Shippers may consider air freight as an alternative to avoid delays in Red Sea maritime shipping.
Date：12-25 157 Belong to：News Information
Due to the ongoing uncertainty of the Red Sea shipping crisis and the anticipated shortage of vessels ahead of the Chinese New Year export rush, global businesses are rushing to redirect some of their maritime shipments to airlines.
Major container shipping companies have rerouted vessels away from the Horn of Africa or paused at secure locations to avoid threats from Iranian-backed Houthi rebels in Yemen targeting vessels linked to Israel to support Palestinians in besieged Gaza. Thirty percent of container traffic passes through the Red Sea and Suez Canal, a shortcut between Europe and Asia.
At a time of commercial shipping strikes, drought is forcing another trade bottleneck at the Panama Canal, which restricts transit due to insufficient water levels, complicating decisions for some ship operators who have recently shifted services to the Suez route to avoid delays in Panama, now in a quandary.
Amid a Gaza war that sees no end and escalating tensions, freight suppliers' businesses could see a surge, having been in long-term market doldrums until recently when a spike in China's e-commerce exports during the holidays occurred.
"The e-commerce boom just started, and prices plummeted this week. We expect the Red Sea shipping crisis to reverse this trend," Marc Schlossberg, Executive Vice President of Unique Logistics International, told FreightWaves. "We've seen impacts on air cargo shipping to multiple regions, industries, and supply chains. Some retailers are already starting to switch shipments from the Indian subcontinent to the US East Coast from sea to air without waiting for two more weeks. We have other clients assessing their demand from Asia to the UK and Europe."
Shipping experts said the route around the Cape of Good Hope triggered a chain reaction, including ships unable to arrive as planned, ship congregation in ports, dock congestion, and global container repositioning challenges. The Cape route adds 7 to 14 days to journeys to Europe and 5 to 7 days to the US East Coast. Transit times could be longer due to turbulent seas and storms at the top of Africa.
Lars Jensen, CEO of Vespucci Maritime, said during a Flexport webinar on Wednesday that seasonal pick-ups before the Chinese New Year now see ships loading in Asia late by weeks, causing a shortage of shipping capacity.
The Lunar New Year falls on February 10, but factories slow production from mid-January and shut down completely during the holiday, gradually resuming production – a hiatus that could last over a month. Companies ship demand in advance each year, leading to congestion, transport delays, and freight rate hikes at Chinese ports.
According to Flexport's analysis, approximately 540 ships have been allocated to Suez Canal services, with 136 currently being diverted around Africa and 42 halted.
Seko Logistics, based in Chicago, received inquiries about shifting sea freight to air freight before the Chinese New Year holidays, "but this is likely to continue until 2024," said Chief Commercial Officer Brian Bourke in an email.
Ninety-seven percent of container trades are calculated by weight through sea routes, so slight changes in sea freight can have a significant impact on air freight.
Xeneta's Chief Shipping Freight Officer Niall van de Wouw said during a company webinar that importers and exporters might shift critical goods to airlines to ensure sufficient and timely arrival to meet production or sales needs, especially with many flights from Asia to Europe still fully booked.
If disruptions in the Red Sea supply chain persist, demand for wide-body freighters could quickly increase.
"I spoke with a global home appliance company with offices worldwide. Air freight is cheaper than sea freight. We expect a surge in manufacturing freight shipping demand as car, electronics, and other supply chains assess their stock needs over the coming days," Schlossberg said.
"We have customers looking for solutions from Egypt and Jordan. Egyptian ports are closed, and Jordanian customers are uncomfortable with cross-border choices. The sea route via Israel and Aqaba is no longer viable."
Trine Nielsen, Head of Ocean Business for Europe, the Middle East, and Asia at Flexport, said the company spent half a year reducing excess pandemic inventories to normal levels. If the Red Sea bottleneck continues to disrupt shipping, there may not be enough safety stock. She urged shippers to plan extra delivery time and price increases and book early.
"Most of our fashion apparel retail customers have a strong holiday sales season. Inventory levels are relatively good, so disruptions like this will drive significant demand for shipping," Schlossberg said.
Logistics managers said the urgency of making switch decisions decreased as the industry passed the peak of Christmas shopping, but this could change quickly if the Middle East conflict remains unresolved.
