Janice R. Andrews
Unexpectedly, the Houthi rebel attacks in the Red Sea have resulted in prolonged diversions for ocean cargo vessels, which has led to a spike in air freight volumes. Major merchants and automakers have been forced to use air transport because to the bottlenecks, which has led to concerns about rising shipping prices and possible supply chain disruptions.
Leading benchmarking platform Xeneta reports that the situation has resulted in an increase in air freight, mostly headed for Europe, as businesses try to avoid taking long detours around Africa’s Cape of Good Hope. Chief Air Freight Officer at Xeneta Niall van de Wouw pointed out that, in contrast to the usual slowdown in air freight in late December and early January, new data shows a notable change in the number of businesses viewing air freight as a practical means of guaranteeing on-time product delivery to clients.
Concerns about resurgent supply chain inflation have been sparked by the Red Sea situation. The most notable feature, though, is the unheard-of rise in air freight volumes, which now exceeds all previous highs for 2023. The average cargo capacity of flights is currently 93%, and if demand keeps growing, air freight rates may reach above 10%.
Key distinctions between pandemic-related supply chain shocks and their analogies are emphasised. The corporations driving the present rise in demand are trying to reduce ocean transit delays created by the Red Sea problem, unlike the capacity issues during the pandemic.
According to Xeneta’s data, air freight volumes on the main route for clothes from Vietnam to Europe increased by an astounding 62% in the week of January 14 compared to the peak week in October 2023. Although rates have not yet returned to levels observed during COVID-19, the sharp rise is seriously disrupting everything.
The Red Sea/Suez Canal handles about 28% of the world’s container commerce, and according to Bank of America, almost 30% of the commodities that are shipped in these containers are garments, furniture, and home products. It is anticipated that prominent brands with a substantial presence in Europe may be affected, such as VF Corp, Nike, Ralph Lauren, Birkenstock, Capri Holdings Limited, Phillips-Van Heusen Corporation, and Levi Strauss & Co.
The longer maritime routes, especially to Europe, that circumnavigate the Cape of Good Hope to bypass the Red Sea have led to a rise in the usage of air freight. Prominent brands including Ikea, Next, and Crocs have issued product delays warnings, and automakers like Suzuki Motors, Tesla, and Volvo have already experienced manufacturing difficulties as a result of delayed components.
Brian Bourke, Global Chief Commercial Officer of SEKO Logistics, observed a shift in the shipment of goods, from automobile parts to fashion garments, to air freight as businesses try to lessen the effects. Although stock levels have not returned to the height of the Covid-19 pandemic, there has been a noticeable shift to air shipment due to the need to maintain stock levels in the face of more delays and impending production shutdowns. The Red Sea crisis has created obstacles for shipping businesses, who are keeping a careful eye on alternative routes and methods of operation. The situation is still unpredictable.
