The ongoing Houthi attacks on shipping vessels in the Red Sea have caused a major disruption in global trade, forcing many container ships to take longer routes and driving up ocean freight rates. This has also increased the demand for air freight, as some retailers look for faster alternatives to deliver their goods.

According to industry sources, ocean freight rates have soared by up to $10,000 per 40-foot container in the past weeks, as shippers avoid the risk of attacks by taking detours around the Cape of Good Hope in South Africa. This has diverted more than $200 billion worth of cargo from the vital trade artery that connects Asia, Europe and Africa.

The delays and uncertainties in maritime trade have prompted some shippers to switch to air freight, which can reduce delivery times from weeks to days. Air cargo is expected to play a bigger role in the supply chain ecosystem, as shippers seek to ensure timely and reliable delivery of their goods.

“Some shippers are already in survival mode with one goal on their mind: ‘Make sure my freight moves by whatever means possible,’” said Matthew Burgess, vice president of global ocean services at C.H. Robinson, a transportation logistics firm. He added that his company is blocking additional air capacity on core trade lanes to cope with the potential surge in demand.

Another logistics giant, DHL, said that it has received several inquiries from shippers who are considering switching from ocean to air freight, but not many conversions yet. However, Andreas Von Pohl, air freight head for DHL Global Forwarding Americas, said that he expects that to change if the situation in the Red Sea worsens.

The increased demand for air freight will likely push up the rates even further, especially as the Chinese New Year holiday in February approaches. Parash Jain, HSBC’s global head of shipping and ports research, said that he anticipates a spike in the air freight rate in the next two to three weeks, as exporters from Asia try to ship more goods before the holiday period.

The air cargo industry, which saw a 18% year-on-year decline in the global average spot rate in December, according to Xeneta, an ocean and air freight analytics platform, may benefit from the escalating international disruption. “The predictability of air cargo means the industry stands to benefit from escalating international disruption,” Xeneta wrote in a recent report.

Reference