Spreads between ocean and air freight for global trade have narrowed to their lowest level in nearly two years.
In the past, May ~ June was the off-season for shipping, but this year, in this range, the overall shipping freight rate has been abnormal and continues to rise. According to the shipping giant's increase in the July rate, the highest freight rate to Europe is close to 10,000 US dollars, which has been the sea freight price of the route during the epidemic several years ago.
Data from market intelligence firm Rotate shows that at present, the global sea freight rate is only one-sixth of the air freight rate, which is the smallest gap between air freight prices and ocean freight prices since the third quarter of 2022, when global port congestion and "hard to find". Historically, the price of air freight is usually 12~15 times that of sea freight.
The relevant person in charge of Ningbo COSCO Shipping Logistics Co., Ltd. told the 21st Century Business Herald reporter that the biggest transportation problem for foreign trade enterprises is the increase in shipping prices and the difficulty of booking space.
On June 26, a shipping (air transport, China-Europe train) and international exhibition supply and demand docking activities held by the Zhejiang Provincial Department of Commerce were held in Ningbo, and many foreign trade enterprises expected to dock the most cost-effective mode of transportation. At the matchmaking meeting, many enterprises consulted about air transportation methods, especially cross-border e-commerce enterprises. At present, the skyrocketing cost of ocean freight has narrowed the price difference with air freight, will this affect the choice of transportation mode for enterprises?
The 21st Century Business Herald reporter interviewed logistics companies and cross-border e-commerce companies and learned that sea and air transportation methods correspond to different product types, and there will be no obvious transportation mode "sea to air" due to the reduction of price differences. The competition in the cross-border e-commerce industry has intensified, and considering the cost performance, enterprises choose more by sea, but they will also use air freight due to timeliness, which will bring obvious air transportation capacity shortage in the near future.
Sea and air freight spreads have fallen
At present, the price of shipping has risen significantly, and foreign trade enterprises feel the intuitive cost pressure.
Taking European routes as an example, as of June 24, the Shanghai export container settlement freight index (European routes) was reported at 4765.87 points, up 1.6% compared with the previous period, and the upward trend has continued since March this year.
At present, it is in the off-season of foreign trade shipments, and around August is the peak season for shipments in the traditional Christmas season. Some foreign trade enterprises told the 21st Century Business Herald reporter that the shipping price in the off-season this year has risen very high, and it is expected that in the peak season in the second half of the year, the shipping price will rise, and it may reach the freight rate level during the epidemic in previous years, which is expected to be a large cost to foreign trade enterprises.
The trend of rising sea freight prices has also been transmitted to air freight, which has led to higher air freight prices, but the price gap between the two has narrowed since the beginning of this year.
Speaking at a quarterly air freight webinar held at the end of January, Niall van de Wouw, chief air freight officer at transportation data company Xeneta, said that air freight prices from Asia to Europe began to skyrocket in January, more due to the impact of the Red Sea crisis. From a broader perspective, the fact that air freight prices are recovering so quickly is a macro signal: logistics companies are using air freight more than expected because of the uncertainty of ocean freight.
According to data tracked by Rotate, the difference between global air and ocean freight prices has fluctuated dramatically over the past 12 months. In the third quarter of last year, e-commerce demand surged and the ocean freight market calmed down, with the price difference between the two soaring more than 20 times. At the beginning of this year, the Red Sea crisis caused sea freight rates to soar, and the ratio of the two prices fell back to between 5~10 times.
A relevant person in charge of a pharmaceutical and chemical company in Taizhou told the 21st Century Business Herald reporter that the company mainly shipped by sea, and the samples were delivered by international express. Now it is also considering the use of air transportation for some high-value products to seize the timeliness. Taking shipping to India as an example, it takes about 14 days by sea and 3~4 days by air.
However, air freight is still more suitable for high-value products, and some foreign trade enterprises in the textile industry and furniture industry still use sea freight as the main mode of transportation, and the transportation cost of air freight is still high for them.
