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Air freight rates show resilience in May amid low season

Air freight rates experienced a solid month in May, with the Baltic Air Freight Index (BAI00) calculated by TAC Data increasing by +0.9% in the four weeks leading up to 3 June, marking a +6.4% year-on-year (YoY) rise.

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In its latest update for the month of May, the Baltic Air Freight Index said there was evident strength in the air freight market during what is traditionally a low season.

This has come as something unexpected, as additional passenger bellyhold capacity typically becomes available over the summer holidays. Several factors contribute to this year’s unusual trend, including the continued growth of e-commerce out of China, and disruptions in ocean shipping in the Red Sea and other areas, which have driven more business into air cargo.

The index of outbound routes from Hong Kong (BAI30), the world’s busiest airport for cargo, saw a slight decrease of -0.9% over the month but remained +15.0% higher YoY.

Shanghai’s outbound index (BAI80) showed a +3.3% month-on-month (MoM) increase, resulting in a significant +41.4% YoY rise.

Meanwhile, other Asian routes, such as those from India and Vietnam, also saw an uptick, particularly on routes to Europe.

European Air Freight Rates Lag Behind

In contrast, European outbound rates remained sluggish. The index of outbound routes from Frankfurt (BAI20) showed a +2.3% MoM increase in the final week of May, driven by higher rates to Asia.

However, it was still down by -26.0% YoY. London Heathrow (BAI40) experienced a -12.2% MoM drop, leaving it -39.8% lower YoY.

U.S. market shows strength amid customs crackdown

From the United States, the market demonstrated more resilience. The outbound index from Chicago (BAI50) increased by +6.5% MoM, narrowing the YoY decline to -17.7%.

The end of May was also marked by significant industry news concerning a U.S. Customs and Border Protection (CBP) crackdown on compliance with rules for its Entry Type 86 programme, which allows duty-free shipments for items worth $800 or less.

CPB announced the suspension of multiple customs brokers for suspected rule breaches, aiming to combat the import of illicit substances, counterfeits, intellectual property rights violations, and goods made with forced labour.

Reports of considerable disruption for customs brokers and shippers, including delays and cancellations, surfaced. However, sources indicated that these reports might be exaggerated, as major customs brokers already had effective compliance systems in place to mitigate the impact.

Supporting this, the Baltic Air Freight index has cited reports by Air Cargo News stating there was no noticeable reduction in air freighter activity between Northeast Asia and North America in late May.

E-commerce and future outlook

According to the Baltic Air Freight Index, some view the CPB crackdown as a potential threat to the e-commerce business model and major players like Temu and Shein. Others argue that these companies have anticipated stricter U.S. regulations and have successfully expanded into other global markets.

Another key topic in late May was the robust rates from Asia to Europe, which some sources believe are not yet fully reflected in the current average rates.

Finally, as air freight rates continue to perform well despite the low season, the Baltic Air Freight index notes that the industry remains optimistic about the months ahead, especially for routes to Europe.