Ahead of the Lunar New Year in Asia and as a result of attacks on Red Sea shipping, which force businesses to obtain more expensive air cargo space, global air freight costs have increased for the first time in seven weeks.

Reversing falls since a mid-December seasonal peak, the Baltic Air Freight Index, which indicates general cargo weekly transactional rates across a variety of routes, climbed 6.4% in the week ending on Monday, according to price reporting firm TAC Index.

In an effort to show support for the Palestinians in Gaza, the Houthi party in Yemen, which is associated with Iran, initiated attacks on ships in the Red Sea. This has compelled shippers to choose longer routes, which can prolong delivery schedules by several weeks.

“The increase is in line with expectations that rates may spike following disruption to ocean shipping in the Red Sea, though sources also point out that rates often rise in the run-up to Chinese New Year,” TAC Index said.

This year, on February 10, many Chinese factories will close for an eight-day holiday. Businesses are working hard to get merchandise to clients in advance of this holiday.

On Monday, air freight rates from Shanghai increased 8.8% on a weekly basis, including significant hikes to Europe. Rates from Southeast Asia increased by 10%, while rates from Hong Kong increased by 5.9%.

A major east-west commerce route connects the industrial centres of Asia with Europe and the east coast of the Americas via the Red Sea, which leads to the Suez Canal.

To avoid delays, some clients have started delivering items entirely or partially by air, and freight companies have been obtaining more air cargo space in recent weeks.

Nonetheless, because of the post-Christmas decline in demand and the shipping crisis, air freight prices had stayed rather steady.

According to Nick Frank, CEO of DHL Global Forwarding Asia Pacific, lengthier sea transit times, higher sea prices, and a scarcity of boats as a result of the Red Sea disruption were meeting an anticipated customary peak before the Lunar New Year. According to him, this is forcing some clients to switch to air freight.

“Some are also shipping more due to the longer transit time, so they are moving stocks that are scheduled for later,” Frank added.

Since early 2022, global air freight prices have been declining from their peak during the pandemic. On Monday, the Baltic Air Freight Index was down almost 24% year over year.

According to the airline industry group IATA, air freight, which is more expensive than sea freight, accounts for less than 1% of all commerce volume worldwide.

(Adapted from DeccanHerald.com)

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