectors such as German autos (due in large part to higher energy prices). In the US, by contrast, the economy has continued to defy fears of a recession – maintaining a trend towards a ‘soft landing’ with lower interest rates helping to ease the pain.   While the market has been looking ahead beyond the US election to what that might mean for trade policy, tariffs, currencies, inflation and interest rates, in the meantime China has also become a focus of attention.  This followed the announcement in late September of major action by the government and People’s Bank of China to try and address a ‘balance sheet recession’ and arrest the trend towards deflation. This so-called ‘fiscal bazooka’ – alongside lower interest rates, easing of lending requirements and other measures – sparked an immediate surge in Chinese equities in late September.  Since then, however, the market has oscillated around the same levels – as investors have tried to work out whether the trillions of RMB committed are really enough of a bazooka to move the dial on growth sufficiently. As we entered November the jury was very much still out on that. Meanwhile, there was some fascinating discussion regarding the capacity side of the market at the recent 30th annual Cargo Facts Symposium, held last month in San Diego.  Among key issues highlighted were various supply chain challenges and blockages. These ranged from current well-publicised problems with production at manufacturers like Boeing to a lack of sufficient ‘feedstock’ of older planes for freighter conversions, which looks significant given that dedicated freighters currently carry around 50% of air cargo volume (and a lot more on some important lanes). Among various illuminating contributions was a presentation from Boeing market analysis director Aaron Tayler, highlighting how growth of freighter capacity was looking highly likely to lag a continuing rise in demand, driven not least by the continuing boom in e-commerce.  Air cargo demand had risen about 7% YTD through August, according to figures Tayler cited – much in line with the rise in Baltic air freight index rates as measured by TAC. Looking ahead, demand is projected to grow an average of 2.7% a year, he added – significantly faster than capacity looks able to grow alongside it. So this year’s peak season may not be quite so strong as expected. But with air freight rates up while average jet fuel prices were down some -20.7% over the 12 months to 1 November, according to Platt’s data, 2024 should still prove a considerably profitable year for airline carriers. And with capacity looking tighter again in future, the air cargo market looks potentially even stronger going forward. Absent any major geopolitical developments – and big changes to global trade patterns.

Overall air freight rates were little changed last month, with the global Baltic Air Freight Index (BAI00) edging up +1.8% over the four weeks to 30 September, leaving it ahead by +7.5% over the previous 12 months. The index of outbound routes from Hong Kong (BAI30) – still the world’s biggest airport for cargo volume – was up +0.3% over the month, leaving it ahead by +16.8% YoY. Meanwhile, outbound Shanghai (BAI80) was up +2.7% MoM to leave it ahead +20.4% YoY. From Europe, the index of outbound routes from Frankfurt (BAI20) was higher by +1.5% but still at -11.2% YoY. Meanwhile, outbound London Heathrow (BAI40) jumped +11.6% MoM, though also still in negative territory YoY at -1.3%. From the Americas, the index of outbound routes from Chicago (BAI50) was lower by -0.7% MoM to still languish at -31.5% YoY – although overall rates from the US were generally firm to most major markets. The flattish tone of the market was arguably starting to deflate expectations of an earlier and/or more pronounced peak season surge than usual after a stronger than expected summer. At least before a dock strike threatened to disrupt ocean shipping through the US East Coast – and push yet more shippers to switch to air cargo instead. Sources have been suggesting for months that a lot of forward capacity for the upcoming peak was already sold out through block space agreements (BSAs) – which could mean spot prices surge in the runup to Thanksgiving and Christmas.  There were also a number of other factors pointing towards higher rates, including some big orders for items like solar panels and mobile phones known to be coming through.  And that was before the US dock strike by the International Longshoremen’s Association (ILA) began on 1 October – affecting all ports down the Eastern seaboard. Some market sources were also expecting a small uptick in average rates in the runup to Golden Week in China – if, as often happens, shippers rushed to move goods ahead of the holiday.  