--Shippers are starting to consider unconventional shipping routes.
With persistently high aviation fuel prices and congestion on key Middle Eastern waterways, some shippers have begun exploring unconventional routes. The recent ceasefire agreement between Iran and the United States is not expected to quickly alleviate the current predicament.
A US freight forwarding company stated that customers who previously shipped popular consumer goods such as electronics from Asia to Europe via Middle Eastern hubs are now even opting for sea-air intermodal transport via Los Angeles to obtain more favorable prices.
"This is much faster than shipping via sea around the southern tip of Africa, and much cheaper than direct air freight," said Ryan Peterson, CEO of Flexport.
The continued blockade of the Strait of Hormuz by Iran has led to a surge in air freight demand coupled with high aviation fuel prices, causing air freight costs to soar.
According to WorldACD Market Data, a global air freight data provider, air freight capacity to the Middle East has decreased by more than 50% year-on-year in the past two weeks.
According to Flyers, in contrast, due to strong passenger demand, airlines have added several passenger flights, freeing up more belly cargo capacity, resulting in only an 8% increase in air freight prices from Los Angeles to Paris.
Noel Hasegaba, CEO of the Port of Long Beach, stated, "If the trade disruptions in the Middle East continue, cargo volumes at the Port of Long Beach could increase." The Port of Long Beach, along with the Port of Los Angeles, forms one of the busiest seaport clusters in the United States.
Air Freight Capacity Losses
Marco Blumenthal, managing director of consulting firm Aevean, stated that global air freight capacity, which was initially projected to grow by 5.5% this year, has so far declined by 1% due to the conflict with Iran that began in late February.
He said that the final full-year performance will depend in part on the recovery of capacity on wide-body aircraft from major Gulf carriers-these aircraft contribute about half of the region's air freight capacity.
Neil van der Wood, chief air traffic officer at Xeneta, a transportation pricing platform, said that a slow recovery in the Gulf region's tourism industry after the conflict could lead to airlines cutting passenger capacity, which in turn would affect air cargo.
He pointed out, "Gulf airlines such as Emirates and Qatar Airways operate one of the world's most important air cargo networks."
British Airways said on Thursday it would reduce the number of flights to the Middle East after relevant routes resumed operation, a signal that escalating regional tensions have suppressed passenger demand.