South Korean forwarders look at air and rail alternatives amid container freight surges
05.02.2024
A seminar organised by Korea International Trade Association on 30 January heard that South Korean exporters and forwarders are inclined to substitute air and rail freight for sea freight, as they expect the Red Sea crisis to last until at least mid-2024. The crisis has caused container freight costs to increase by 44% from December 2023.
During the seminar, Seo Don-seok, team leader at forwarding group Samsung SDS’ digital platform Cello Square said, “Transportation times are increasing and there are potential risks, so reinsurance companies have recently announced that it is difficult to compensate for cargo insurance. Shippers’ burdens are increasing every day.
“If this persists, forwarders will shift to air freight, prioritising high-value products. It’s very likely that as a result, air freight will go up.”
Seo suggested that cargo bound for the US and Mexico should be railed or trucked via Long Beach.
He said, “Rail is the cheapest, but transhipment by sea takes more time, taking two to three weeks. While it takes about seven to 10 days to use a single truck, a team truck driven by two drivers arrives in about three days and is the fastest, but is more expensive.”
Meanwhile, sea freight rates to Europe have risen to the point of being on par with rail freight.
Seo noted, “We recommend railing goods from Xi'an, China using the Trans-China Railway, which is more reliable than other regional platforms.”
The diversions round the Cape of Good Hope have also made it difficult to secure shipping slots.
Other forwarders said that it is also taking a long time for empty containers to be returned that they now have to secure containers before arranging shipping.
Ramses Logistics director Bae Byung-seok called the Houthi scourge in the Red Sea the second major logistical crisis after Covid-19.
He said, “The Red Sea crisis won’t end anytime soon. We expect the situation to remain into the first half of the year. Now, we have to start looking for empty containers before competing for slots. That said, we expect that Chinese exports will decline after the Lunar New Year, so shipping capacity won’t be so tight. We see that liner operators are blanking sailings as freight rates are cooling off.
“In abnormal circumstances, as was the case during the pandemic, we must endure even if local inventory take two to three months longer to clear out.”
Hwang Gyu-young, a team leader at forwarder LX Pantos, urged attendees to sit out the situation, as circumstances will eventually normalise.
He said, “The Red Sea attacks occurred suddenly and this placed a premium on freight rates. We believe the situation will be resolved. Freight rates will stay elevated until end of 1Q 2024, and correct gradually.”