Weekly Recap : Air Cargo Trends and Ocean Freight Developments

Impact of Middle East Geopolitical Tensions on Global Shipping Routes

In this issue of our newsletter, we delve into the recent geopolitical developments in the Middle East and their implications for global ocean freight container shipping. The seizure of the MSC Aries near the Strait of Hormuz on April 13 has sparked renewed concern over the security and reliability of one of the world's busiest maritime routes.

1. Increased Freight Costs and Supply Chain Disruptions

‍Recent tensions in the Middle East have led to notable shifts in shipping rates and routes. According to Xeneta data, the average spot rates for shipping from Shanghai to Jebel Ali surged by 87% from late 2023 into early 2024, largely due to diversions away from the Red Sea amidst growing conflicts. This trend underscores the volatile nature of shipping costs in response to geopolitical unrest.

2. Strait of Hormuz: A Critical Chokepoint

‍The Strait of Hormuz remains a vital artery for global trade, particularly for the transportation of oil and containerized cargo. Despite the recent incident, ships continue to navigate this narrow passage, a testament to the resilience of the ocean freight industry. However, the ongoing risks highlight the need for strategic route planning and the consideration of alternative transshipment points.

3. Impact on Regional and Global Supply Chains

‍The Arabian Gulf ports, particularly Jebel Ali in Dubai, play a crucial role in global supply chains. Any disruption in this region could compromise not only sea-air cargo flows but also the effectiveness of land bridges used as contingency routes during maritime disruptions. Companies are advised to stay informed and prepare for potential changes in their logistics strategies.

4. Oil Prices and Shipping Costs

‍Interestingly, despite the potential for disruptions, oil prices have remained relatively stable since the incident. This stability is crucial for maintaining manageable fuel costs for shipping lines, which directly affects overall shipping rates and costs.

5. Navigating Forward: Strategic Recommendations

‍As we monitor this situation, it is essential for companies involved in international trade to consider diversifying their transportation routes and methods. Staying agile and responsive to the fast-changing geopolitical landscape will be key to mitigating risks associated with such disruptions.

Conclusion

‍The recent escalation of conflict in the Middle East serves as a reminder of the fragile nature of global trade routes. It is vital for stakeholders to remain vigilant and proactive in adjusting their operational strategies based on the latest developments. Our team continues to monitor the situation and will provide updates as new information becomes available.

Eid Impact on Global Air Cargo

The second week of April, coinciding with Eid, saw a significant dip in air cargo tonnages, particularly from countries with large Muslim populations. Despite this seasonal decline, it's notable that average global air cargo rates held steady at US$2.52 per kilo, maintaining the levels seen in the same week last year and showing a remarkable +40% increase over April 2019 rates.

• South Asian Tonnages: Exports from India, Pakistan, and Bangladesh were notably high before the Eid drop, primarily due to strong demand and disruptions in ocean shipping.
• Week 15 Highlights:
  • Pakistan: Tonnages dropped by -41% week-on-week.
  • Bangladesh: Saw a -14% decline.
  • UAE: Experienced a -29% fall, impacting overall Middle East & South Asia (MESA) to Europe tonnages, which fell by -18%.

Despite these fluctuations, the overall year-on-year figures from these regions to European destinations continue to show growth, underscoring the robust demand in these trade lanes.

Spot Rates Analysis

Despite the decline in tonnages during Eid, spot rates from the MESA region to Europe remain significantly high:

• India-Europe: Average spot rates were at $4.05/kg, a slight -2% week-on-week drop but a staggering +174% increase year-on-year.
• Bangladesh-Europe: Rates edged up to $4.61/kg, marking a +176% rise compared to last year.
• Dubai-Europe: Spot prices increased by +33% compared to the same week last year.

This resilience in spot rates despite fluctuating demand highlights the dynamic nature of air cargo pricing influenced by broader market conditions and specific regional factors.

Overall Market Trends

Looking at the broader picture, global air cargo rates in weeks 14 and 15 combined rose by +4% compared to the previous two weeks, despite a -9% drop in global tonnages and relatively stable capacity. This is indicative of the strong pricing power in the market, driven by sustained demand and constrained supply in certain routes.

Key Regional Insights:

• Asia Pacific to Europe: Prices rose +9% even as demand dropped by -4%.
• Europe to Africa: Both northbound and southbound rates increased, despite significant tonnage declines.

Looking Ahead

As we move past the Eid-related disruptions, it will be crucial to monitor how air cargo tonnages and rates adjust. The current resilience suggests a robust underlying demand, but the market remains sensitive to geopolitical, economic, and health-related developments globally.

Thank you for your continued interest in our weekly updates. We look forward to bringing you more insights as the market evolves.

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Note : All the data sourced* from Worldacd and Xeneta.

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