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Futureproofing Your Supply Chain: How Air Freight Can Support Your Business Amidst Disruption

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Futureproofing Your Supply Chain: How Air Freight Can Support Your Business Amidst Disruption

Boats, planes, trains, trucks – when you start to add up all the global freight transportation options available and factor in constantly changing economic and geopolitical elements, it can be difficult to predict which will be the best mode for your freight. Having access to and knowledge of various options is critical for businesses who want to maintain a dynamic supply chain. Recently, the global air freight market has gained recognition for its benefits of speed and agility in the wake of disruptions.

An excellent example of this happened in 2020 when the demand for global air freight took off out of the necessity to move PPE, medical equipment, and other just-in-time inventory amidst the COVID-19 pandemic. With fewer commercial planes flying passengers and therefore less belly capacity, airlines were able to quickly increase capacity through cargo planes and businesses were able to capitalize on the speed of air freight.  

The outlook for air freight, however, hasn’t been so sunny over the last few years. In 2023, as supply chains finally started to iron out following years of expensive delays and disruptions, the demand for air freight dropped as business returned to ocean shipping as consumer behavior shifted and many looked to recoup costs after paying premium transportation costs during the pandemic. 

As new disruptions arise in 2023, however, the role of air freight remains an important option for a robust supply chain. For the first time in months, the demand for air freight has grown. Not because air freight is a direct cost-saving option, but because it is largely able to avoid disruptions other transportation options cannot. As businesses work to futureproof their supply chain from major delays and inventory shortages, as well as complex geopolitical factors, this trend towards using air freight to diversify your supply chain is likely to continue into 2024.

Here are 3 factors contributing to the growth of air freight into 2024:

Expanding Nearshoring Opportunities

After a few years of rollercoaster-like supply chain conditions, many businesses are recognizing the benefits of having their manufacturing operations closer to the products’ final destination or customer. Nearshoring, reshoring or friend-shoring has become increasingly popular as businesses are shaking off the damages caused by past and ongoing disruptions including labor issues at ports on the West Coast, mis-forecasted inventory and other supply chain delays. 

The transition of nearshoring, however, doesn’t just happen in the blink of an eye – it can often be rocky. As businesses adjust to completely new supply chains, air is used frequently to keep up with inventory as moving supplier components can be more difficult than just relocating manufacturing facilities. While it might not be the most affordable option long term, air freight is a popular mode for supporting businesses who are looking to quickly nearshore their operations. 

Congestion at the U.S.-Mexico Border

Several factors, including technology issues at customs, increased border security, and crossing closures created congestion and a backlog of shipments at the U.S.-Mexico border at the start of this fall. For some routes, these disruptions added nearly 15 hours to transit times, causing many to pivot to air freight to avoid delays at the border. 

For one industry in particular – automotive manufacturing – these delays plus recent strike activity created the perfect storm of disruption. The automotive industry has historically relied on just-in-time inventory management to drive efficiency, so delays can have detrimental effects on production. Many C.H. Robinson automotive customers looking to transport goods out of Mexico to mitigate further supply chain risks from strike activity, for example, were able to secure air charters in as little as a few hours. Air remains a major player even when strikes end as manufacturers  get caught up on production and suppliers need to ship inventory quickly to avoid a line-down situation. Air freight allows businesses to keep goods moving when other modes aren’t working efficiently enough. 

While the congestion has waned from the disruptions mentioned above, the growing demand and volume for U.S.-Mexico cross-border shipping through nearshoring and other trade incentives that make the countries an attractive option for many companies, could lead to more consistent congestion or bottlenecks in 2024.  

Holidays and Increased Retail Activity

While often more expensive, air freight is also a critical tool for specific industries and during certain times of the year. For example, medical equipment, electronics and trend-driven retail industries leverage air freight as they cannot afford major delays in the supply chain due to their timeliness.  

While consumer spending isn’t as high as it was during the beginning of the COVID-19 pandemic, it remains high given the current economic outlook. Many predicted that there wouldn’t be a peak holiday season in 2023, and while it is mellow compared to the last few years, it is forecasting similarly to what we experienced before the pandemic. 

