Global air freight rates rose strongly in October, according to the latest data from TAC Index. The Baltic Air Freight Index (BAI00) gained a solid +7.6% in the four weeks to 3 November, leaving it not far below where it was 12 months earlier at -4.6% year-on-year (YoY).

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% in the four weeks to 3 November, leaving it down only -4.5% YoY. Outbound Shanghai (BAI80) gained +16.6% month-on-month (MoM), leaving it lower only -2.3% YoY.

A closer look at the new Baltic Air Freight Spot (BAI Spot*) indices out of Hong Kong – now officially launched in partnership with Baltic Exchange and TAC Innovation, and extended to include routes originating from India and Korea – 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 30 September to HK$37.91 on 31 October. However, 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 30 September to HK$44.46 on 31 October. HK to West Coast rose from HK$36.85 to HK$41.36.

Rates out of Europe also firmed 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 -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 to be 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, although nothing as high as was originally feared.

As a consequence, some capacity has shifted from Transpac to China-Europe routes, as well as to other lanes from Asia, such 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 ‘deglobalisation’ appear somewhat exaggerated. All this also indicates there should be a peak season spike again this year, although it is unknown how high it will go, and on which lanes it will be 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 (although not Germany). Meanwhile, China continues to have 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 the AI sector.

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, reaching that threshold in late October.

This has also, alongside a parallel boom in Blockchain and cryptocurrency activity, stoked fears that all this looks a little like the ‘dot-com’ 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, although 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 is before considering whether it will indeed become a bubble – and what the potential 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.

·      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.

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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