May meltdown, June rebound? Air cargo adjusts to trade shocks

May marked a turning point in the global air cargo market. The Baltic Air Freight Index (BAI00) dropped 6.24% month over month, reflecting market stress that followed the U.S. suspending its de minimis exemption and imposing steep tariffs on Chinese imports.

A mid-May tariff rollback helped ease the pressure, but volatility hasn’t gone away. Rates dropped across major hubs: Frankfurt fell 10.44%, Shanghai Pudong 6.38% and Hong Kong 5.05%. Tonnage bounced back briefly in week 20 after Golden Week and the trade pause, but deeper issues remain, especially on China-U.S. lanes.

Capacity trends are diverging. After early May saw nearly 50 freighters grounded and 40% of trans-Pacific capacity removed, week 20 saw partial recovery, particularly on Asia-U.S. and Asia-Europe lanes. Some of that has come back, especially on those two routes, but operators are still moving cautiously. Instead of fully ramping back up, many are testing new lanes in Latin America, the Middle East and within Asia to absorb parked capacity.

Key drivers of market dynamics Trans-Pacific volatility and tariff reprieve : The U.S.-China tariff war escalated fast, reaching a peak of 145% before being dialed back to 30% in mid-May. The 90-day suspension helped spark a partial rebound in China-U.S. air cargo, with volumes rising 19% week over week by mid-month. Still, year-over-year demand is down 27%, and rates, while steady around $4/kg, have not recovered to pre-April levels. Freighter repositioning still underway : As demand on the trans-Pacific routes collapsed, carriers pulled widebody freighters from the skies — nearly 50 aircraft were grounded in early May. Some of that capacity is coming back, but operations remain below April levels. Airlines like Atlas have started flying some routes again, particularly those into secondary Chinese cities and Latin America, helping to fill the gap, though not yet at full scale. Spot market dominance : With long-term block space agreements canceled and demand unpredictable, the market is increasingly spot-driven. Older aircraft remain active, particularly 747-400Fs and MD-11Fs, sustained by short-term ACMI demand. Despite aging fleets, conversion feedstock shortages and high component lead times (up to 35 weeks) continue to delay fleet renewal. Front-loading and inventory distortions : Retailers rushing to get goods in ahead of tariff hikes, combined with already high inventory levels, have thrown seasonal patterns off track. May saw a bounce in tonnage from Asia Pacific, helped by Golden Week and U.S. restocking. Cargo Facts Consulting expects Q2 growth to stay muted as consumer demand softens and inventories take time to clear. Regional and route-specific insights Trans-Pacific capacity retracts, then rebounds: China-U.S. tonnage dropped by over 25% YoY by mid-May, with freighter capacity down 40% at peak. However, by week 20, volumes seem to have recovered. Still, e-commerce demand remains soft. Much of the returned lift is serving general cargo. Rates remain low versus the first quarter, and most growth is inventory-driven. Asia-Europe gains strength : China-to-Europe routes (BAI81, BAI31) held firmer than expected. Hong Kong-Europe rates rose (up 2% WoW in week 20), while Shanghai-Europe declined marginally (down 5%). Volume surged 11% in May compared to the same period in 2024. The trade tension spillover into Europe remains a risk, but no EU tariffs had materialized as of June 13. Europe-U.S. trade stabilizes: After a sharp early-May decline (BAI20, down 10.44%), Frankfurt to North America rates stabilized, up 0.2% WoW by late May. Despite continued weakness, Europe is absorbing some of the reallocated Asia capacity. However, infrastructure bottlenecks and uncertainty around potential EU tariffs — now delayed to July 9 — are tempering confidence. Intra-Asia and Latin America fill void: With traditional long-haul lanes disrupted, intra-Asia and Latin America saw capacity boosts. Singapore, Vietnam and Taiwan are benefiting from the China +1 |sourcing strategy. LATAM-U.S. volumes fell after Mother’s Day, but freighter services continue to expand. Chinese carriers introduced air-to-air services via Hanoi to ease pressure on Vietnam-U.S. lanes. Freighter market, supply-side trends Freighter supply constraints continue. While global capacity saw an increase in late May, a significant portion of this new lift represents redeployed rather than actual new aircraft. Feedstock for conversions remains limited, particularly for medium and large widebodies, leading to increased costs and extended delivery schedules.

Legacy freighters retain their essential role. More than 100 747-400Fs and MD-11Fs continue to operate, addressing existing capacity gaps. Concurrently, 767Fs and A330Fs (including both production and converted variants) maintain strong demand. Lease rates for mid-life assets remain stable, although yields are experiencing pressure.

Carriers are reassessing long-term fleet strategies. Boeing’ s China backlog encountered geopolitical headwinds in May, while OEM delivery delays (notably for the 777-8F and A350F types) are constraining growth. Given that 58% of new deliveries are projected to replace existing units, overall fleet growth remains limited.

End of Q2 outlook: Unstable equilibrium May started with a dip, but in the next two months, we could see moderate demand gains. This is thanks to a tariff pause and restocking efforts. Still, the situation is uncertain. The trans-Pacific route will stay volatile, with a shift from e-commerce to general cargo. Europe might see more goods coming in from Asia, while trade within regions and on less common routes (like India-Middle East or Latin America-Europe) becomes more important.

Cargo Facts Consulting remains cautious. While the global freighter fleet will keep growing, operators will still face challenges from mismatches in demand and supply, plus sudden policy changes. Staying agile, being flexible in the short term, and focusing on the secondary market will be key to getting through the second half of the year.

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