Red Sea impact on time-critical modes

Shippers’ concerns about Red Sea supply chain delays, plus an early Lunar New Year, pushed up air cargo volumes by 10% in January, putting pressure on rates on some routes, notably from the Indian Subcontinent and South East Asia into Europe.

This week has seen a huge spike in air cargo demand, due to the Red Sea crisis creating lower than expected inventory levels. Products that should have arrived by ocean freight against original forecasts from last year have been delayed in transit, as a consequence of the re-routing of vessels away from the Middle East passage. 

In addition the Chinese New Year Spring festival that commences this week throughout China and much of Asia has seen a rush for air freight capacity before the factory shut downs throughout Asia.

Retailers and fashion brands are already shipping more goods by air freight, with air cargo volumes from Vietnam spiking 62% in one week in January, up 16% on the same week in 2023.

There has been a three-week consecutive increase in air cargo volumes from China and Vietnam to Europe in January, surpassing peak season highs, with spot rates from Northeast Asia to Europe climbing 11% in the week ending 28th January.

Lunar New Year related spikes in demand for air freight will also be a contributing factor to increasing volumes, putting pressure on capacity and costs, which could be set to rise further.

Public domain data does evidence that there may be a shift to air and sea/air solutions, with global air cargo tonnages rising 24% in one week in January and while there is usually a strong bounce back after the Christmas break, this year’s increase is 5% above 2023’s.

Elevated tonnage figures to Europe from Asia Pacific and from Middle East & South Asia do reflect some contribution from modal shift on these lanes from sea to air and to sea/air, though spot rates are not rising as rapidly as feared, given the disruption to ocean shipping in the Red Sea.

The situation in the Red Sea is unsettling for many supply chains and it is inevitable that some shippers will need to shift some urgent orders to airfreight, while bringing others forward to secure capacity. 

In addition, the Ukraine/Russia conflict and Middle East situation are creating diversion of air cargo capacity and aircraft away from traditional markets to follow the more lucrative demand from Russia and The Middle East for time critical products, which is a consideration effecting available capacity.

However, we expect that this will not have a long-term impact on airfreight and the initial nerves and uncertainty will subside as shippers accept that ocean freight will just take two weeks longer. Supply chains and critical path planning will stabilise as the conveyer belt of products begin to arrive at their destinations. 

That is subject to any further variable or negative issues occurring over coming weeks and months. We are monitoring the global situation closely.

We have seen a very large increase of 300% in airfreight and ocean freight enquiries over recent weeks for both air freight and sea/air services across all lanes in and out of Europe. 

Some of these are speculative and some are immediate requirements on ocean freight that needs to be converted to a faster transit and mode. 

It is not quite ‘pay-to-play’ but rates are definitely moving north regardless of the region and market we have observed.

While an increase in airfreight and sea/air volumes is apparent, it is not at a magnitude likely to cause disruption and it remains to be seen if it will be sustained past the Lunar New Year.

We anticipate high demand to continue into March and will keep you advised of capacity balancing from airlines over the CNY period which will also have an impact on the market. 

Currently, longer term, we are confident that the airfreight market will settle and normal seasonal flows will be restored.

For valuable, special and time-sensitive shipments we have a range of air freight and sea/air solutions, with extremely competitive rates and service combinations, to meet every deadline and budget requirement.

EMAIL Elliot Carlile, Operations Director, for insights, prices and advice.