Red Sea crisis expected to drive sea-air demand as Chinese New Year looms

29 January 2024

Red Sea crisis expected to drive sea-air demand as Chinese New Year looms

A convergence of disruptions in the shipping industry, coupled with the early start of the Chinese New Year in February, is anticipated to drive up air freight rates. Despite this expectation, there has been no noticeable increase yet, but demand for rail services between Asia and Europe has seen a rise.

The TAC Index highlighted a significant 20.5% drop in the Baltic Air Freight Index during the first two weeks of January. Forwarders report receiving a growing number of inquiries, though substantial additional demand for air or sea-air has not been booked so far.

A forwarder in Shanghai commented on the situation, stating, I have not seen so far that the Red Sea crisis has caused a big impact on the air freight market, although weve had significantly increasing inquiries for rail freight, including both eastbound and westbound. The forwarder noted a busy rail freight space and mentioned some inquiries about possible sea-air via Dubai.

Despite the rise in inquiries, actual live bookings have not materialized to a large extent. The forwarder emphasized the importance of observing the next few weeks leading up to Chinese New Year, anticipating an increase in real orders during that period.

CargoGulf, which had anticipated a surge in demand and began promoting its sea-air services, acknowledges that the expected increase in conversion has not yet occurred. An industry expert noted, We see lots of inquiries, but conversion is not as much as I would have thought, highlighting Sri Lanka as the surprising origin of many inquiries.

Metro Shipping predicts that once shippers grasp the full impact of extended transit times for shipping lines, rates will witness an uptick. The company emphasized the potential impact on air freight as manufacturing components, stock, and inventory run low, coinciding with the Chinese New Year.

The European forwarder emphasized the current sea-air demand as a viable solution from countries like Bangladesh, Cambodia, and Vietnam. This demand is routed through Singapore and Dubai, providing operational and cost benefits. The forwarder expects the impact to become more evident in the coming weeks as shippers realize the location of their stock and inventory.

Acknowledging a drop in its overall index, the TAC Index attributed the decline to falling rates from China, particularly from Hong Kong and Shanghai. However, rates from other Asian regions were not experiencing the same decline, and some were even higher on lanes to Europe from locations such as Vietnam, Bangkok, and India.

By: Alex Lennane