Air Cargo Freight Rates Also Soar... Freight Index Hits Annual Record High

BAI 2144 Record... 20% Increase Compared to Late February
Balloon Effect of Rising Sea Freight Rates... Upward Trend to Continue for the Time Being

Dawn is breaking behind an Asiana Cargo plane being loaded at the Asiana Airlines Cargo Terminal at Incheon International Airport. / Yeongjongdo - Photo by Jinhyung Kang aymsdream@

Air cargo freight rates continued their soaring trend, reaching the highest level of the year. The surge in e-commerce shipments from China, including Ali and Temu, coupled with the prolonged Red Sea crisis triggered by attacks on ships by Yemen's Houthi rebels, has caused the rise in maritime freight rates to spill over into air cargo freight rates. This has increased the burden not only on domestic export companies but also on overseas direct purchases.

According to the Hong Kong TAC Index, which publishes the global air cargo freight index on the 18th, the Baltic Air Freight Index (BAI), released weekly, recorded 2144.00 as of the previous day. It rose 35 points (1.7%) compared to the previous week, setting a new annual high. Compared to the annual low of 1787.00 recorded on February 26, it has increased by nearly 20%.

Freight rates by region are also still soaring. Last month, the freight rate for the Hong Kong-North America route was $5.53 per kg, up 18.7% from the lowest point of $4.66 in February. Air cargo freight rates for the Hong Kong-Europe route also rose 12.5% compared to March.

The strength in air freight rates is interpreted as a balloon effect caused by the rise in international maritime freight rates. Ships have been rerouted around the Cape of Good Hope in South Africa instead of the Suez Canal, increasing travel distance and time. Additionally, with a flood of shipments from China, containers have piled up at ports, causing maritime freight rates to start rising. As a result, demand has shifted toward air transportation. According to the International Air Transport Association (IATA), as of March, international air cargo demand increased by 11.4%, but supply only rose by 10.5% compared to the previous year.

Moreover, the surge in e-commerce shipments from China worldwide has fueled the rise in air cargo freight rates. It is analyzed that the volume of cargo departing from China, transiting through Incheon Airport, and then being transferred to the United States has significantly increased. According to the Ministry of Land, Infrastructure and Transport's Aviation Information Portal System, international cargo transported by 11 Korean airlines from January to May this year totaled 1,154,436 tons, up 17.2% from the same period last year. This is the highest since statistics began in 2009.

Transportation costs are expected to continue their soaring trend for the time being. Choi Go-woon, a researcher at Korea Investment & Securities, said, "Since container ship freight rates have recently surged, we expect a secondary benefit from shipping bottlenecks going forward," adding, "With a shortage of container ships and belly cargo, waiting times are inevitable, so freight rates will inevitably continue to rise."

While this is good news for airlines and shipping companies' earnings, the burden on export companies and consumers is expected to increase. A logistics industry official said, "If the rise in freight rates becomes entrenched, costs will increase, reducing export companies' profits," and added, "Costs will also be passed on to relatively small overseas direct purchase items, which may cause some price increases."

This content was produced with the assistance of AI translation services.