Cargo traditionally sent by air is increasingly switching to sea as shippers capitalise on the mode’s lower transport costs – a trend expected to continue over the coming years.

Lloyds List reports that several leading freight forwarders reported in their full-year results that certain cargo types — particularly hi-tech and telecoms — switched from air freight to sea freight last year.

DHL Global Forwarding CEO Roger Crook said the switch was the result of a price difference of 10 times between the two modes of transport. He said: “Obviously many companies are under cost pressure and looking to reduce total supply chain costs. Therefore, they are buying and moving by ocean freight, and particularly it is happening in the technology sector.”

Panalpina chief operating officer Karl Weyeneth said he expected the trend to continue. “There is a maximum shift you can achieve, depending on what industry you are talking about,” he said.

“But I believe that now supply chains are used to working with more ocean freight, this impact will stay for at least a couple of years, until the economy has really recovered, then it will start to shift back again.”

“We really see this as an important factor in our market for the next two to three years.”

Kuehne+Nagel (KN) chief executive Reinhard Lange said the decision on whether cargo was suitable to be switched from air to sea partly came down to the weight of the shipment. He said that if two products had the same market value, but one weighed less than the other, the overall cost impact of flying was less for the lighter cargo because air cargo costs were based on weight. He said this explained why hi-tech products had transferred to ocean freight while lighter products, such as pharmaceuticals, had, in the main, continued to utilise air freight.

The forwarders said the impact of the switch from air to ocean freight was partly to blame for a decline in air freight volumes last year, while container volumes continued to grow. In its full-year results, Panalpina saw air freight volumes decline 6% last year while ocean freight volumes grew by the same amount. Meanwhile, DHL Global Forwarding’s air freight volumes slipped 5.3% in 2012 with ocean freight increasing 4.3%, while KN saw its air freight volumes grow by 2% while ocean freight increased 6% year on year. Source: LloydsList

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