What is Best for Your Business, Air or Sea Freight?
The shipping industry has been in existence for an extremely long time but it wasn’t until the 1950s that the shipping container was introduced. This changed the industry massively and now around $4 trillion worth of products are shipped across the world every year.
Ships can carry over 20,000 containers each making them invaluable to business and the world’s economy. However, flying is far quicker than shipping so which one should you use for your consignments?
Firstly, why would you need to ship something?
Most shipping containers will be carrying goods for export and import. Cars are imported into countries for dealerships to sell. Electronics, clothing, machinery, and bananas, lots of bananas are shipped around the world.
With the internet being worldwide it makes sense that companies learn how to export and then of course they need a way to get their products to the customer.
You may be moving overseas and therefore want to ship your furniture and belongings to your new home. Obviously, they are too big for your luggage so they will need to be shipped. Important items or documents may also need to be delivered abroad.
When deciding whether to use air or sea freight you will first look at how fast you need to deliver your product or goods. If something is urgent then it makes sense that you would ship by air. If the goods were perishable then, again you might choose air. These days, shipping by sea can be expedited so if meeting a delivery date is important but not imminent then this may be the best choice. It depends on a few other factors too.
Size and weight of the shipment
Although air is far quicker than by sea it isn’t suitable for everything. Any shipment that is bulky, heavy, or large will not be suitable for air travel. Shipping containers are built for taking large loads conveniently whereas airplanes were not designed to carry the latest sports cars from Japan.
Then there is the expense to consider also. If you don’t have to be concerned about the time of the delivery then sea shipping has much to offer including the financial benefits.
Sea shipping is cheaper
The cost of shipping by sea is dramatically lower than by air. Because of the pandemic, many airlines are now operating skeleton services and this means less space than normal, however, the cost of air freight has risen between some routes, alarmingly so.
Obviously, with modern cargo ships being so large they can carry thousands of containers and therefore offer lower rates. Prices of shipping can go up and down due to a variety of reasons.
Which method is the most eco-friendly?
With most people being concerned about the environment it makes sense to choose the shipping method with the smallest carbon footprint. Shipping by sea or ocean bets air freight every time. Airfreight emits up to 50 times the amount of Co2 compared to cargo shipments. Many shipping companies are actively looking to improve their environmental credentials further and fuels are being switched to greener versions.
Switching to LSFO Low-sulfur fuel oil is better for the environment and freight companies need to calculate the fuel cost when working out shipping rates. This means that sea shipping rates will rise but will still be much lower than air shipping costs.
Businesses sometimes need to transport goods that are dangerous or banned from air freight. Shipping companies can take many items that air freight companies cannot touch. If you had a company shipping dangerous goods such as solvents, flammable liquids, chemicals, and batteries then the sea is the option to take.
Shipping dangerous goods will increase the costs involved but many businesses know that shipping by sea is the best option for them.
What about distance?
Sea freight is perfect for long-distance and the cost can be kept low but if you only want to send something a short distance then air may win. As long as the shipment was small and light enough then it makes more sense to ship by air if it is not going far.
How are shipping rates calculated?
There are several elements involved when working out the shipping rates. The cost of the container is one, there are a number of fees and surcharges involved including terminal handling charges at origin and at the destination and there is also a piracy surcharge. A shipping company must calculate the fuel cost when working out shipping rates. This can be difficult as fuel prices can change often.
Why do shipping rates fluctuate?
As mentioned above, fuel prices can go up and down very often but this isn’t the only reason the shipping rates rise and fall so much. There are quite a few other factors that determine how your rate was worked out.
The destination you are exporting to will make a difference as they may have favorable or unfavorable trade policies in place. The weather will make a difference as will the time of year; shipping around Christmas time for instance will see a hike in prices.
One other area to consider when choosing between air and sea freight is insurance. It could be that your shipping comes without insurance included or only minimal cover. Airfreight may be cheaper to insure than sea freight because of a few reasons.
Sea freight is more at risk from the elements and other dangers including piracy. The International Maritime Bureau reported that piracy and attacks on shipping rose in the first three-quarters of 2020. Also, the goods being shipped will be factored into the insurance rates and often cargo ships carry more dangerous items than airlines do.
You may see in your quote that you have freight insurance. This doesn’t cover the cost of your goods so you will need to take out cargo insurance to cover the cost of your consignment. How you are covered will also depend on the details of the contract you have agreed with your buyer.
CIF and FOB
After deciding to ship by sea you will also have a contract in place with your buyer. This can affect how you insure the goods. If you choose CIF (cost, insurance, and freight) then you are responsible for the goods until they reach the destination port.
FOB means free on board. This puts the responsibility of the goods on to you until they have been placed on the ship and then the buyer is responsible for insurance costs.
Unless you need to send your goods a short distance or they need to get to their destination quickly then sea freight is the best choice nearly always. Under a certain weight, it may be more economical to use air but depending on fuel prices at the time, it usually works out cheaper to use the sea for anything above 500 kilograms.
Today, modern cargo ships are vast with lengths up to 400 meters, think of a running track. The largest ship in the world can carry more than 21,000 containers meaning that costs can be kept low so businesses can export all across the world. Aircraft just cannot compete with that capacity.
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