Christos Spyrou, founder and CEO of wholesale network Neutral Air Partner, said as importers placed new orders with Asian suppliers, shipping demand might heat up mid-January, especially with many shipping companies expecting a slowdown and reducing freight plans.
He predicted an increase in charter flights to meet demand, particularly for urgent and valuable goods, while air-sea routes from Dubai to Europe would also increase. Flexport's Global Shipping Freight Director Zeid Houssami said in an email that Flexport is also handling inquiries about deferred air and air-sea shipments via Dubai and Doha. Flexport helps companies place orders with overseas manufacturers and manage shipments.
This hybrid service is cheaper than air freight but faster than sea freight.
Houssami noted that if shipping companies redirect vessels to Asia-bound routes to improve reliability, trans-Pacific shipping capacity could tighten after the Chinese New Year.
Ocean freight's infinite risk
The Suez route attracts a large proportion of the world's large vessels. Peter Sand, Chief Data Analyst at Xeneta, said shipping companies also need 50 more ultra-large container ships on the eastbound corridor. Shipbroker Clarksons estimates that 19% of global capacity will shift from the Suez route.
Shipping companies currently have idle capacity, but not all vessels are suitable or easily restartable.
In addition to coping with supply chain uncertainties, shippers will face higher transportation costs as shipping moves from the Red Sea.
First, adding vessels to transport the same number of containers means additional crew, fuel, supplies, port fees, and other expenses. If smaller ships are deployed, unit costs per mile will be higher.
Sand explained that operators will save $400,000 to $700,000 in tolls on the Suez Canal, but an additional 3,000-mile voyage from Africa to Europe will add $1 million in fuel costs per ship, costs passed on to customers.
Presently, shipping companies charge $20 to $100 per container for war risk surcharges, with higher fees for longer routes around Africa by Evergreen.
Since ships were attacked in early December, the price of spot containers from China to Northern Europe has risen by about 15%. (Chart: FreightWaves Sonar)
CMA CGM announced this week a force majeure and charges a maximum of $1,550 per container unit depending on the origin and destination. Invoking the force majeure clause informs customers that carriers may not be able to fulfill contractual obligations due to situations beyond their control.
Maritime experts said that assembling a multinational task force led by the United States to protect commercial shipping is unlikely to reduce the risk of attacks, thus prolonging disruptive impacts on supply chains.
Partner countries have previously escorted convoys to prevent ships from being hijacked by Somali pirates, but airstrikes pose another level of danger to commercial operators. Participating navies may lack the correct missile defense technology, and no system is foolproof.
Jensen of Vespucci Maritime said small drones seem not to pose a significant threat to large container ships, but he noted the danger of rapid fire spreading.
"Are you going to risk sailors' lives and $1 billion worth of cargo on board, hoping they can shoot down all those missiles?" he said. "I can't see aircraft carriers returning to deploy large Panamax ships through the region unless there's a solution to stop the attacks themselves, or at least completely eliminate them."
Jensen said the biggest shipping problems would occur in the Mediterranean, where shipping companies previously docked in ports like Genoa, Italy, but will now bypass smaller destinations on their way to major gateways in Northern Europe.
Shippers should also prepare for containers heading to the Mediterranean being stuck for up to a week in unfamiliar transshipment ports like Tangier in Morocco or Algeciras in Spain. In these ports, carriers will unload containers to avoid detours from major routes.
Jensen also warned that some consumer goods might return to the Panama Canal as agricultural growers in Chile and Peru are unable to prioritize due to weak financial capacity.
Shippers moving products to the East Coast via the Suez Canal may also opt for the trans-Pacific route, then rail or truck inland.
Jensen said strong demand during the Chinese New Year, combined with actual declines in global container capacity (requiring additional vessels to maintain transshipment around Africa), could triple shipping rates. Jensen forecast a doubling of the global average rate to around $3,000 in a CNBC interview on Friday.
Ocean temperatures have already spiraled upward. According to Xeneta's platform data, on December 14, the price of a 40-foot equivalent unit between Asia and the Mediterranean reached $1,875, up 25% from the previous week. But Mediterranean Shipping Company's Diamond Tier service for high-priority goods quoted over $6,500. MSC has imposed a $2,000 peak season surcharge on Asia-Mediterranean cargo.
