It was another volatile month in May for air freight markets. The global Baltic Air Freight Index (BAI00) did not move much overall in the four weeks to 2 June, gaining +1.2% to leave it lower by -5.4% from where it was 12 months earlier. However, an array of countervailing trends led to a lot of intra-month volatility and dispersion in rate patterns on different lanes. Meanwhile, a continuing state of flux on terms of trade continued to make it difficult for shippers, forwarders, and airlines to plan ahead.

Nevertheless, given the significant disruption to global trade this year – driven by the Trump administration’s moves to address global trade imbalances with threats of higher tariffs – rate levels continued to be relatively firm. Especially when compared with a year ago when the market was being driven by a boom in e-commerce, now de-railed to some extent by an end to the so-called de minimis exemption for smaller parcels entering the United States.

With jet fuel price levels lower by some 18.3% over 12 months to 30 May, according to Platts’ data, that should also mean the market has, if anything, become even more profitable for carriers.

Rates on the busiest lanes out of China eased lower overall during May but not by much, with spot market levels first falling then rising sharply as the month went on.

The index of outbound routes from Hong Kong (BAI30) – the biggest airport in the world for air cargo – edged up +0.9% in the four weeks to 2 June to leave it lower by -6.3% year-on-year (YoY).

However, pure spot rates from Hong Kong –  as tracked by the new BAI Spot indices, which are soon moving to public trials – were rising strongly towards the end of the month before flattening out at month-end, both on transpacific lanes to the US East Coast and West Coast, as well as to Europe.

However, pure spot rates from Hong Kong –  as tracked by the new BAI Spot indices, which are soon moving to public trials – were rising strongly towards the end of the month before flattening out at month-end, both on transpacific lanes to the US East Coast and West Coast, as well as to Europe.

Meanwhile, the index of rates out of Shanghai (BAI80) was also firmer in May, showing a healthy increase of +7.0% month-on-month (MoM), albeit at a decline of -5.3% YoY.

Some sources said disruption to ocean shipping due to cancellations during the recent stand-off on tariffs between the US and China could lead shippers to turn to air cargo instead, causing a ‘Covid effect’ similar to the pandemic period when supply chains became severely snarled. Others, however, suggest customs issues are still causing some hesitancy on shipping to the US, holding back demand to some extent.

With many block space agreements (BSAs) having been cancelled earlier this year due to uncertainties on tariff levels, it seems likely the market – at least short term – will be dominated and driven more by spot market activity.

With many block space agreements (BSAs) having been cancelled earlier this year due to uncertainties on tariff levels, it seems likely the market, at least short term – will be dominated and driven more by spot market activity.

Complicating the picture was also a drop in capacity on transpacific lanes, with carriers having shifted some aircraft to other routes in response to the US-China trade stand-off. Following the deal to cut tariff levels back to 30% for Chinese goods into the US and to 10% for US goods into China – at least for 90 days – sources reported some reversal of that trend, with capacity starting to be restored.

Meanwhile, other markets out of Asia that tend to be dominated by spot market activity did not seem to benefit from any short-term drop in levels of US-China trade during the recent stand-off. According to TAC Freight data, rate levels out of both Vietnam and India, for instance, are now considerably lower YoY.

Out of Europe, rate patterns were mixed. The index of outbound routes from Frankfurt (BAI20) – the biggest airport by cargo volume in Europe – was lower by -4.0% MoM to leave it lower by -4.7% YoY.

Meanwhile, the index of outbound routes from London Heathrow (BAI40) bounced back from very low levels in late April, gaining +26.3% MoM – putting it back in positive territory by +5.2% YoY.

Out of the Americas, the index of outbound routes from Chicago (BAI50) went the other way, giving back most of the big gains from earlier this year during May, dropping -24.0% MoM, dragging it back into negative territory by -7.2% YoY.

Rate levels on lanes from the US to South America – dominated by volume from Miami – continued to stand out from most other markets by being well ahead YoY, according to TAC Freight numbers. That said, after big increases on those rates over the past year, some sources are starting to say there are now indications of over-capacity emerging on lanes to Latin America.

Meanwhile, in May, TAC announced the launch of data on range of new lanes, including 10 regional and six country-to-country routes, adding numbers for the first time on key markets such as Mexico, Brazil, Australia and South Africa.

More broadly, despite some serious concerns about the “big, beautiful” tax bill proposed by Trump, the global macro picture was looking a little better in May than in April, when there had been a steep drop in equities and then a dramatic rebound after Trump backtracked on most of his big tariff announcements.

The subsequent 90-day deal on tariffs between the US and China was then perceived as a material positive for markets, and a meaningful de-escalation that had reduced, if far from eliminated, the risks going forward.

Markets now expect US growth will be slower, but earnings for most companies to be affected only modestly, paving the way for US equities to continue their rebound through May. Similarly, economic growth in China is also expected to be slower than before, not least after a 21% decline reported in exports to the US in April. China seems to have coped reasonably well to offset the impact of that by increasing exports elsewhere. It also enjoys plenty of scope to soak up excess production by boosting domestic demand – if it can find effective stimulus tools to achieve that.

Markets now expect US growth will be slower, but earnings for most companies to be affected only modestly, paving the way for US equities to continue their rebound through May. Similarly, economic growth in China is also expected to be slower than before, not least after a 21% decline reported in exports to the US in April. China seems to have coped reasonably well to offset the impact of that by increasing exports elsewhere. It also enjoys plenty of scope to soak up excess production by boosting domestic demand – if it can find effective stimulus tools to achieve that.

In the short term, European equities have been doing well, led by the German DAX index, up around 20% year-to-date by late May. Even economic growth in the United Kingdom has been surprising to the upside so far in 2025.

By contrast, in late May, the S&P 500 index of leading US stocks was still a tad below levels at the turn of the year, when it was very high in terms of price/earnings (PE) ratios compared with other markets.

Whether the outperformance of Europe can continue this year remains to be seen, especially if Trump tries to play hardball on trade with the EU, which continues to be a bigger trading partner with the US than China, as well as on how the EU responds.

The US court decision in late May to rule Trump’s tariff moves beyond his powers – and thus illegal – further put the cat among the pigeons. While the Trump Administration was quick to appeal, it was not immediately clear whether that would be successful. Either way, it was not being seen as too much of a negative for markets.

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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