There were some signs these things might be starting to show in the TAC data during September. Rates achieved at the higher quintiles in the range of prices paid did spike at times on big lanes out of China – indicating spot rates might be on the rise, and the indices were rising in the final week of the month. However, all these things together did not appear to have had much overall effect on rates – as of yet. Indeed, some sources had been starting to say the expected peak season spike may not reach quite so high as last year.  With the threatened US dock strike now going ahead, perhaps opinions will be revised. Meanwhile, the mood in global markets has continued to be somewhat nervous.  The steep selloff in equities in early August – even if followed by a quick recovery – revealed worries about a number of things from US growth to rising interest rates in Japan. It also revealed some areas of market fragility, including: shallow levels of liquidity; herding in certain trading positions; and worries about leverage, especially among traders using the ‘carry trade’ to borrow cheaply in Japanese yen and invest in more risky assets. That said, other than in Japan, interest rates in most major currencies have been trending down – with uncertainty only about the timing and extent of further cuts.  Chances of a recession in the US may have increased marginally – but most traders were still expecting it to be mild, with a ‘soft landing’ if it happens.  Markets had also been quick to respond positively to rate cuts so far, led by a half-point cut from the US Federal Reserve followed by similar moves by the European Central Bank and People’s Bank of China. Furthermore – at least until the latest escalation of hostilities in the Middle East – the oil price had continued to trend down, leaving the jet fuel price more than 20% lower in the 12 months to 27 September, according to Platt’s data. This combination of higher air freight rates and lower jet fuel prices should be good for the profit margins of carriers this year. For air cargo going forward, however, the most important issue is the outlook for global trade – given continuing prospects of higher tariffs and/or other barriers into the US as well as into the EU and elsewhere, perhaps in retaliation.  Much attention has focused on former US President Donald Trump, who stated some time ago that if re-elected he planned a 10% tariff on all goods imported into the US. More recently he’s talked of a 20% tariff – and up to 60% for goods from China. Not to be outdone, the Biden administration has announced plans for stricter rules on e-commerce imports under the so-called ‘de minimis’ exemption.  The exemption – under Section 321 of the US Trade Facilitation and Trade Enforcement Act – currently allows goods with a value of $800 or less to avoid duties and face less customs scrutiny when shipped directly to an individual.  Under its proposals, the Biden administration aims to crack down on what it suspects to be evasion of duty, circumvention of safety standards and smuggling of illicit products under Section 321.  A very significant proportion of US imports, including an estimated 70% of textile and apparel imports from China, may no longer be exempt under the new requirements.  Whatever might be proposed by a re-elected Trump or a new President Kamala Harris, there is also now a bipartisan bill proposed in Congress to curtail Section 321. This would among other things also close the current de minimis loophole for textile and apparel importers; impose new penalties for violations; and impose a $2-per-package fee to allow closer inspection of goods.  As noted previously, big Chinese players in e-commerce like Temu and Shein appear to have already made some moves in anticipation – such as by altering distribution models to move

Air freight rates maintained a firm tone again through the month of August. The Baltic Air Freight Index (BAI00) gained another +5.6% over the four weeks to September 2, taking its rise over 12 months to +17.2%. Overall, rates have remained unusually strong throughout the summer – a season when they typically ease lower as higher passenger traffic adds extra bellyhold capacity. Market participants point to two factors in particular driving this year’s stronger price pattern: disruption to ocean traffic in the Red Sea – which has led to big delays and price hikes in ocean shipping; and the continuing rise of e-commerce, notably out of Asia. The rise of e-commerce has been reflected in the data out of China all year, and the index of outbound routes from Hong Kong (BAI30) was up a further +3.0% MoM taking its gain over 12 months to +25.0%. The outbound Shanghai index (BAI80) gained +7.8% MoM to put it ahead by an even more impressive +39.5% YoY. The rates on some other big lanes out of Asia, such as from India and Vietnam, have risen even more strongly