Port congestion doubles air freight prices | Economy

The problems of maritime transport to meet all the demand, with large congested ports and crises such as the one caused by the Ever Given ship in the Suez Canal, are causing many companies choose to pay more and ship their merchandise by plane. An option that sectors such as the automotive, food or textile sectors usually resort to, which handle products that have to be on the market in a short period of time, and to which companies engaged in other activities that cannot wait longer for shipping prices to drop to deliver your merchandise.

The cost of shipping air cargo from major airports in Asia has doubled in the last six months, coinciding with the crisis and the rising cost of shipping, according to data from the Baltic Exchange index. At the end of last June, bringing a kilo of merchandise from Shanghai to Europe cost 4 dollars. Today it costs more than 9. On the route from Hong Kong to Europe, they have gone from paying 4.3 dollars per kilo to more than 7.5. The bill for transporting merchandise by plane is today almost four times more expensive than before the pandemic and, according to industry experts, it will not get cheaper to then levels.

“It is 2022 is not going to be far from what we are experiencing now In the next years 2023 and 2024? Maybe yes, but not at pre-pandemic levels, without a doubt ”, he affirms to the SER string Iban Mas, general manager for Spain and Portugal of DSV, the leading logistics operator in our country by turnover. In your opinion, when planning your supply chain and cost analysis, companies must “become aware” that prices are going to remain high and that those before the virus were abnormally low.

“In the end, a container that came from China would end up costing you between 1,000 and 2,000 dollars, when the delivery in Vic could cost you between 800 and 1,000 euros … It’s absurd. What was happening? That was offset by export prices. That is to say: if you pay cheaply for imports, you will end up paying dearly for exports. Y There were a series of absurd imbalances that in the end there was no way to compensate for them and even many companies have ended up losing a lot of money and others have ended up closing, ”says Mas. In his opinion, although there have always been price peaks coinciding with periods of maximum demand, such as Christmas, ‘Black Friday’, or the Chinese New Year, now those ups and downs are much more frequent.

The pandemic shakes prices

Those periodic spikes in costs that were recorded before the pandemic show up well on the charts. If we look at the evolution from January 2018 to February 2020, we can see small peaks that were repeated every year, for example, in the weeks leading up to Christmas. As explained by Iban Mas, the sector was experiencing a time of relatively low prices in air freight transport mainly due to the increase in commercial aviation in the last decade. With the increase in the number of flights and destinations, airlines began to dedicate the space in the holds of airplanes that they did not fill with passenger suitcases to cargo cargo. This allowed that in the two years before the Covid, the prices of transport from China to Europe remained between 2 and 4 dollars per kilo.

Evolution of the price of air freight from Hong Kong to Europe. / Baltic Exchange Index

The graph of the evolution of prices changed radically with the arrival of the pandemic, which has drawn more abrupt rallies. The logistics chain ‘broke’ with the paralysis of the economy in the first months of 2020 and the sector has not yet been able to meet the explosion in demand that has been produced since then. This caused an increase in the cost of air and sea freight, which has skyrocketed in the second half of 2021.

“When it returns to normal, there is a certain euphoria on the part of the world population in regaining purchasing power, having life again, going out to lunch and dinner, electronic commerce explodes … It is a huge demand, and when demand exceeds supply, prices rise again of maritime transport. And sometimes, when maritime prices are so high, even though it is always far from the air, it makes something come closer ”, says Mas.

Analysts note that although air freight rates from Asia to Europe fell slightly in the last weeks of the year, volatility continues in the sector due to the breakdown of fixed price contracts. A situation aggravated by the expansion of the Omicron variant, which has forced corridors to close and sunk the price of oil by the reduction of flights. “All of this paints a complicated picture for the market in 2022, with oil prices falling, capacity potentially falling once again, and a lot at stake with the development of the new variant of Covid,” he writes. Peter Stallion, responsible for air transport of the Freight Investor Services (FIS) corridor, in its balance sheet for the month of December.

The International Air Transport Association (THERE IT IS) estimates that airline cargo volume will grow by almost 8% in 2021 compared to 2019, and will be 13% above pre-pandemic levels in 2022. According to its forecasts, Freight revenues will reach a record $ 175 billion this year (27% more than the previous year), and will touch the 170,000 million next year. These increases in freight transport contrast with the falls in passenger transport, where demand will be 60% below that of 2019 in 2021 and revenues 43%.


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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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