In normal times, the choice between air and sea freight is determined by the weight and size of the goods and how fast you want them to arrive. Nonetheless, COVID-19 has made this choice more complicated for cross-border e-commerce merchants by posing numerous challenges to international logistics, such as volatile prices, delays and less availability. Under these uncertainties, you might be wondering which form to choose for your next shipment. This article contrasts these two shipping methods and gives recommendations, which are especially relevant if you want to ship from China to Germany.
Pre-pandemic, shipping by air from Shanghai to Hamburg took around 3 days, compared to 3 weeks by sea. Apart from the faster speed, air freight also has the advantage of less planning time, even though it is a lot more expensive than ocean freight. Therefore, it made sense to use airfreight if you wanted to transport goods of small quantity and high value quickly. However, currently, air freight services are less available and even much more expensive than normal, because of fewer flights and priority for medical supplies during COVID-19. What’s more, the pandemic also has rendered the prices for airfreight more volatile.
By contrast, just like during non-pandemic times, sea freight is typically far cheaper, especially for larger shipments, and the prices are far less volatile than air.
Take shipping 500kg cargo from Shanghai to Hamburg as an example:
Some carriers, such as 5688.com (a Chinese logistics company), have stopped their air service since March this year when European countries started to go into lockdown.
Apart from higher prices and less availability, the fast speed of air freight is not guaranteed anymore. According to Mr. Liu, the key account manager at Kühne + Nagel Shanghai office in China, “In recent months, airfreight is way more expensive than sea freight, and the transport duration is not as short as before (5-10 days now versus 2-3 woking days before). Also, airfreight now is less available.”
When it comes to speed, sea freight remains stable, and there are new expedited ocean freight services which offer faster transit times.
If you are able to get working capital financing, such as the one from Myos, it makes even more sense to use sea freight, and this can be shown by simple calculations. An average loan for e-commerce merchants is about €27K with interest rates ranging between 1-2 percent per month. Assuming that this amount is used to purchase 500kg goods from China and K+N is the carrier, the pre-pandemic costs (excluding the 27K loan used to purchase the goods) were:
The costs during the pandemic are:
Before the pandemic, together with the interests for a financing service, the total cost of air freight was already around 1.4 times that of sea, and this multiple has gone up to 3 times, meaning a substantial extra cost because of COVID-19.
And K+N is certainly not an exception. Looking at another example for the same shipment (500kg), the airfreight price of the biggest and fastest Chinese international carrier ShunFeng is €5,960 (CNY42,120)
Overall, if you are not urgently expecting your goods to arrive, and you use financing services from fintech companies, such as Myos, shipping by sea certainly makes more sense in terms of price, stability and availability in the current situation. Plus, another perk for using sea freight is that it's more environmentally friendly, which makes you a greener business!
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