over the past year. Indeed, rates out of Vietnam overall reached levels exceeding those from China. In August, however, rate rises from other regions were no longer lagging. Out of Europe, the index of outbound routes from Frankfurt (BAI20) was up +8.5% MoM to trim its YoY fall to only -10.1%. Outbound London Heathrow (BAI40) gained a chunky +10.4% MoM, cutting its YoY decline to only -7.6%. From the Americas, the index of outbound routes from Chicago (BAI50) gained a more modest +3.9% MoM – to show a YoY decline of -14.6%. Over the month, there was certainly a lot of ‘noise’ in the global macro outlook. Equity markets took a sharp tumble in early August amid rising fears of recession in the US – before recovering rapidly back towards previous highs. As the month came to a close, the S&P 500 index for instance was still up more than +25% YoY. The sharp fall in early August, however, was particularly steep in Japan where the Nikkei 225 index plummeted some -12% in only one day – its worst single day drop for many years. With interest rates finally rising in Japan, the equity market was suddenly gripped by worries local exporters would get hurt by a rising yen. There were also concerns about an end to the so-called ‘carry trade’ – whereby many investors all around the world have borrowed in yen for years virtually interest-free in order to invest in higher-yielding (and riskier) assets. Even though the move to higher rates had been well-signalled by the Bank of Japan, the sudden reality of a higher yen seemed to take many by surprise. Labour market and other data from the US subsequently calmed the jitters – plus expectations of faster and steeper interest rate cuts from the Federal Reserve and other central banks. As August came to a close, even the Nikkei 225 was back up over +18% YoY. Over the same period, there was the emergence of what some dub the ‘Trump trade’. This is based on expectations higher tariffs on imports to the US might in turn hit US exporters, including big tech companies that dominate the Nasdaq index – but benefit domestic companies that feature more in the Russell 2000 index. Needless to say, the relative performance of the Nasdaq and the Russell waxed and waned as odds on a Donald Trump victory in the US Presidential election first increased and then reduced – after Kamala Harris was chosen to replace Joe Biden as the Democratic Party candidate. Companies that export a lot to the US – particularly from China, though also to some extent from Europe – are certainly concerned about prospects for higher tariffs and/or other new barriers to trade. As noted previously, however, it seems strange markets are so worried about Trump – given that the Democrats, under Biden, have proved pretty much as hawkish on trade issues. Under Biden, the US has not removed but added to tariffs introduced by Trump. It has also passed the misleadingly titled Inflation Reduction Act (IRA), designed in part to incentivise developments to address the climate transition, but which some critics view as the most protectionist piece of legislation in US history. Prospects for higher tariffs and other barriers to trade with the US – and also with the EU – are not coming at a great time for China. After an initial rebound last year when Covid restrictions were eased, the Chinese economy has since got mired in a construction and property sector crisis – with consumers responding by cutting spending and increasing (already high) savings levels. The resulting decline in growth and economic activity has arguably exacerbated other knock-on effects, including a rise in youth unemployment. Hitherto, one bright spot for China has been the e-commerce sector –driven both domestically and internationally by the increasing popularity of cheaper non-branded goods. While volumes of other goods are probably little changed this year, it has been the rise in e-commerce that has lifted activity and average rates in air freight overall. In late August, however, even the seemingly unstoppable rise of e-commerce was coming into doubt – as leading player Temu delivered a set of results that surprised and disappointed the market with lower than expected levels of growth. The share price of Temu parent company, PDD Holdings, fell sharply after the results were announced – alongside some words of caution about the outlook from CEO Chen Lei. Perhaps, as with the sudden fall in the Nikkei, this sudden drop in PDD shares may come to be seen as an over-reaction by the market. After all, Temu revenues were still up some +86% from the previous year, and with a profit margin actually ahead of expectations – not dissimilar to the performance of AI giant Nvidia, which also disappointed market expectations despite huge growth. The rate of growth at