Electronics, for example, typically has a few major new product drops throughout the year. With these new devices, consumers typically need additional accessories like cases or chargers. Air is used for these goods to ensure they can arrive on time with the new technology. Additionally, as fashion trends evolve, brands cannot afford delays as the marketability of their goods relies on timely trends or fads. As ocean carriers use blank sailings to adjust to lower demand, air is far more reliable and mitigates the risk of last-minute delays. To keep up with this demand for quick-turn consumer goods, air freight will remain a good option in 2024 for those who can’t afford to miss their window of opportunity. 

Building Contingency Plans

Since 2020, supply chain professionals have collectively learned that while air may cost more initially, the potential savings from avoiding delays and inventory shortages make it a worthwhile investment and key element of any contingency planning and diversification strategy. While we can’t predict the future, we know disruptions and unforeseen factors are inevitable. Understanding supply chain solutions like air freight is a critical way to prepare for the unknown and futureproof your business as we move into 2024.  


Real-Time Tracking: New Customers for BlueBox Systems’ Air Freight Tracking API

Prompt and seamless exchange of accurate information is essential for a robust logistics network. With ThinkPrime and Delpa Group, BlueBox Systems, a leading developer of intelligent air freight tracking solutions, welcomes two new customers for its state-of-the-art air freight tracking programming interface. With this, BlueBox Systems enables companies to quickly and easily access high-quality air freight data, resulting in streamlined operations.

Using BlueBox Systems’ air freight tracking programming interface, ThinkPrime and Delpa Group each get the ability to integrate BlueBox Systems’ tracking data into their own platform, allowing the independent applications to communicate with each other and share data in real time. This gives all parties along the supply chain access to the most up-to-date and accurate information. For example, carriers gain access to real-time shipment data to optimize routes and allocate resources efficiently. Similarly, manufacturers can get up-to-date shipment tracking information so they can plan production and proactively manage inventory. At the same time, the API solution enhances security by providing controlled data access that ensures only authorized parties can access and use shared information. Finally, the API streamlines processes by fostering automation and seamless system interactions, reducing manual intervention and improving overall operational efficiency.

In addition to the API solution, BlueBox Systems also offers BlueBox Air, a web-based air freight tracking platform with a fast and intuitive user interface. BlueBox Air enables companies to efficiently manage their air cargo operations, reduce errors and improve overall productivity. BlueBox Systems also offers a white-label solution for companies that want to use its technology to offer their own air cargo management system to their customers.


U.S. Travel Agency Air Ticket Sales Top $8 Billion in June

Air Travel Sales and Passenger Trips Grew Steadily in the First Half of 2023.

Airlines Reporting Corp. (ARC) today released data showing June 2023 U.S. travel agency air ticket sales increased 2% year over year to $8.1 billion.

Total sales for the first six months of 2023 were 27% higher than the first six months of 2022 and down 0.3% compared to 2019. Total passenger trips were up 11% over the same period compared to 2022 and down 12% compared to 2019.

International travel saw the biggest improvement from January to June 2023, with the total number of international trips settled through ARC increasing 22% year over year compared to a 5% growth in domestic trips.

Results for June 2023 showed:

ARC Ticketing Metric Total Month-Over-Month Variance Year-Over-Year Variance
Total sales $8,098,227,889 -10% +2%
Total passenger trips 22,276,370 -8% +3%
U.S. domestic trips 13,620,896 -8% -1%
International trips 8,655,474 -7% +10%
Average ticket price $555 -1% -8%

June marked the third month in a row that the average price of a U.S. round-trip ticket was below year-over-year levels.

Ancillary sales increased 79% year over year to $24,555,898. Ancillary transactions increased 62% to 377,122 over the same period.

More detailed information is available on ARC’s sales statistics page.

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Sailing the Seas or Soaring the Skies: A Comprehensive Look at Ocean Freight vs Air Freight Shipping for Your Business

Complexity and congestion in the supply chain are at an all-time high today. Therefore, it is essential for a company’s success to choose the most suitable freight alternative. Air freight and ocean freight are both viable options for overseas shipments. They each have their benefits and drawbacks. Your company’s specific circumstances and goals will determine the most effective freight strategy.

