With no sign of the crisis in the Red Sea abating, an exclusive survey by Ti Insight reveals the extent to which global shippers are taking steps to avoid delays involved in re-routing ships around the Cape of Good Hope.
Almost two thirds of shippers taking part in the survey said that they had switched a proportion of their shipments away from sea freight services. Of the various modal shift options available, the switch from sea to air was the most common choice (17.2%). But the shift towards multi-modal solutions (air/sea combination and sea/land combination) was also significant – almost 20% in aggregate. This is due to the cost and time advantages of using a combination of air/sea and sea/land compared to a full shift to air.
The results of the snap survey are below:
Ti’s analysts provided additional context to the survey results.
- Air cargo is the obvious choice for urgent shipments and this, combined with the Chinese New Year, is pushing up rates for the first time in months.
- Delays, shortage of shipping capacity and increasing sea freight rates are making air (and sea-air hybrid combinations) more attractive.
- Dubai-Europe is a particularly popular sea-air lane, with rate platform Xeneta asserting that it was seeing double digit growth in the early part of 2024, a period which is traditionally weak.
- Shippers are also looking at alternative sea-air routes including China to Europe via Los Angeles.
- The use of rail, either on its own or as part of a sea-rail hybrid solution, has also soared. Talking to CNBC, Rail Bridge Cargo claimed that China-Europe rail route bookings had risen by 37% since the start of the crisis.
- Whilst many global manufacturers and retailers are happy to wait out the crisis in the short term, if disruption continues for months rather than weeks, more are likely to seek alternative modal choices. Decisions to look for more expensive but expedited transport will be informed by the trade off with additional inventory carrying costs caused by delays to shipping.
- One little talked about consequence of the crisis is the impact on carbon emissions. Significantly longer transit distances and the use of air cargo will make it difficult for shipping lines and their customers to meet their carbon reduction targets in 2024.
Author: John Manners-Bell
Source: Ti Insight