Air versus sea: the Red Sea crisis and the changing dynamics of freight transport
The Red Sea crisis continues to have a significant impact on global supply chains, causing significant disruption to major container shipping companies and increasing transportation costs. The implications of this ongoing conflict go beyond geopolitics and lead to a reassessment of the interaction between maritime and air transport. In this narrative, we address the various consequences of the crisis and seek to understand how the shipping industry’s adaptability will shape the enduring balance between sea and air freight within the complex network of global supply chains.
About 15% of global shipping traffic, including 30% of global container trade, passes through the Suez Canal to and from the Red Sea. However, reports suggest that due to rising tensions in the Red Sea, around 95% of ships were rerouted around the Cape of Good Hope, extending their voyage by between 4,000 and 5,000 nautical miles and between 15 and 20 days. As of January 18, 2024, 158 ships have left the Red Sea, carrying more than 2.1 million cargo containers.
According to media reports, logistics managers were quoted freight rates of $10,000 for 40-foot containers from Shanghai to the United Kingdom as of January 19, 2024. Last week prices were $1,900 for a 20-foot container and $,2400 for a 40-foot container.
In addition, delays due to the Red Sea attacks and diversions have also affected the availability of containers returning to Asia. Experts believe that the only relief will come with the delivery of new ships.Additionally, a multinational defense force, Operation Prosperity Guardian, was created to protect merchant ships, further impacting the shipping industry.
As Ruby Abidi (Air Cargo Director, Cargo Partner Logistics) navigates the current situation, she shares that they have carefully considered their routes and choice of shipping companies while keeping all their customers updated with communications and latest market news have held.
Whereas Pratul Shekhar (Senior Director of Air Transport, DSV) shares how they met the needs of consumers with multimodal transport during the crisis.
“The leadership team works with relevant authorities and stakeholders to obtain real-time updates and assessments. We continually
evaluate alternative routes and offer solutions using a combination of all land, rail, sea and air modes of transport. We always pay attention to safety.” Transit.“The safety of personnel and cargo on the is always our top priority,” he says.
Red Sea Crisis: Impact on Indian Trade
The Red Sea crisis threatens India’s trade, especially since 80% of India’s exports to Europe travel via the Red Sea. Shipping costs have skyrocketed, resulting in longer routes or delays. Mediterranean Shipping Company (MSC) and CMA CGM have suspended or canceled voyages from India.
The diversion from the Cape of Good Hope affects reliability and requires a realignment of services. The diversion affects. 25% of India’s trade, particularly to Europe, the East Coast of the United States, North Africa and Russia.The hardest hit sectors include refined petroleum, chemicals and plastics. These products, known for their low profit margins, present a challenge for companies to absorb additional shipping costs. High-value, low-volume items, such as diamonds, can be mitigated through air freight.
The Russia-Ukraine war and the Red Sea crisis are compounding challenges for Indian exports to the EU. Exporting Basmati rice results in loss of quality and higher freight costs due to longer transit times.The delays threaten India’s manufacturing sector, which relies on components from Europe, Korea, Japan and other regions. The crisis is also affecting oil-importing countries such as India, as some suppliers’ supply routes are disrupted.BMI, a unit of the Fitch Group, warns that India’s economic forecasts are at significant risk if disruptions continue, while
World Economic Forum (WEF) President Borge Brende also raised alarm over the negative impact of the rise in oil prices struck (in view of the crisis) on oil importing countries. He said this would lead to an increase in oil prices in India by $10 to $20, which could have a negative impact on the country’s economy.