Volcano Fallout Hits the Shipping Industry and Affects Prices!

The passenger airline business isn’t the only industry feeling the heat from the volcano eruption in Iceland. The shipping industry also finds itself caught in the ash cloud, and desperately looking for solutions.  Beyond the solutions that were needed to solve the immediate congestion of transporting cargo, the next issue is steep air cargo rate hikes. 

With European airspace re-opened, the capacity for cargo is sparse, thus causing the airlines to charge premium rates for all new shipments that are three times the standard shipment rates.  We had already seen higher standard rates prior to the volcanic eruption in Iceland but this increase was centered more on exports shipments out of Asia because of the short supply of air and ocean capacity.  

To cope with the recession, airlines and ocean lines reduced capacity to cut costs.  As freight volumes have increased the shortage of ocean capacity has driven many shippers to transport their goods via air, further stressing air cargo capacity.  In Europe, even before this current volcanic event, again capacity was reduced as airlines reduced flights to save costs. 

Even after airspace has been re-opened, we expect capacity to remain in short supply due to the huge backlog of freight and passenger priority on passenger flights, and therefore increased prices.