Freight is the single most considerable expense in most supply chains. Businesses must consider how freight and its hidden fees affect their bottom line. Importers in the modern, globalized economy should try to save on both transportation costs and delivery times as much as possible. Which mode of transportation should a company choose when there are so many to pick from, including the air, road, train, and sea? Keep reading to find out what ocean freight and air freight shipping are and the top advantages of each.

Ocean Freight: What Is It And What Are Its Advantages?

Scheduling the transport of cargo through ships is referred to as sea freight forwarding. The freight company packs the items into metal containers and loads them onto the ship. The average container capacity of a cargo ship is about 18,000. This alone makes ocean transport a cost-effective method to ship colossal cargo.

  • Ocean Freight Is Often The Most Cost-Effective Option Compared To Air Freight 

Budget constraints are one of the primary drivers for SMBs to seek ocean freight transport services. For long-distance shipments, air freight could be costly. In most cases, shipping by the ocean is the most cost-effective method for transporting heavier items across distant locations.

  • Ocean Freight Are The Ideal Choice For Large Cargo

Shipment by air is too costly for heavy cargo. Thus most people choose ocean freight instead. Ocean freight rates can be influenced by weight, but shipping container sizes mostly determine how much it costs. Standard container lengths range from 20 feet to 40 feet to 45 feet. They can only hold a certain amount of weight due to the containers’ specific dimensions.

  • Little Impact On The Environment And Lower Carbon Footprint

The environmental effect of freight shipping is a valid concern for many company owners. Especially in the future, strict regulations may be required to control the impact of freight transportation on environmental issues, particularly when it comes to the use of roads and airplanes. In contrast to the other two options, ocean freight has a far less carbon imprint.

Air Freight: What Is It And What Are Its Advantages?

Parcel delivery through air freight is transporting items via an air transport service. Small, medium, and big companies who want to stay competitive can consider air freight delivery an excellent choice for shipment. This shipping mode not only delivers reliable delivery lead times but also simplifies the process to increase consumer loyalty. When importing or exporting items, it is necessary to consider each country’s legal and compliance requirements. PEO services can handle these aspects for your business. Professional global PEOs can manage the paperwork and procedures associated with the overseas shipment.

  • The Quickest Shipping Option

Congestion at ports is a significant problem that has made sea freight extremely slow in recent years. Air freight services are the most incredible option if you need to get your shipment to its final destination quickly. This is a significant time saver compared to going by the ocean or road. 

  • Strong Safety Measures Taken

Security concerns are pretty strict in the airline sector. This means it may prevent theft and damage from occurring while in transit. Cargo handling at the airport follows a set of specific protocols. The airport authority strictly enforces these regulations at all times.

  • Transport Status Monitoring Capacity

Many businesses specializing in shipping goods by air will allow you to keep tabs on your shipment via a web-based tracking system. As a result, you can track shipments from departure to their delivery. 

The Bottom Line

Matching your company’s needs with the benefits of air or ocean freight can help you make the best decision. Your attention can be divided between the two alternatives. In this instance, you should consider the benefits and drawbacks of each option to choose the one that best fits your requirements.


Silk Way West Airlines Signs Air Cargo Transport Memorandum with Nippon Express

Silk Way West Airlines Signs Air Cargo Transport Memorandum with Nippon Express

Silk Way West Airlines and Nippon Express Holdings have signed an Air  Cargo Memorandum of Understanding to offer enhanced solutions to their customers and to respond more  flexibly to changing supply chains. This agreement strengthens Silk Way West Airlines’ presence in the Japanese  market whilst helping Nippon Express Holdings to expand its business globally by providing cargo capacity across a worldwide network. 

Silk Way West Airlines has been serving the Japanese air cargo market since 2018 via weekly flights connecting  Baku with Kansai International Airport. The largest cargo airline in the Caspian Sea region has moreover been  offering regular flights to Narita International Airport, the most important air cargo gateway in Japan, since  2021. With the new memorandum between the cargo carrier and Nippon Express, Silk Way West Airlines will  play an increasingly important role in the region’s freight network, constantly improving the quality of air cargo  transportation services for both Japanese and international partners. 

