With air freight rates predicted to return to normal this year, retailers and their suppliers are looking to rationalise traditional supply chain routes from factories to localised warehouses. In many cases, they are mixing air and sea freight solutions.
Marcus Ng, regional head of air freight, Asia Pacific, at AP Møller–Maersk, notes that the Sea-Air option – where some products are shipped rapidly by air and others less quickly by ocean – has been particularly attractive to some ‘lifestyle’ apparel retailing customers. Such companies are keen to ensure fast delivery of products, especially new product launches, to the market rather than using only ocean shipping options.
He expects the Sea-Air to become more popular this year – especially at a time when the cost of sea freight has soared on the back of international cross-border conflicts.
The disruption caused by the Red Sea crisis and Russia’s invasion of Ukraine drove shipping costs on some Mediterranean and African routes to historical highs, largely due to longer shipping routes.
As Carrie Yap, the Singapore-based Southeast Asia area head of airfreight for AP Møller–Maersk, explains, numerous geopolitical crises – coinciding with a boom in e-commerce demand – have seen the cost of shipping goods long-haul out of the Asia Pacific (Apac) region go “through the roof”.
The cost differential between ocean and air remains narrower than ever before. Where ocean shipping used to be 15 to 20 less expensive than airfreight typically, but that ratio is now closer to around six.
While many industry verticals have adopted airfreight shipping for some of their transport needs, Sea-Air offers a middle ground for those who can see beyond the cost implications of air cargo, explains Ng.
Get the full insights report here: Embracing the Future in Unpredictable Times with Maersk Air Freight.
Multimodal solutions
Maersk is unique in its ability to offer its customers truly multimodal, potentially owned-controlled shipping. Access to this capacity safeguards against the vagaries of the airfreight business.
The company’s in-house freight airline, Maersk Air Cargo, flies Boeing 767s out of China to the US and Europe. Airports served by Maersk’s owned-controlled network include Hangzhou and Zhengzhou in China, Billund, Liege and Frankfurt Hahn in Europe, and Chicago Rockford and Greenville-Spartanburg in the US.
Last year, Maersk took delivery of its first two Boeing 777 freighters, which now operate between China and Europe. This allows Maersk to offer airfreight shipment options on its own network and use other airlines’ capacity – all in addition to the ocean transport solutions available on its shipping fleet.
Ng says Sea-Air solutions that represent a real “value proposition” to customers. Maersk’s Sea-Air offering differs to that of other companies as it has access to its own fleet of vessels and terminals, meaning it can provide greater control and reliability.
It offers Sea-Air products out of hubs such as Singapore via Tanjung Pelepas Port (TPP) in Malaysia, Dubai, Panama and Los Angeles. The Sea-Air option can provide a cost-effective solution for shippers looking to move goods out of Asia compared with the high airfreight rates on direct services out of the region into Europe and the US.
Unpredictability
Ng believes the potential for ongoing ‘black swan events’ and market disruptions make forecasting the industry’s trajectory exceptionally challenging this year.
Pre-Covid, there might have been a rare, unforeseeable event that could disrupt the global airfreight business somewhere in the world every five to 10 years – such as 9/11 in 2001 or the Icelandic volcano eruption in 2010. But in current times, one or more disruptions seem to be ever-present, such as geopolitical conflicts or regional wars.
For retailers – and especially their Asian suppliers – demand for sea and air freight continues to be affected by developments such as the ‘China Plus One’ trend. In this trend, manufacturers are diversifying production to other countries to reduce potential exposure to US tariffs. Ng says this trend has affected demand for export airfreight capacity out of Apac.
What lies ahead this year
Ng says there is much doubt about what will happen in ocean shipping this year, impacting airfreight demand.
Any improvement in ocean shipping lead times and greater reliability in punctuality would improve that segment’s attractiveness vis-a-vis airfreight.
Air cargo is likely to cede some volume to ocean shipping this year, given that Maersk’s customers typically say they want to take advantage of the cost efficiencies of sea over air despite the narrowing gap between the two.
Yap expects airfreight rates to remain fairly steady compared to last year’s figures. This will facilitate more manageable longer-term planning for shippers and forwarders and allow for longer-term pricing contracts to be agreed upon.
However, the stability of rates will depend on geopolitical crises and their impacts on global logistics.
While the market is currently very uncertain, one thing is for sure, Ng concludes: “Forwarders and their client shippers will have to be agile in their strategy and decision-making.”
Get the full insights report here: Embracing the Future in Unpredictable Times with Maersk Air Freight.
