Unexpected Worsening of Container Shipping

Unexpected Worsening of Container Shipping

Unexpected Worsening of Container Shipping Disruption in Asia: Limited Impact on Air Cargo

Recent weeks have seen a significant worsening in container shipping operations out of Asia, leading to port congestion and a shortage of container shipping capacity. Despite this disruption, the impact on air cargo is expected to be limited.

Surge in Ocean Freight Rates

Port congestion and capacity shortages have driven up ocean freight rates significantly. According to analyst Xeneta, ocean rates from Asia to Europe have increased by 198% year-on-year, while rates from the Far East to the west coast of the US have surged by 214%. DSV described this development as “significant” and unexpected.

Limited Impact on Air Cargo

While it might be assumed that such disruptions would increase airfreight demand, Xeneta’s chief airfreight officer, Niall van de Wouw, suggests otherwise. He explained that the current surge in demand is largely due to shippers preparing for the peak season in shipping, rather than an urgent need to move cargo quickly.

“We think that the spike in rates on the ocean side is caused by shippers front loading in anticipation of a capacity squeeze in the third quarter, which is the shipping peak season,” van de Wouw told Air Cargo News. “If that is the case, then it is a safety measure and not so much an urgency measure which I think will have limited impact on airfreight.”

This preemptive action means that while inventory is being moved, it is not necessarily creating an immediate need for airfreight services. The anticipation of a capacity squeeze later in the year may even result in less urgency for airfreight towards the end of the year.

Contributing Factors to Ocean Shipping Pressure

In a market update, DSV identified several reasons for the increased pressure on ocean shipping. The elongated sailing times around Africa to avoid missile attacks in the Red Sea have worsened capacity levels, despite the addition of extra capacity. DSV noted that weekly capacity from Asia to Europe is about 10% lower compared to the same period last year, despite more vessels being used.

Congestion at major ports worldwide is another critical factor. Sea-Intelligence reported that only 37% of all vessels from Asia to Europe are arriving on time, the lowest rate in over a year. This congestion causes delays that further exacerbate the issues in ocean shipping.

Extended Delays and Increased Costs

Tiaca director general Glyn Hughes highlighted in a Xeneta webinar that the maritime sailings around Africa can add up to two weeks to the journey from Asia to Europe, increasing operational costs and fuel burn. This situation is pushing up container prices, sometimes more than doubling them.

Additionally, returning empty containers now takes up to four weeks, contributing to a lack of available containers in some parts of China and Southeast Asia. This shortage is pushing some demand towards air cargo.

“The higher cost of ocean shipping is making air cargo a more attractive option,” Hughes said. “These are very positive indications for the air cargo sector but a shame for the overall disruption of supply chains in the next few months.”

Conclusion

Despite the current disruptions in ocean shipping, Neutral Airfreight Consultants expects the impact on air cargo to remain limited. The proactive measures taken by shippers to mitigate future capacity issues indicate a preemptive approach rather than an urgent shift to airfreight. Nonetheless, the ongoing challenges in ocean freight underline the importance of a flexible and adaptive logistics strategy to navigate these turbulent times.

For more information, please refer to the original sources:

• Air Cargo News
• Xeneta
• DSV
• Sea-Intelligence
• Tiaca