About Silk Was West Airlines 

Founded in 2012 in Baku, at the heart of the Silk Road, Silk Way West Airlines operates hundreds of monthly flights across the  globe via its fleet of 12 dedicated Boeing 747-8F and 747-400F aircraft based at Heydar Aliyev International Airport. On April  28, 2021, Silk Way West Airlines signed a strategic fleet expansion agreement with Boeing for the purchase of five new 777  Freighters, followed by a further agreement signed on November 10, 2022 for the purchase of two state-of-the-art 777-8  Freighters. Silk Way West Airlines also agreed the purchase of two A350 Freighters with Airbus on June 28, 2022.   

About Nippon Express 

Nippon Express Group has positioned freight forwarding as one of its core businesses in the “Nippon Express Group Business  Plan 2023: Dynamic Growth” and is vigorously pursuing initiatives consistent with its air freight business growth strategies.  The company leverages an extensive international service network and offer a wide range of consolidated air freight  forwarding services – including collection, customs clearance, delivery and distribution operations – to a variety of  destinations worldwide.


Air Freight Tracker Q4 2022: When the US Recovers, Air Freight Rates will Recover

The balance of supply and demand in early 2023 will be a mix of mediocre or flat demand combined with strengthening supply, according to Ti Insight in its latest data report – Air Freight Tracker Q4 2022.

In 2023 freight rates will continue to weaken and this will end when the American consumer decides, according to data from Ti Insight’s knowledge platform GSCI, featured in its latest report – Air Freight Tracker Q4 2022 – which takes an in-depth look at the demand drivers of air freight, from a muted consumer economy in the US to Asia-Pacific production.

The extraordinary conditions of the past two and half years have ended, with the notable exception of China. However, the effects of the policies remain in the form of inflation that has resulted in higher interest rates and higher prices.

Key findings & data from GSCI:

–        The US consumer: The way that US consumer demand moves will have a disproportionately high impact on air freight demand, especially in Q3-Q4 2023. Internet-retail volumes in markets such as the US have fallen-back noticeably, affecting both the domestic and international operations of the big air express companies.

–        Inventory: In both electronics and US retail, inventory levels have increased over the past several quarters. In container shipping the so called ‘peak season’ failed to arrive, with demand flatish in Q3 and Q4. This is a strong signal that retailers perceive that their inventory levels are at least adequate and possibly too high- going into Christmas. This is a strong signal that air freight rates will be under downward pressure in Q4 2022 to at least Q1 2023, and very probably following quarters.

–        Asia-Pacific production: The forecast for demand from semiconductor manufacturers suggests that demand will fall between 10-15% year-on-year in Q4 2023. This represents a marked slowing from the perceived wider market trends at the beginning of the year. The result is a much weaker air freight demand environment, especially across and around the Pacific.

–        China & its COVID policies: China’s COVID policies are continuing to depress activity of all kinds, especially air transport. This reduces both the supply of and demand for air freight capacity. However, if China were to return to something like normality, then the implications for the wider global air freight market would be significant with renewed demand surging onto the market.

–        Passenger air travel: The appetite for passenger air travel is returning, yet in many regions the volume of air transport operations is not yet at 2019 levels. However, the trajectory looks promising and there is a real prospect that early 2023 will see the belly freight market returning to the very well supplied conditions seen previous to 2020.

–        Express carriers expand: All of the three large express carriers have expanded their fleets over the past two years, whilst airlines such as Emirates retain enlarged freighter capability. There have also been significant new entrants, such as Maersk and CMA CGM who have engaged substantial fleets of freighters. All of this suggests that the supply side will be very accommodative in 2023 and beyond.

–        Jet fuel: At present it might be tempting to assume that prices will remain high. However, they weakened noticeably through Q2-Q3 2022, so further weakening in the face of any recession in the US and low growth in China should not be ruled-out. Although the war in the Ukraine is perceived to have affected oil prices, the effects of this should not be exaggerated. Oil is more fungible than gas.


