Some shippers caught between high jet fuel prices and congestion in vital Middle East waterways are now looking for transport routes in unexpected places, with the recent ceasefire between Iran and the United States unlikely to offer quick relief.
Reuters reports that clients moving electronics and other fast-selling consumer products from Asia to Europe through Middle East hubs are now going as far as transporting their goods by ship and plane via Los Angeles to secure lower rates.
"It's a lot faster than going by ocean,” Flexport CEO Ryan Petersen said, referring to the much longer way around the Cape of Good Hope.
But the airfreight detour via LA was also “much, much cheaper than doing air direct”, he said.
The cost to ship air cargo has soared due to strong demand and high jet fuel prices in the wake of Iran's continued blockage of the vital Strait of Hormuz shipping corridor.
According to WorldACD Market Data, air cargo capacity to the Middle East has shrunk by more than 50% on an annual basis over the past two weeks.
Meanwhile, air cargo rates on long-term contracts from Vietnam to Europe have almost doubled to $6.27 per kilogram, compared with before the war, Flexport has found.
By contrast, air rates for LA to Paris are up only 8% as airlines add more passenger flights due to strong demand, opening up belly capacity for cargo.
This was expected, said Noel Hacegaba, CEO of the Port of Long Beach, which is part of the busiest seaport complex on the US West Coast.
"We could see a bump if trade disruptions persist in the Middle East.”
According to Marco Bloemen, managing director of consulting firm Aevean, global air cargo capacity, once expected to grow by 5.5% this year, has so far fallen 1% due to the conflict.
How the year turns out will depend in part on the restoration of the major Gulf carriers' widebody passenger aircraft, which account for roughly half of the region's air cargo capacity, he says.
Dedicated cargo companies like UPS are still operating in the region using "contingency plans" as their pilots are not currently flying to hubs like Dubai.
Third-party charter aircraft have moved in to pick up some of the slack, but jet fuel supplies are expected to remain tight and costly for months, Reuters reports.
"The major issue for everyone is the massive hike in fuel prices," said Dan Morgan-Evans, group cargo director at Air Charter Service.
A client of AIT Worldwide Logistics spent at least five to six times more to move oil drilling equipment bound for Saudi Arabia by air and truck after its planned ocean voyage from Houston was cancelled due to the war, said Ryan Carter, executive vice president of the freight forwarders’ Americas region
Still, many companies feel they have no choice but to pay extra to ship by air.
"Sometimes the cargo just has to move," Morgan-Evans said.
