The latest on DeMinimis and Cross-Border Air Freight

Here are four insights on the current CN-US de minimis situation: 

1) The only destination in the US "growing" (albeit very small) with Asia freighter capacity since May 2nd is Miami. As Chinese e-commerce players have committed to capacity with ACMI operators, they are shifting their focus, including to Latin America. Chicago is down 9 freighters a day, JFK down 4, while Miami is up 0.2. 

2) As expected, parcel volume has receded dramatically in the US. Our firm was estimating about a 90% reduction in parcels at 145% tariffs, and this was validated by a final mile delivery company that has multiple China clients. The pivot from China to US origin fulfillment for Temu is not filling in the gaps. Parcel volume is down, and companies with fixed cost (employees) are feeling significant pain, more so than crowd-sourced or independent drivers. Companies such as UniUni, SpeedX, and OnTrac are exposed to China business. 

3) Global Air Freight Rates are falling, but we were incorrect in how fast the rates would move from HKG and PVG. The TAC Index has global rates down 4.5% WoW, with HKG rates only down 3.3%, and Shanghai down 2.4% WoW. However, a friend on the ground in HKG is telling us you can by HKG to US West Coast for $3.50 All Inclusive of Fuel and Security. So, our forecast may have been correct, we were just a few days too quick to see the movement. More to come, here. Thank you, Nick. 

4) Lastly, as we field questions on YoY Trans-Pacific Capacity: While TPAC capacity is down roughly 32% since May 2nd based on our data, Eastbound Freighter Capacity is down 23% YoY, according to our friends at Rotate. With the explosive growth of e-commerce, we had been getting opinions that "the market will just revert to one year ago", which was still quite profitable. 23% YoY decline confirms this adjustment is much greater than just reverting to one year ago.