Air-ocean price difference far above pre-pandemic levels

Date: Tuesday, October 3, 2023
Source: AirCargo News

The cost difference between air and ocean is now above pre-pandemic levels as ocean rates have rapidly declined.

The latest figures from consultant Drewry Supply Chain Advisors show that airfreight now costs 16.7 times more than seafreight.

Before the pandemic, airfreight typically cost around 13 times more than ocean transport.

During the pandemic the opposite had been true and the difference was as low as 5.5 times as major congestion in ocean supply chains pushed up container transport prices much faster than airfreight.

This resulted in modal shift from ocean to air and there were expectations that the price difference would remain more narrow than it had in the past due to consolidation in ocean shipping.

“This cost multiple, which tracks the spot freight rate differential between cargoes sent by air (heavy freight, deferred service) and cargoes sent by container, on the major East-West routes, has been trending above the long-term average for the last 10 months,” wrote Philip Damas, head of supply chain advisors practice and managing director at Drewry Shipping Consultant.

“Whereas maritime freight rates are now only 7% above the 2019 reference point, airfreight rates are still 36% higher than in 2019 and show no sign of softening.”

Damas said that there are reports of cargo shifting from air to ocean, as shippers consider switching from air to ocean (or sea-air) to “reduce freight costs substantially, transit times allowing”.

“The air cargo sector faces growing competition from container shipping and from providers whose core business is container shipping.”

[Read from the original source.]