Narrowing Gap between Ocean and Airfreight Rates as Supply Chain Pressures mount

This development ought to bring a significant shift in the supply chain industry.

Data provider Rotate recently highlighted that globally, ocean freight rates are now only six times lower than airfreight rates. This represents a marked change from historical norms, where airfreight rates are typically 12-15 times higher than those for ocean transport. A similar situation was witnessed back in 2022 when a combination of port congestion and container shortages led to a dramatic increase in ocean freight rates.

Aggravated by relentless geopolitical tensions, the ongoing issues in ocean shipping have again contributed to a renewed spike in ocean freight rates due to unseasonal capacity shortages and increased port congestion. Niall van de Wouw (Xeneta’s Chief Airfreight Officer) suggests that the current issues in ocean freight are largely due to shippers front-loading peak season cargo to avoid the expected third-quarter rush. This strategic move, while creating temporary pressure on ocean freight, does not necessarily translate into immediate increased demand for airfreight, which is often reserved for more urgent shipments.

Despite these complexities, the airfreight sector is feeling the ripple effects of ocean freight disruptions. The most undeniable example would be the intensified demand for air cargo solutions as attacks on vessels in the Red Sea have led carriers to reroute ships around the southern tip of Africa, significantly extending sailing times.

The unexpected surge in box shipping demand and the resultant capacity shortages have caught many industry players off guard. Spring and early summer are traditionally quieter periods for shipping, but this year, the landscape is markedly different.

In May this year, the elongation of sailing times around Africa, coupled with missile attacks in the Red Sea, began to severely impact capacity levels. Despite an increase in the number of vessels, the weekly capacity from Asia to Europe is about 10% lower than the same period last year.

Industry experts predict that these issues will persist until at least July, with central port congestion being a significant contributing factor. This ongoing congestion is creating a bottleneck effect, further pressurizing both ocean and air freight markets.

As the global supply chain continues to navigate these challenges, the narrowing gap between ocean and airfreight rates may influence logistics strategies. Shippers will need to weigh the cost and speed advantages of airfreight against the current reliability issues faced by ocean freight. Whether this will lead to a sustained shift towards air cargo remains to be seen, but the industry will undoubtedly remain vigilant as it adapts to these evolving circumstances.