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Silk Way West Airlines Invests in New Boeing 777-8 Freighters

Silk Way West Airlines shows no sign of slowing down its impressive record of growth, having secured a deal to offer even more cargo capacity in the future. The Azerbaijani cargo carrier signed an order with Boeing for two state-of-the-art 777-8 Freighters with options for two additional aircraft, the two companies announced today at the agreement signing ceremony in Everett, Washington. Per the agreement, aircraft deliveries are planned for 2029 and 2030.

Silk Way West Airlines is the first customer in the whole Central Asia region to order the industry’s newest, most capable and fuel-efficient twin-engine freighter. The aircraft can carry over 118 tons of structural payload with a range of over 9,200 km. With its advanced technology, new GE9X engines and composite wing design, the 777-8 offers 30 per cent greater fuel efficiency and emission levels as well as 25 per cent lower operating costs per ton. As a result, the new aircraft will also make an important contribution to the airline’s sustainability goals.

This investment will not only enable Silk Way West Airlines, which serves 40 destinations around the world, to further expand its international network and meet growing demand for cargo transport, but will also strengthen Baku as a key international cargo hub. The Azerbaijani capital has become increasingly important for the Middle Corridor linking Europe and the Western Hemisphere to Asia through the Caspian region.

Back in April 2021, the cargo airline signed a purchase agreement for five Boeing 777s, setting the course for further fleet growth. Now, the new 777-8 aircraft complement SWWA’s fleet development plans by enabling the necessary operational commonality, enhancing a long-term strategy of sustainable growth as well as allowing the Azerbaijani carrier to continuously improve service to its customers.

About Silk Way West Airlines

Founded in 2012 in Baku, at the heart of the Silk Road, Silk Way West Airlines operates hundreds of monthly flights across the globe via its fleet of 12 dedicated Boeing 747-8F and 747-400F aircraft based at Heydar Aliyev International Airport. On April 28, 2021, Silk Way West Airlines signed a strategic fleet expansion agreement with Boeing for the purchase of five state-of-the-art 777 Freighters. The airline’s annual cargo turnover exceeds 500,000 tons, while its growing route network covers over 40 destinations across Europe, the CIS, the Middle East, Central and Eastern Asia, and the Americas. South Korea’s Incheon Airport honored Silk Way West Airlines with the prestigious ‘Cargo Airline of the Year 2020’ award.

About Boeing

As a leading global aerospace company, Boeing develops, manufactures and services commercial airplanes, defense products and space systems for customers in more than 150 countries. As a top U.S. exporter, the company leverages the talents of a global supplier base to advance economic opportunity, sustainability and community impact. Boeing’s diverse team is committed to innovating for the future and living the company’s core values of safety, quality and integrity.


Advantages of Air Freight vs Ocean Freight

When it comes to shipping goods globally, there are two main freight transportation types: air freight and ocean freight.

Both have their own unique advantages and disadvantages, so it can be difficult to decide which is the best option for your business.

In this blog post, we will discuss the pros and cons of both air freight and ocean freight, so that you can make an informed decision about which type of shipping is best for your company.

Advantages of Air Freight

Planes are able to go hundreds of miles an hour in a straight line, so the travel time for your goods is going to be significantly shorter than it would be if you were shipping by cargo ship.

If you need your goods to arrive at their destination quickly, then air freight is the way to go.

In addition, planes typically fly directly from point A to point B, so there are no stops along the way (unlike ships, which often have to make several stops at different ports). This means that your goods are less likely to be damaged or lost in transit.

Another advantage of air freight is that it is not affected by weather conditions as much as ocean freight. Ships can be delayed for days or even weeks due to bad weather, but planes will almost always be able to take off and land regardless of the weather.

Disadvantages of Air Freight

The biggest disadvantage of air freight is that it is much more expensive than ocean freight. If you are shipping a large number of goods, then the cost of air freight can quickly become prohibitive.

In addition, there are weight and size restrictions on what can be shipped by air, so if you are shipping large or heavy items, you may need to use ocean freight instead.

Another disadvantage of air freight is that it has a larger carbon footprint than ocean freight. If you are shipping goods internationally, you will need to take this into consideration if your
company is trying to position itself as an economic and environmentally responsible organization.

