Manufacturers are seeking to fly their products in the next few weeks as attacks on Red Sea shipping force them to find alternate routes, logistics firms say, a potential boon for a sector dealing with muted post-pandemic demand and overcapacity.
The Red Sea, which leads to the Suez canal, lies on the key east-west trade route from Asia’s manufacturing hubs to Europe and onto the east coast of the Americas. About 12% of world shipping traffic accesses the Suez Canal via its waters.
But more than two months of attacks by Yemen’s Houthi militia on ships in the region have affected companies and alarmed major powers in an escalation of Israel’s war with Palestinian Hamas militants in Gaza.
Price reporting agency TAC Index also said there were signs of an uptick in China-to-Europe air freight rates this week.
“We are talking to many customers already about increased air capacity,” said Yngve Ruud, head of Air Logistics at global logistics firm Kühne+Nagel. “We have probably 20-30% more discussions and proposals than usual in January.”
Air freight costly
Air freight is costly compared to sea freight, and not competitive for bulky, low-margin items. Such constraints have limited air cargo to less than 1% of global trade by volume, according to airline industry association IATA.
But since the attacks, which have forced shippers to take costlier routes that can add weeks to delivery times, air freight has become a more attractive option.
“As the price of ocean goes up, as the transit times increase, and as backlogs build up, that’s when shippers start to get very concerned that they won’t have their spring inventory,” said Neel Jones Shah, chief customer officer at digital freight forwarder Flexport.
A slowdown in the global economy has helped to mute the impact on trade flows from the attacks by the Iran-aligned Houthis, who say they are acting in solidarity with the Palestinians in Gaza.
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Source : Reuters
