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Air freight rates in Singapore set to continue rising amid worldwide port congestion

Wednesday, 10 July 2024 | 12:00

Congestion at ports worldwide, including Singapore, has prompted some companies to switch from sea to air freight to get their goods to eager customers on time.

Logistic providers told CNA they are seeing about 20 per cent more local companies making that switch. But that also comes at a price – these firms are paying up to 50 per cent more for air freight compared with the start of this year.

With cargo planes packed for the next two months, industry players expect air freight rates to continue going up. This is especially as peak delivery season approaches.

In May, CNA reported that shipping delays in Singapore more than doubled in recent weeks amid port congestion and a shortage of container ships.

This was due to various factors such as diversions caused by unrest in the Red Sea.
At the time, port operator PSA Singapore said the volatility was likely here to stay, and it would continue to ramp up capacity and smart technologies in its terminals.

According to the International Air Transport Association, demand for air cargo in the Asia-Pacific region has gone up to about 20 per cent on-year in May. However, supply for air capacity only stands at 9 per cent.

CUSTOMERS CHASING UPDATES
For e-commerce company Singapore Home Cooks, flying a 95kg cargo from source markets like Japan and South Korea costs about S$1,000 (US$740) – five times more than shipping it by sea.

But sea freight is a risk the firm cannot take, given that it brings in perishable items like fruits and snacks.

It has raised prices slightly, explaining to customers that this is due to higher logistics costs, said the firm’s corporate communications manager Canlian Liew.

“I think 80 per cent (of the time), we absorb the cost ourselves, and then only 20 per cent we will do a little bit more mark-up,” she added.

The firm sources products from overseas, especially exclusive items that are usually not available in Singapore, and sells them through Facebook livestreaming. It then usually works with a logistics partner to ship the items over.

Sea shipments have been delayed to at least a month due to port congestion. A year ago, it would have taken half that time for cargo to arrive in Singapore.

“Last time, it was one ship all the way to Singapore so it’s very straightforward,” noted Ms Liew.

“But right now, they use a different route. Every different point, our cargo gets unloaded and reloaded onto a different ship, and then that’s where they … are not able to track the shipment anymore. So they are also not able to give us an estimated timeline,” she added.

This means the company cannot assure their customers that goods will arrive within the usual delivery timeline of four to six weeks, Ms Liew said.

She recounted: “I remember the experience that my admin team had was that every single day, there were customers chasing us for updates. Asking, ‘Hey, when (are) my shipments coming? When is my mushroom arriving? Has the shipment arrived in Singapore?’

“Luckily, a majority of our customers are quite understanding, because the port congestion is something that is not up to us to control.”

She said that about 20 per cent of customers asked for refunds, which means the company also incurred losses.

LOGISTIC PROVIDERS EXTEND NETWORKS
Logistic providers said that companies should plan ahead and work closer with their freight forwarders to avoid any delays.

To cope with rising air freight demand, the providers also told CNA they are working hard to extend their networks.

Mr Vincent Wong, Asia airfreight director from global logistics firm CH Robinson Freight Services, said it has expanded its portfolio of airlines by about 30 per cent over the last two years.

“These airlines … each have their own network, so as we add new airlines into our portfolio, their network becomes part of our network and that also becomes part of our customer network. And together, it becomes a solution,” he added.

The company has seen an uptick of about 20 per cent in inquiries on switching from sea to air freight.

Mr Wong said costs were already rising after the COVID-19 pandemic, making it unsustainable to go back to pre-pandemic rates.

“We started the year with rates increasing almost every month,” he added.

“Right now, it’s supposed to be the low season, but we’re definitely not seeing any low season this period.”
Source: CNA

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