Advantages of Ocean Freight

When choosing ocean freight, you will be able to take advantage of its low cost. Shipping by boat is much cheaper than shipping by plane, so if you are shipping a large number of goods, it will be more affordable to use ocean freight.

In addition, ocean freight is not as affected by weight and size restrictions as air freight. This means that you can ship larger and heavier items by ocean freight without having to worry about
your cargo being charged extra fees.

Another advantage of ocean freight is that it has a smaller carbon footprint than air freight. If you are concerned about the environmental impact of your shipping, then ocean freight is the more eco-friendly option.

Disadvantages of Ocean Freight

One of the main disadvantages of ocean freight is that it takes much longer for your goods to reach their destination. If you need your goods to arrive quickly, then you should use air freight

In addition, ocean freight can have several weather delays depending on how bad the conditions are. If your cargo is time sensitive, you may not want to use ocean freight for your

Another disadvantage of ocean freight is the number of stops ships tend to make before reaching the final port. Not only does this lead to a longer shipping time, but it could increase the possibility of your goods being lost while in transit.

If you prefer to minimize some of the risks involved with shipping, you may want to stick with air freight.

Maps Can Help You Choose

Integrating a map API into your business is a good idea if you are going to be shipping internationally. Using a map API, you’ll be able to get live updates on ship and plane locations, as well as estimated arrival times.

This will help you make more informed decisions about which freight shipping method to use for your business and which one is saving you the most money. You can even use the data from your map’s API to ensure your shipping carriers are using the most efficient route.
Since the API integrates into your entire system, you can view it using any browser, giving you more information no matter where you are.

Choosing Air Freight or Ocean Freight

If you need your packages to be delivered quickly and aren’t worried about price, then air freight is the best option for you. However, if you are shipping a large number of goods or heavy items, ocean freight will be the more affordable option. Each method has its advantages and disadvantages so the decision will ultimately depend on your business’ needs.


traffic cargospot

Air Freight Rates May Be Spiking Now but a Fall in Rates Looks Possible

The airline sector is recovering. As Willie Walsh, the former CEO of British Airways and now Director General of IATA said on Thursday, “the recovery in air travel is gathering steam as governments in many parts of the world lift travel restrictions.

States that persist in attempting to lock-out the disease, rather than managing it, as we do with other diseases, risk missing out on the enormous economic and societal benefits that a restoration of international connectivity will bring,” Willie Walsh is, of course, referring to China, which continues the most savage response to COVID-19 outbreaks. This is placing a break on the bounce-back of air traffic at the global level.

The rest of the world is doing its best to compensate. Total air traffic measured in revenue passenger kilometers increased 115% year-on-year in February 2022, although this is still 45.5% less than the volumes seen in February 2019. In particular international traffic is recovering violently, with a 256.8% increase year-on-year, although this is 59.6% lower than 2019, showing how severe the crash in international air traffic has been.

In terms of demand, air cargo is a very different market. Over the past two years the market for cargo has often been extraordinarily strong in the face of a near absence of belly freight. Demand is still respectable, with global traffic measured in cargo ton-kilometers up 2.9% year-on-year for February, with a slight bias to domestic operations, possibly due to e-commerce traffic in markets such as the US. However, IATA also reports that actual ton-kilometers, that is the volume of cargo carrying capacity available, increased 12.5% year-on-year in February, whilst load-factors fell 4.9%.

Cargo capacity is still 5.6% below February 2019, but demand is not increasing as fast as it was in December 2021. If these trends are sustained the implications are that the balance between air cargo capacity supply and air cargo demand will tip towards lower prices.

The disruptions in China and Hong Kong are taking their toll, as is the avoidance of Russian airspace by many airlines, with air freight rates reportedly spiking on China-Europe routes in recent days.

However, as Willie Walsh commented “Demand for air cargo continued to expand despite growing challenges in the trading environment. That is not likely to be the case in March as the economic consequences of the war in Ukraine take hold. Sanction-related shifts in manufacturing and economic activity, rising oil prices and geopolitical uncertainty will take their toll on air cargo’s performance”.

