Worsening box line disruption to have limited air cargo impact

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Disruption to container shipping operations out of Asia has unexpectedly worsened over recent weeks but the development is expected to have limited impact on air cargo.

The last few weeks have seen the return of port congestion and container shipping capacity shortages out of Asia push up ocean freight rates.

Figures from analyst Xeneta show that ocean rates from Asia to Europe are currently up 198% year on year and from the Far East to west coast US there is a 214% increase.

DSV said that the “significant development” had “caught most by surprise”.

However, while capacity shortages and port congestion in ocean shipping often result in rising airfreight demand, Xeneta chief airfreight officer Niall van de Wouw said there may be limited impact on airfreight this time.

He explained that in Xeneta’s view, much of the surge in demand was caused by shippers preparing for possible disruption in the shipping peak season rather than an urgent rush to move cargo.

“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,” he 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.

“They are moving inventory around and if that is delayed a little bit, you don’t need airfreight to compensate for that.”

He added that the move may even result in less supply chain urgency in the final part of the year.

“If they are moving peak season cargo now, it means that they will have quite a bit of inventory at destination which would restrict the need for urgent airfreight shipments because they will have the inventory at a higher level than they would normally have to avoid a potential capacity crunch,” he said.

In a market update, freight forwarder DSV said that there were several reasons for the rising pressure in ocean shipping.

It said that the impact of elongated sailing times around Africa to avoid missile attacks in the Red Sea on capacity levels was starting to worsen despite extra capacity being added to the market.

“The weekly capacity offered from Asia to Europe is about 10% lower than the same period last year, even though significantly more vessels and thus more capacity are being used to operate a network,” the forwarder explained.

“Perhaps the most important factor causing the pressure we are experiencing on the market is congestion at many central ports around the world.”

Figures from market analyst Sea-Intelligence show that only about 37% of all vessels from Asia to Europe arrive on time, which is the lowest in more than a year.

The port congestion can result in vessels becoming so delayed that they miss their next departure from Asia adding to ocean shipping’s woes.

DSV said it expects the issues to continue until at least July.

In a Xeneta webinar earlier this week, Tiaca director general Glyn Hughes also highlighted the issues faced by the ocean market this year.

“The maritime sailings (around Africa) can add two weeks sailing time from Asia to Europe and also adds additional cost,” he said.

“Fuel burn, operational costs, it’s therefore putting the price of [containers] up in some cases more than double.

“It is also having a secondary effect as the returning of the empty containers is now taking up to four weeks.

“We’ve also heard reports that it is actually a lack of containers which means they can’t even get the containers to the ports in some parts of China and Southeast Asia.

“That is a secondary push that is moving to air because they can’t wait for containers to come back into the distribution cycle.”

He added that the higher cost of ocean shipping was also making air cargo a more attractive option.

“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,” he said.

Air cargo looks to index-linked deals in response to a volatile market

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Damian Brett

Damian Brett
I have been writing about the freight and logistics industry since 2007 when I joined International Freighting Weekly to cover the shipping sector.After a stint in PR, I have gone on to work for Containerisation International and Lloyds List - where I was editor of container shipping - before joining Air Cargo News in 2015.Contact me on [email protected]