Jensen noted that a new European maritime emissions trading scheme effective January 1 will be costly, as carriers must pay carbon taxes for emissions in Africa.
Major container shipping companies have rerouted vessels away from the Horn of Africa or paused at secure locations to avoid threats from Iranian-backed Houthi rebels in Yemen targeting vessels linked to Israel to support Palestinians in besieged Gaza. Thirty percent of container traffic passes through the Red Sea and Suez Canal, a shortcut between Europe and Asia.
At a time of commercial shipping strikes, drought is forcing another trade bottleneck at the Panama Canal, which restricts transit due to insufficient water levels, complicating decisions for some ship operators who have recently shifted services to the Suez route to avoid delays in Panama, now in a quandary.
Amid a Gaza war that sees no end and escalating tensions, freight suppliers' businesses could see a surge, having been in long-term market doldrums until recently when a spike in China's e-commerce exports during the holidays occurred.
"The e-commerce boom just started, and prices plummeted this week. We expect the Red Sea shipping crisis to reverse this trend," Marc Schlossberg, Executive Vice President of Unique Logistics International, told FreightWaves. "We've seen impacts on air cargo shipping to multiple regions, industries, and supply chains. Some retailers are already starting to switch shipments from the Indian subcontinent to the US East Coast from sea to air without waiting for two more weeks. We have other clients assessing their demand from Asia to the UK and Europe."
Shipping experts said the route around the Cape of Good Hope triggered a chain reaction, including ships unable to arrive as planned, ship congregation in ports, dock congestion, and global container repositioning challenges. The Cape route adds 7 to 14 days to journeys to Europe and 5 to 7 days to the US East Coast. Transit times could be longer due to turbulent seas and storms at the top of Africa.
Lars Jensen, CEO of Vespucci Maritime, said during a Flexport webinar on Wednesday that seasonal pick-ups before the Chinese New Year now see ships loading in Asia late by weeks, causing a shortage of shipping capacity.
The Lunar New Year falls on February 10, but factories slow production from mid-January and shut down completely during the holiday, gradually resuming production – a hiatus that could last over a month. Companies ship demand in advance each year, leading to congestion, transport delays, and freight rate hikes at Chinese ports.
According to Flexport's analysis, approximately 540 ships have been allocated to Suez Canal services, with 136 currently being diverted around Africa and 42 halted.
Seko Logistics, based in Chicago, received inquiries about shifting sea freight to air freight before the Chinese New Year holidays, "but this is likely to continue until 2024," said Chief Commercial Officer Brian Bourke in an email.
Ninety-seven percent of container trades are calculated by weight through sea routes, so slight changes in sea freight can have a significant impact on air freight.
Xeneta's Chief Shipping Freight Officer Niall van de Wouw said during a company webinar that importers and exporters might shift critical goods to airlines to ensure sufficient and timely arrival to meet production or sales needs, especially with many flights from Asia to Europe still fully booked.
If disruptions in the Red Sea supply chain persist, demand for wide-body freighters could quickly increase.
"I spoke with a global home appliance company with offices worldwide. Air freight is cheaper than sea freight. We expect a surge in manufacturing freight shipping demand as car, electronics, and other supply chains assess their stock needs over the coming days," Schlossberg said.
"We have customers looking for solutions from Egypt and Jordan. Egyptian ports are closed, and Jordanian customers are uncomfortable with cross-border choices. The sea route via Israel and Aqaba is no longer viable."
Trine Nielsen, Head of Ocean Business for Europe, the Middle East, and Asia at Flexport, said the company spent half a year reducing excess pandemic inventories to normal levels. If the Red Sea bottleneck continues to disrupt shipping, there may not be enough safety stock. She urged shippers to plan extra delivery time and price increases and book early.
"Most of our fashion apparel retail customers have a strong holiday sales season. Inventory levels are relatively good, so disruptions like this will drive significant demand for shipping," Schlossberg said.
Logistics managers said the urgency of making switch decisions decreased as the industry passed the peak of Christmas shopping, but this could change quickly if the Middle East conflict remains unresolved.
Christos Spyrou, founder and CEO of wholesale network Neutral Air Partner, said as importers placed new orders with Asian suppliers, shipping demand might heat up mid-January, especially with many shipping companies expecting a slowdown and reducing freight plans.
