Amid the traditionally quiet or ‘low season’ of the year, air freight rates changed relatively little in August. The global Baltic Air Freight Index (BAI00), calculated by TAC Data, edged up by +1.2% over the four weeks to 1 September, leaving it lower by -5.9% from a year earlier.

Although the headline numbers did not 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 United States from various countries, ranging from Brazil and South Africa to Switzerland and India.

Although the headline numbers did not 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 United States from various countries, ranging from Brazil and South Africa to Switzerland and India.

Sources also reported 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 United Kingdom, 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 causing delays in certain places, with both freighter and bellyhold capacity being fully utilised on some lanes. This has handed 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, with some 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 Southeast Asian markets such as Bangkok, Singapore and Kuala Lumpur, there have already been reports of transhipment congestion causing delays of up to 12 days. Meanwhile, 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 year-on-year (YoY), fuel costs have fallen even more.

According to Platts data, jet fuel rates dipped -4.3% in the month to 29 August 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 29 August. HK to the US East Coast went up a tad from HK$37.34 to HK$38.55, while HK to the US West Coast was also higher, up from HK$35.46 to HK$36.41.

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 29 August. HK to the US East Coast went up a tad from HK$37.34 to HK$38.55, while 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 1 September, leaving it down by -8.1% YoY.

Outbound Shanghai (BAI80) showed a similar trend, gaining +3.0% month-on-month (MoM) to leave it lower by -7.5% YoY.

Rates from some big hubs out of Europe were down over the month of August, although remain relatively stronger versus the same period in 2024. The index of outbound routes from Frankfurt (BAI20) dipped -2.2% MoM, albeit lower by -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 (although 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, although 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, albeit 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.

Neil Wilson, TAC Editor

Neil Wilson is Editor of TAC Index, which provides independent, accurate and actionable global air freight data, allowing our customers to make comparative, cost-effective and intelligent air freight decisions.

Neil has more than 30 years’ experience in financial journalism and publishing, specialising mainly in derivatives and alternative investments. He has contributed to various publications including The Financial Times, The Economist and Risk magazine. He has also been a guest speaker at many industry events.

Neil has a B.A. with Honours in Philosophy, Politics and Economics from the University of Oxford.

 

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