Cargo shifting from air to sea as freight rates dropped and problems improved

Cargo has been shifting from air to sea

Over the past two years, the air freight industry has benefited from a modal shift from sea to air, but leading forwarders have shown that the trend has begun to reverse in the second quarter of this year.

CH Robinson and DHL Global Forwarding said there was a shift back to sea in the second quarter as container shipping costs fell and congestion at ports eased.

CH Robinson said: “Airfreight conversions back to ocean freight have continued with more shippers seeking lower supply chain costs by tolerating the longer duration of ocean freight transit."

The US-based forwarder saw a 6% drop in air freight tonne volume during this time in part due to the shift back to sea.

Writing in its Q2 earnings report, DHL Global Forwarding explains the drop in air volume this year: “Airfreight volumes decreased moderately, in part due to modal shifts back towards ocean freight products, as customers recognised the again improved schedule reliability in ocean freight.”

The company's second-quarter air freight volume fell 7.7% year-on-year to 477,000 tons.

During the peak of the pandemic, the air freight industry increased production due to rising sea freight rates and disruptions in ocean shipping.

CH Robinson said the disruption is easing as demand at sea eases.

The cost difference between these two modes of transportation is also growing again.

Last year, Tom Crabtree, regional director, market analysis for Boeing Commercial Airplanes - air freight, pointed to statistics showing that high sea freight rates have narrowed the cost difference between air and sea.

The price of air freight in mid-2021 is about six to eight times higher than sea freight, much lower than the normal price difference of 10-20 times.

Statistics from the Drewry Sea & Air Freight Shipper Insight report show that last year's average container freight rate was 225% higher than in 2020 at $7,379/FEU (40ft container equivalent unit), followed by an increase 31.4% over the same period in 2020.

And in the early part of this year, prices have increased by more than 87% year-on-year to just over $9,000/FEU.

However, freight rates have plummeted since then and are now around $6,430 per FEU.

See more:

• Air freight demand continues to decline in July

Source: Phaata.com (According to AirCargoNews)

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