Air cargo rates remained firm in May despite trade disruption creating intra-month volatility, according to the latest market report from TAC Index.
The overall global Baltic Air Freight Index rose 1.2% compared with April, but remained 5.4% lower than a year ago.
"However, an array of countervailing trends led to a lot of intra-month volatility and dispersion in rate patterns on different lanes,” TAC editor Neil Wilson said in his market review.
At the start of the month, tariffs implemented by the US on China had been at 145% before a 90-day truce was called and duties settled down to 30%.
Tariffs on e-commerce goods have also been lowered to 54% or a flat fee of $100 for postal shipments, or 30% for those using commercial airlines.
Wilson said that despite all the tariff changes, rates had been “relatively firm”.
"Especially when compared with a year ago, when the market was being driven by a boom in e-commerce, now derailed to some extent by an end to the so-called de minimis exemption for smaller parcels entering the US.”
Wilson also pointed out that the market is likely to be more profitable for carriers than last year, as jet fuel prices are around 18% lower than a year ago.
TAC data shows that 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 was up 0.9% month on month, but slipped 6.3% compared with a year ago.
"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," said Wilson.
Outlining other factors impacting pricing, Wilson pointed out that ocean shipping lines had been cancelling services as a result of the tariffs, which could push companies to use air, while air capacity had also been removed from the transpacific market.
"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," he said.
However, following the agreement between the US and China, some of that capacity had been restored.
"Meanwhile, other markets from 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," Wilson said. "According to TAC Freight data, rate levels out of both Vietnam and India, for instance, are now considerably lower year on year."
Elsewhere, rates out of Europe were mixed, from the Americas prices came down, and the US to South America was "well ahead" year on year.
"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," Wilson said.
