Air freight rates remain stubbornly high, despite a steady recovery in capacity as airlines, forwarders, and shippers adapt to a market reshaped by the Iran conflict, elevated fuel costs, and relentless demand from the AI sector.
Capacity recovery incomplete despite gains
Data from Rotate shows global freighter capacity rose 4% month on month in May, and a further 2% in early June, with Asia-US networks continuing to rebuild.
Cathay Cargo said today its global capacity was now “nearly back to pre-event levels”, although some Middle East disruptions remain and its Dubai and Riyadh services were still suspended.
Index, the global Baltic Air Freight Index eased just 2.1% over the four weeks to 1 June, leaving it still 32.7% higher than a year ago. The index remained up 33.4% year on year in the first week of June, despite signs of stabilisation.
WorldACD data highlights the market imbalance: global tonnage growth slowed to just 3% year on year in May, yet average rates remained 36% above last year’s levels.
Gulf carrier capacity still constrained
“There’s still 30% of those carriers’ capacity not back in the market,” Morrison Express CEO Asok Kumar told The Loadstar, referring to Gulf carriers affected by the conflict. “Qatar, Emirates, Etihad – they’re all major cargo carriers, so it still has an impact from a capacity standpoint.”
He added that while airlines had restored much of their lift, the market had not fully normalised. “Up to 70% of it has come back,” he said, noting that airlines had also added direct capacity to compensate for reduced Middle East connectivity.
Fuel costs remain elevated
TAC noted that jet fuel prices fell nearly 25% between April and May, helping ease some pressure on rates. However, fuel costs remain more than 57% above last year’s average.
Hong Kong fuel surcharges tell a similar story. Cathay Cargo has reduced its long-haul fuel surcharge by around 14% for the second half of June, from HK$11.8 (US$1.50) to HK$10.1 While that is almost 46% below the peak reached in April, it remains more than three times higher than pre-conflict levels.
“The big issue remains the price of oil, and jet fuel in particular,” said Cathay Cargo’s head of cargo sales Hong Kong and Greater Bay Area, Frank Yau.
And Mr Kumar said the volatility was creating challenges for shippers. “Customers are not able to properly forecast their costs because of this,” he said. “It brings a lot of uncertainty.”
AI-driven demand sustains high rates
While the Iran conflict continues to shape market conditions, demand remains remarkably resilient, particularly in technology supply chains. WorldACD said Asia Pacific chargeable weight was up 8% year to date, while rates to Europe and the US remained 39% and 36% higher year on year, respectively.
Behind much of that demand is the continued build-out of AI infrastructure. Taiwan-based Mr Kumar said semiconductor manufacturers, memory producers, and equipment makers continued to report full orderbooks stretching years into the future.
“Some are talking about being booked out until end of next year, some even until end of 2028,” he said. “Many are saying this will continue till 2030. The one vertical market that’s just showing exceptional growth is AI.”
The boom is supporting strong intra-Asia and transpacific flows. The strength of AI-related cargo is also helping explain why rates have remained elevated even as overall volume growth has moderated. TAC’s Index showed Asia-origin pricing continuing to outperform in May, particularly on transpacific lanes, supported by semiconductor and technology shipments.
Market stabilises at higher baseline
Nevertheless, there are growing signs that the frantic repricing seen in March and April has ended. WorldACD reported global chargeable weight fell 9% week on week at the end of May, largely due to holiday effects, including Memorial Day, Pentecost, and Eid al-Adha. Yet average rates still rose 2%, underlining the market’s continuing sensitivity to capacity constraints.
For now, most industry participants appear to agree that the market has stabilised at a higher level rather than returned to normal. Cathay said capacity was recovering and rates had begun to soften, while TAC described May as a period in which airlines and shippers stopped repricing risk every week and, instead, learned to operate within a new set of constraints.
Mr Kumar believes that, eventually, market fundamentals will prevail. “If things just revert to where they were before the war started, the market dynamics will correct themselves,” he said. “The rates cannot stay at elevated levels.” For now, however, a combination of incomplete capacity recovery, elevated fuel costs, and insatiable demand for AI-related cargo appears sufficient to keep air freight pricing well above historical norms.
Source: The Loadstar
Compiled from international media by the SCI.AI editorial team.