He predicted an increase in charter flights to meet demand, particularly for urgent and valuable goods, while air-sea routes from Dubai to Europe would also increase. Flexport's Global Shipping Freight Director Zeid Houssami said in an email that Flexport is also handling inquiries about deferred air and air-sea shipments via Dubai and Doha. Flexport helps companies place orders with overseas manufacturers and manage shipments.
This hybrid service is cheaper than air freight but faster than sea freight.
Houssami noted that if shipping companies redirect vessels to Asia-bound routes to improve reliability, trans-Pacific shipping capacity could tighten after the Chinese New Year.
Ocean freight's infinite risk
The Suez route attracts a large proportion of the world's large vessels. Peter Sand, Chief Data Analyst at Xeneta, said shipping companies also need 50 more ultra-large container ships on the eastbound corridor. Shipbroker Clarksons estimates that 19% of global capacity will shift from the Suez route.
Shipping companies currently have idle capacity, but not all vessels are suitable or easily restartable.
In addition to coping with supply chain uncertainties, shippers will face higher transportation costs as shipping moves from the Red Sea.
First, adding vessels to transport the same number of containers means additional crew, fuel, supplies, port fees, and other expenses. If smaller ships are deployed, unit costs per mile will be higher.
Sand explained that operators will save $400,000 to $700,000 in tolls on the Suez Canal, but an additional 3,000-mile voyage from Africa to Europe will add $1 million in fuel costs per ship, costs passed on to customers.
Presently, shipping companies charge $20 to $100 per container for war risk surcharges, with higher fees for longer routes around Africa by Evergreen.
Since ships were attacked in early December, the price of spot containers from China to Northern Europe has risen by about 15%. (Chart: FreightWaves Sonar)
CMA CGM announced this week a force majeure and charges a maximum of $1,550 per container unit depending on the origin and destination. Invoking the force majeure clause informs customers that carriers may not be able to fulfill contractual obligations due to situations beyond their control.
Maritime experts said that assembling a multinational task force led by the United States to protect commercial shipping is unlikely to reduce the risk of attacks, thus prolonging disruptive impacts on supply chains.
Partner countries have previously escorted convoys to prevent ships from being hijacked by Somali pirates, but airstrikes pose another level of danger to commercial operators. Participating navies may lack the correct missile defense technology, and no system is foolproof.
Jensen of Vespucci Maritime said small drones seem not to pose a significant threat to large container ships, but he noted the danger of rapid fire spreading.
"Are you going to risk sailors' lives and $1 billion worth of cargo on board, hoping they can shoot down all those missiles?" he said. "I can't see aircraft carriers returning to deploy large Panamax ships through the region unless there's a solution to stop the attacks themselves, or at least completely eliminate them."
Jensen said the biggest shipping problems would occur in the Mediterranean, where shipping companies previously docked in ports like Genoa, Italy, but will now bypass smaller destinations on their way to major gateways in Northern Europe.
Shippers should also prepare for containers heading to the Mediterranean being stuck for up to a week in unfamiliar transshipment ports like Tangier in Morocco or Algeciras in Spain. In these ports, carriers will unload containers to avoid detours from major routes.
Jensen also warned that some consumer goods might return to the Panama Canal as agricultural growers in Chile and Peru are unable to prioritize due to weak financial capacity.
Shippers moving products to the East Coast via the Suez Canal may also opt for the trans-Pacific route, then rail or truck inland.
Jensen said strong demand during the Chinese New Year, combined with actual declines in global container capacity (requiring additional vessels to maintain transshipment around Africa), could triple shipping rates. Jensen forecast a doubling of the global average rate to around $3,000 in a CNBC interview on Friday.
Ocean temperatures have already spiraled upward. According to Xeneta's platform data, on December 14, the price of a 40-foot equivalent unit between Asia and the Mediterranean reached $1,875, up 25% from the previous week. But Mediterranean Shipping Company's Diamond Tier service for high-priority goods quoted over $6,500. MSC has imposed a $2,000 peak season surcharge on Asia-Mediterranean cargo.
Jensen noted that a new European maritime emissions trading scheme effective January 1 will be costly, as carriers must pay carbon taxes for emissions in Africa.