July proved to be another unusual month in the air freight market. The TAC Data indices ended the month more or less flat overall – but at levels still stronger than usual for the summer season, when there is often a lull. The overall Baltic Air Freight Index (BAI00) calculated by TAC ended the four weeks to 29 July slightly lower by -0.9%, though still ahead by +8.0% over 12 months. The underlying trends driving this were also still there – reflecting the continuing rise of e-commerce business, particularly out of China; and ongoing problems in ocean shipping, with higher prices and slower delivery times driving more business into the air cargo sector. These trends continue to be reflected in the data for Asia – with the index of outbound routes from Hong Kong (BAI30) ending the month only slightly lower by -0.7% to be ahead by +21.8% YoY. Outbound Shanghai (BAI80) was also off a little by -2.9% MoM by still well ahead by +33.2% YoY. Other routes out of Asia also remain a long way up on levels of 12 months ago, particularly on lanes from Vietnam to the US and from India to Europe. And this was ahead of recent news that Apple, for instance, is starting to move some of its high-end iPhone 16 production to India. Rates out of other regions, by contrast, continue to languish a long way from previous highs. The index of outbound routes from Frankfurt (BAI20) was down -1.6% MoM to be -28.1% YoY. The index for outbound London Heathrow (BAI40) was looking similar at -0.3% MoM and -26.1% YoY. Meanwhile, out of the Americas, outbound Chicago (BAI50) had a stronger month in July, gaining +10.0% MoM, but still lower by -19.4% YoY. Looking ahead, some sources have been arguing for a while that the peak season surge started early – at least a couple of months ago – and capacity was already looking tight for later in the year. With a lot of capacity already reserved in block space agreements (BSAs), some thus predict a big spike in spot rates for the latter months of the year. And that was before arguably the most significant market event of mid-July – the big global IT outage, which caused disruption to schedules including thousands of flight cancellations, particularly in the US affecting major airlines like United, American and Delta. With the likelihood that at least some cargo got delayed and that some planes and crew were dislocated from planned positions, some feared this might have a further ratcheting effect on rates. However, there was also a long list of other players – from UPS to Lufthansa to Saudia Cargo – who said there was little or no impact on them from the IT outage. The disruption – and potential market distortions – has thus far been much less than initially feared. From a macro perspective, markets were again overshadowed last month by political events – including the failed assassination of former US President Donald Trump and then withdrawal from the US election race of incumbent Joe Biden in favour of deputy Kamala Harris. There were some bumps in the road in the market too in July, including a late-month sell-off of big US tech stocks. Yet markets overall remained relatively positive about the outlook – certainly for equities. The global outlook continues to look steady, with US economic growth persisting even while inflation is dropping – and so prospects for lower interest rates improving. Though of course there are still some clouds on the horizon – such as in France, which is suffering serious government debt issues not helped by inconclusive election results. Among other developments less widely noted – but supported by the TAC air freight data – were Chinese exports, which went up sharply in June. Imports, on the other hand, fell again in an economy still suffering from weak domestic demand. Tariffs on Chinese goods have already been going up not just into the US but also into Europe. And China’s exporters are nervous about prospects for even more after US elections in November whichever candidate wins the race for the White House. Some commentators who are more cautious about the outlook are also pointing out that, globally, absolute demand is perhaps not so strong as it might look – just rebounding from last year when it was pretty weak. Global consumer demand still relatively lukewarm, they suggest, and rates could be rising mainly because shippers are moving goods earlier – which may simply cannibalise future growth. If that more negative view proves correct, it could be that any strong peak season spike proves transitory – with rates then slipping back rapidly. On the other hand, industry experts point out that serious problems remain in ocean shipping. Costs in ocean shipping have gone up a lot, which means the difference in cost with air cargo has also narrowed significantly – making air freight a much more attractive option. That situation doesn’t look like changing any time soon.