In an interview with the 21st Century Business Herald reporter, the relevant person in charge of the Hangzhou branch of Sinotrans Air Transport Co., Ltd. said that although the current air and sea freight price difference is narrowing, the general sea freight goods will not turn to air freight in large quantities, unless the delivery deadline is rushed. Initially, air freight was mainly suitable for high value-added chemical products and electronic products, and the corresponding product types of air and sea freight were two categories.
"Taking the European route as an example, the current container freight rate is 7000~8000 US dollars, which is still much cheaper than air freight when converted to the price per kilogram." The above-mentioned person in charge said.
Cross-border e-commerce competition catalyzes the shortage of air freight capacity
Enterprises choose sea freight mainly from an economic point of view. Many cross-border e-commerce respondents said that the industry is under great competitive pressure this year, and it is very important to reduce the cost of logistics links.
Xu Yue, East China investment manager of Lecang Information Technology Co., Ltd., said in an interview with the 21st Century Business Herald reporter that at present, enterprises operate their own warehouses overseas, and customers who do cross-border e-commerce will put their goods in overseas warehouses. The way of overseas warehouses emphasizes more on early planning, and stocks are stocked two months in advance for the peak sales season, and the requirements for timeliness are not too high."
Li Feng, a cross-border e-commerce practitioner in Guangzhou, told the 21st Century Business Herald reporter that this year's cross-border e-commerce industry is very volatile, coupled with the rise in logistics freight, the pressure on cross-border e-commerce sellers is indeed not small, and they will try to reduce logistics costs.
As a supplement to cross-border e-commerce cargo transportation, air freight mainly meets specific timeliness needs, especially in the fully managed/semi-managed mode, the number of parcels on e-commerce platforms has grown rapidly, and the demand for air freight has also increased.
"Some of the first order of payment and replenishment of urgent items generally give priority to air freight, coupled with the cross-border platform launched the overseas warehouse semi-custody model, the demand for air freight has also increased, so air freight has been rising in price recently, and the overall air freight capacity is also relatively tight." Li Feng said.
Interviewed people in the air transport industry told reporters that at present, cross-border e-commerce express parcels account for a large part of the air transport business. Since the beginning of this year, cross-border e-commerce has grown rapidly, and related logistics companies are also digging deep into the procurement of shipping and transportation capacity, and air transportation capacity is also increasing. From the perspective of routes, the American routes of the air freight industry are relatively stable this year, and the prices of European routes are rising, mainly because the purchase volume of European cross-border e-commerce has risen rapidly.
In the United Kingdom, for example, the pandemic has accelerated the online shopping habits of local residents. According to the 2024 edition of the UK e-commerce market report released by RetailX, in 2019, 76.9% of UK consumers shopped online, and in 2023, it will steadily increase to 81.9%, and the penetration rate of online shopping continues to rise.
Not only air transportation, but also for different markets, cross-border e-commerce logistics options are also increasing, but sea-air combined transport is still not the mainstream.
Previously, the business model of sea-air intermodal transport has emerged, but it has not been promoted in large quantities due to the high price of air freight. With the gradual enrichment of transportation modes such as shipping, air transportation, railway, and truck aviation in recent years, the living space of sea-air combined transportation, which is not advantageous in terms of timeliness and cost performance, is small.
Li Feng believes that for cross-border e-commerce enterprises, the current business of LCL shipping in the United States is relatively mature, and if you consider the time, you will choose air freight or Matson Express. From the European market, the joint construction of the "Belt and Road" plays a very big role in European logistics, in addition to shipping, railway and truck is also a cost-effective choice, the current European card air basically maintains 18 ~ 25 days of timeliness.
In order to improve gross profit and control logistics costs, they can only make longer-term stocking plans as soon as possible and choose cost-effective transportation methods, but in the case of a certain gross profit margin guarantee, they will choose a transportation mode with faster timeliness from the perspective of capital turnover." Li Feng said. (At the request of the interviewee, Li Feng is a pseudonym)
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