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Supply Chain Pressures from COVID Lockdowns in China, Russia- Ukraine War and Rising Oil Prices

Implications of the Russia-Ukraine war 

“Logistics companies are wary of trade lanes, trade partners and shipments to and from Russia. Market volatility has caused uncertainties in the market which has caused massive delays and reduced capacities.”

“COVID induced lockdowns in China and the Russia-Ukraine war has torn apart the expectations of recovery of the supply chain, which has been grappling to keep up to the pressures of implications resulting from these and many more disruptions.”

“The War has impacted Europe greatly. First, Containers are stuck in the terminals waiting for transhipments to Russia and the result is a huge pileup there. The second significant impact is on the China- Europe rail. The northern corridor is still open, but volumes are massively reduced due to uncertainty in the market. That has pushed cargo towards sea freight and even in some cases towards air freight. Low-value cargo has largely suffered because high-value cargo has been pushed to the ocean transport.”

“On a more global scale, the rise in oil prices has been a major repercussion as a result of the war. More logistic players are unclear about the restrictions of doing business with many companies because there are second order and third order sanctions that are also required to be considered while doing business. Companies are hesitant to make decisions, selection of new partners is significantly impaired.

China lockdowns  

There is market commentary about expectations of significant decrease in freight rates. I don’t think that will happen necessarily in the short term, but in the mid-term to long term, this will lead to increase in rates.

“It’s almost like in a traffic jam. Some people now stepped on the brakes really heavily and the problem is that this will lead to a significant sort of bulk up in demand for freight services which will essentially be unleashed once the factories reopen. And when the demand is back, the carriers will again not have enough equipment on the ground because not enough equipment went into China during the Port lockdowns and not enough vessels are available so that will push up prices once again.

So this will continue pushing the volatility in the market and the congestion situation on the Transpacific will also not significantly improve because it’s almost like a start-stop situation. It will just come back worse than it was because the way you remove the traffic jam is not by stopping something violently and then hitting the accelerator again. It’s sort of making sure that the traffic flows at a certain speed.”

The impact of COVID lockdowns on key markets will have wider reaching impacts leading to equipment scarcity in China, hike up of rates and worsening of the traffic jam on transpacific.

The problem will continue to remain after that because there are also labour union disputes in the US waiting in the month of May which historically always leads to slow down at the west coast ports.

Into the Future?  

“We will need more resilient supply chains and that means less concentration on high volume routes. While China-US will still be significantly massive, more smaller trade networks will increase to other countries in Southeast Asia, countries potentially in Africa and South America, who will pick up some of this uncertainty and some of the volume that now gets diverted from the big supply nation. This will be a very gradual process. And again, it doesn’t mean that freight demand from China will decrease now, but I think it might not grow as much anymore.”

Emergence of small trade networks 

The implications of emergence of smaller trade networks. One is you don’t really need these huge vessels on smaller trade networks. There will be an increase in demand for smaller vessels. Secondly, the model of just a few stops in China, then crossing the Pacific, then a few stops in the US, and then going back will, I think, decrease in importance.

And there will be an uptick in more complex networks with more stops and longer turnaround times, further increasing the turnaround times of containers because they just spent more time on the water or an increase in trans shipments. So, for example, more stops in Southeast Asia, then all of this goes into, let’s say, Singapore or Hong Kong in a major hub and then re-export to across, for example, the Pacific. That again, not only increases sort of intraregional traffic, but it also increases the importance of these transit hubs, which will need to build up further capacity to cope with the demand.

And then lastly, I think it will increase the importance of smaller players in the market, and that can be smaller feeder operators and can be smaller who basically pick up this intra-regional traffic or even the transpacific traffic. But that doesn’t start from the big hubs, depending on, I guess, the network model of the carrier.

Pre-pandemic times, supply chain was all about efficient prices and just in time delivery model to make more profits.

Rising Oil prices 

The rising oil prices are bound to have a limited impact on containerized trade in the short run. But generally high oil prices hit hard when the freight rates are very low. Currently, when the freight rates are astronomically high for the past two years (for instance, $10,000 for a 40 ft high cube from China to the US) the impact of a fuel prices hike will not have a large impact on the short term. What remains to be seen in future is how the war pans out in the future and how the supply chain builds resilience in the end.