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Home | Letter to the Editor | Ocean freight prices billow while Air Freight does a selective price rise: Factors to check for Project Logistics

Ocean freight prices billow while Air Freight does a selective price rise: Factors to check for Project Logistics

[Letter to the Editor] The cost of a 20 foot container to the USA, hovered at USD 1,900 around the New year. 6 months from the Red Sea Crises, they have topped USD 4,000 as the vessels transit around the Cape of Good Hope and more vessels are deployed with even more slated to hit the water. Geopolitical uncertainties surrounding the Red Sea region have nearly sealed the Suez Canal inactive. While tankers transit the canal, a typical 10-day window sees a mere 80 vessels of Containers and Multi-purpose vessel types, transiting the canal, a fair share of which could also be feeders. Project Logistics has relied mostly on Containers and the Breakbulk sector. While the container freight prices have to a major extent, bucked the trend since the start of the year, the MPV prices reversed its downward trends by January 2024, and have appreciated by 8%.

There is a spillover effect too. For instance, there was a juncture where the container prices were too low that Breakbulk cargo was booked on container vessels. However, the vessel utilization swelling led to the Breakbulk cargo coming back to the MPV fleet. However, as there been a demand uprising, as yet? The market is of the view that there has definitely been some amount of demand pick-up in the Ocean Freight space. A major chunk of this is pointing towards cargo that would have typically hit the shores towards the later end of the year. Geopolitical concerns and Inflationary fears have possibly led to the push-over for the items to be shipped early. While the headhaul trade has gone from strength to strength, the backhaul trade hasn’t appreciated so much for containers. The logistics lead times have led to alternatives ranging from near-shoring from a supply chain POV to Multi-Modal connectivity, including Sea- Air. Data says that the quantum of Sea-Air shipments arising from UAE rose significantly in January.

And coming to air, indeed at a composite level the prices haven’t risen much, but the sector has made some inroads with the Asia- America and Africa- Americas segments seeing a price rise. As H1 2024, touches down in another 40 days, the impact of General Rate Increases which has led to a second string of spurs in the container freight space will dissipate, but the typical, cyclical trends will possibly differ a bit this year if the cargo surges for the end of the year continue. In the contract market, we can see carriers trying to keep prices a tad lower in exchange for volume-based promises and as the carrier world sees more consolidation and with big names like DB Schenker likely in the fray for acquisition, we could see more consolidation of power, in order to get volumes.

Another factor for the Project Logistics fraternity is that about a third of the world undergoes election(s) in 2024, which can alter, impact or change the geopolitical dynamics further. Planning for Supply Chain and transportation impact(s) should also focus on these factors and add to that the ever-growing consequences of climate change which had severely impacted the likes of the Panama last year. While an ultimate win-win situation for all supply chain stakeholders would render the best solution possible, there should be an apt amount of inputs from everyone on board to reduce the gap in cost versus time, sourcing strategies and quicker execution.


Author of the article: Gautham Krishnan

Gautham Krishnan is a logistics professional with Fluor Corporation, in the area of project logistics and analytics, and has worked in the areas of Project Management, Business Development and Government Consulting. He has been bestowed the AntwerpXL 40-under-40 award for the year 2023, as one of the upcoming, future leaders in the project logistics space.


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