Logistics leaders say that a protracted Red Sea crisis could see a pandemic-style rise in demand for air cargo.
One of the world’s largest logistics companies, Bolloré Logistics, has said in a statement that increased ocean transit times due to the Red Sea disruptions.
“The situation is putting pressure on inventories and having an immediate repercussion on air freight capacities, significant price hikes expected on major trades” - Bollore Logistics company statement
Bolloré Logistics has a network spread across 146 countries, including 83 partners, with 15,000 professionals responding to your specific requirements.
It offers multimodal transport, customs and regulatory compliance, logistics, global supply chain, and industrial projects. The company added that it expects to see “an augmentation in airfreight capacity” from mid-January to early February, “originating from China”.
During the pandemic, the air cargo market soared as people embraced the omnichannel model and took to the internet in their hundreds of millions to order the kind of high-value consumer goods – such as jewelry and electronics – that typically are shipped by air, rather than sea.
In March 2022, the International Air Transport Association (IATA) ‒ a trade association of the world's airlines ‒ said 2021 air cargo revenues hit a record US$175bn, and the figure was similar for 2022.
A significant uptick in airfreight levels is most likely if the Red Sea situation proves protracted – which is exactly what some of the biggest logistics players fear will be the case.
Speaking to the Financial Times, the CEO of AP Møller-Maersk, Vincent Clerc, warned the crucial Red Sea trading route might not return to normal for months, and that inflation is the likely result for the global economy.
“It’s unclear if we are talking about re-establishing safe passage into the Red Sea in a matter of days, weeks or months. It could have significant consequences on global growth.” - Vincent Clerc
An estimated 15% of the world's shipping traffic transits via the Red Sea en route to the Suez Canal, and is by far the shortest shipping route between Europe and Asia.
The journey from Rotterdam to Singapore via Suez is 8,400 nautical miles. Via the Cape, it’s 3,280 nautical miles longer, an increase of almost 40%.
Maritime experts say this will impact up to 1.7 million TEU of goods. (TEU stands for ‘twenty-foot equivalent unit’, and is a unit of cargo capacity used for container ships.) For an idea of the scale of the likely disruption, this is on par with that seen during the Suez blockage in 2021.
Source: Supplychaindigital
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