Global air freight rates maintained a firm tone again throughout the month of June according the latest data from TAC Index, the leading price reporting agency (PRA) for air freight. The overall Baltic Air Freight Index (BAI00) calculated by TAC ended the four weeks to 1 July down only a tad by -1.2%, leaving it ahead +10.4% over 12 months. The latest data confirms the market has remained surprisingly strong through what is normally a low season in the year – as extra bellyhold capacity comes on stream when passenger traffic increases in the summer. Sources said the relative strength of the market reflects continuing robust activity in e-commerce driven by big China-based exporters such as Temu and Shein. And also continued disruption to ocean shipping – which has been made much more expensive by ships diverting away from the Red Sea and around the Cape of Good Hope. A huge rise in ocean shipping rates has made air cargo look relatively less expensive. These trends are confirmed by TAC’s data on air freight rates out of China, with the index of outbound routes from Hong Kong (BAI30) gaining a further +2.3% in June to put it ahead +21.1% YoY. Outbound Shanghai (BAI80) was slightly lower by -2.7% MoM, but still ahead by a remarkable +42.1% YoY. Rates are also significantly higher YoY out of some other big markets in Asia, notably from India and Vietnam according to TAC data – particularly on lanes to Europe. Out of Europe, by contrast, the market remains somewhat weaker. The index of outbound routes from Frankfurt (BAI20) was lower again by -3.4% MoM, leaving it at -18.3% YoY. Outbound London Heathrow (BAI40) did enjoy a rise in the final week of June to push it ahead by +6.4% MoM, but is still down by -27.2% YoY. From the Americas, the market also ended the month on a weaker note – with a big drop in the final week leaving the often volatile index of outbound routes from Chicago (BAI50) down -15.9% MoM and -32.0% YoY. Nevertheless, the overall tone of the market clearly remains very firm for the time of year – with some reports even proclaiming peak season had come early. Such reports seem somewhat premature – given that traditional peak season is still months away. That said, sources report a lot of block space agreement (BSA) capacity has already been signed up for Thanksgiving and Christmas – which could presage a big spike in spot rates later in the year. Despite the strength of overall demand in the market, there has also been some news of a further tightening of capacity – with FedEx confirming in late June the permanent retirement of some 22 older Boeing 757-200 freighter aircraft from its fleet. In part, this reflects some changes in the structure of the market, including FedEx losing its position as primary cargo provider for the US Postal Service – with that role switching to UPS from September. Some sources suggest it also reflects a reduction in premium rate ‘express’ business – in a market now driven more by e-commerce players moving large volumes of lower value items. Looking ahead, some players are also speculating that e-commerce players could drive demand up for more short-haul narrowbody freighters – if they ship more items initially by ocean to air cargo distribution centres in locations like Mexico and Canada nearer to end-destination markets in North America and Europe. As noted last month, the macroeconomic outlook has also started to look somewhat more optimistic – with the US economy slowing down but at a very gentle rate, and the Federal Reserve looking to engineer an ‘immaculate soft landing’; Europe starting to revive after the shock of the Ukraine war; and Japan enjoying robust growth after years of stagnation. With the economic outlook not too bad, markets have started to fret instead about the political outlook – given the many elections around the world occurring this year, alongside ongoing conflicts in Ukraine and the Middle East. Markets seem relatively sanguine about the prospect of a Labour government in the UK. But traders and investors were rather more spooked by the unexpected snap election in France called by President Macron – which seems likely to result at best in an awkward period of ‘cohabitation’ with a National Assembly no longer aligned with the President. Likewise, there was a surprise when Narendra Modi did not achieve the big majority expected in India, though the result there has not knocked markets so much off course as initial reactions suggested. The big elephant in the room continues to be the US election in November – with increasing concerns about President Biden’s fitness for the task and prospects of a return to power for ex-President Trump. That leaves some fretting about all sorts of potential consequences from the future of democracy in the US to the stability and coherence of the NATO alliance and the wider western rules-based world order. Given Trump’s stance as a populist and previous record in power, one significant worry has been the prospect of more and higher tariffs – aimed at China in particular – and effects on global trade and economic growth. The economies of the US and China – the two biggest in the world – seem so hugely and intricately entwined that further impediments to trade may seem unlikely acts of self-harm for either side to make. That said, as we noted before some months ago, Biden and the Democrats have also proved pretty hawkish in practice on trade issues – not only not reducing or removing tariffs introduced by Trump, but continuing to add to them. Whatever the result in November, it may not be so great for trade and growth.