Demand for Air Transportation Has Slowed Down, and a Return to Sea Transport Has Started? What will Happen after Shanghai Lockdown is Lifted?

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I would like to broadcast IINO san’s Logistics Radio.

Today, I would like to talk about, “Shift from ocean to air transportation pauses. Ocean supply-demand slackens, air freight rates fall.”

Daily Logistics Radio by IINO san in 24th May 2022

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Shift to Air Transportation Settling Down

The shift from ocean to air for long-haul shipments from Japan is settling down.

Now, against the backdrop of the lockdown in China and the situation in Ukraine, the space supply-demand balance for ocean transport is loosening.

Airfreight demand has so far been underpinned by cargos shifted from ocean transport, but if the volume of goods declines in the future, air freight rates may soften in level.

Air freight rates are also currently at a high level.

The Impact of Shanghai Lockdown

A major influence in the current international transportation market is Shanghai lockdown.

Currently, international transportation and land transportation are disrupted due to strict action restrictions as well as stagnant production activities because of Corona pandemic, resulting in a decrease in cargo movement.

This is also affecting ocean transport.

Some major forwarders have reported a 30% decrease in sea export volume from Shanghai in April compared to before lockdown.

In addition, the situation in Ukraine has had an impact on European shipping routes, resulting in a slackening of space supply and demand in ocean transport, as well as a decline in spot rates.

Freight Beginning to Return to Ocean Freight Forwarding

Demand remained high for air freight forwarding.

In addition to EC, medical and pharmaceutical transportation, there was the demand for air transport for emergency transportation due to the shortage of space and containers for ocean transportation that began around the fall of 2020.

This has led to a growing movement back to ocean freight forwarding from Japan to the Americas and Europe.

Several forwarders are predicting that this trend will continue for the time being.

This trend is targeted at large cargoes such as automobiles and construction machinery, which were originally transported by sea.

As space for ocean transport has become relatively available, shippers are tending to return to ocean transport, which offers lower freight rates than air transport.

What Happens after Shanghai Lockdown is Lifted?

The lockdown will be lifted on June 1.

Production and logistics are expected to gradually normalize.

However, after the lifting of the lockdown, supply will not be able to keep up with demand, and both ocean and air space is expected to be tight.

At a press conference on May 19, the executive officer of NIPPON EXPRESS Holdings indicated that, “the backlog of cargo is increasing very rapidly, and there will be a considerable rebound after the lifting of the lockdown.”

However, since the ocean schedule compliance rate has not recovered, it is expected that air cargoes will continue to be used for those cargoes that cannot be delivered on time.

Shortage of Space Again?

In the long term, the article reports that cargos shifted from ocean transport are likely to decline in the air cargo market.

The article concludes that air exports from Japan at this time continue to decline, falling below the same month a year ago for four consecutive months, although the volume of goods continues to be high.

Now that sea transport is calming down, air is also settling down.

The article mentioned that several forwarders predicted that “for the time being, there is a growing trend to return to ocean transport from Japan to the Americas and Europe.”

My personal opinion is that the current calm is temporary.

As mentioned in the article, due to the impact of labor negotiations in North America, I think space will gradually become harder to get after the lockdown.

I will continue to update you with information.

That’s all for today. Thank you.