How Sea Freight Rates Are Making The Ocean More Appealing Than The Skies

How sea freight rates are making the ocean more appealing than the skies
A drug company’s switch highlights the booming transport industry

Container-Ship

Astra Zenica, one of the biggest pharmaceutical companies in the world, is pushing air freight aside and moving forward with plans to make sea freight the main mode of transport for their drugs.

While at first glance sea freight seems time consuming, expensive, and old fashioned, it’s far from it — and companies like Astra Zenica are taking note.

Sea freight rates are the lowest in the industry, the transport is extremely energy efficient, and it’s becoming more reliable with technological advances. Those within the industry are now touting these advances, and targeting companies that once wrote them off for business — and it’s working.

Astra Zenica says although they’re going to save a lot of money with sea freight rates, reliability is why they’re switching. While it is important to get their drugs to their destinations on time, making sure they get there in a usable state is also important. That’s where air freight lacked.

The technology, and feasibility of keeping these drugs in a temperature controlled environment wasn’t necessarily improving in air freight. While some advances had been made, Astra Zenica says nearly 30 percent of their shipments needed to be quality controlled at the end due to lack of temperature control. This can be caused at multiple points before, during, and after air transport like when the drugs are being taken across the tarmac or when they’re loaded for their final destination.

But sea freight is uniquely qualified to keep these big batches temperature controlled. Once the product is loaded onto the ship (often at, or very close to where the drugs are manufactured), it can stay there in a controlled environment with the door closed until it reaches the final destination. Astra Zenica says just 17 percent of these shipments require a quality control check, and for that reason they’re switching.

It’s just one story, but it’s illustrative of where the market is going. Sea freight’s importance and prominence in the transport industry is growing.

Why are sea freight rates are so low?

There’s the common misconception that sea freight rates are high, and it probably stems from the fact that the infrastructure surrounding sea freight is costly to build and modernize.

Sea freight though, provides global transport for some of our world’s most heavy and important commodities like:

  • Iron Ore
  • Coal
  • Oil
  • Grain

And sea freight can handle these worldwide shipments best for two reasons.

  1. Less FrictionThese shipments are heavy, and are traveling great distances (often across the globe). But this isn’t a problem for sea freight because water and buoyancy mean there is little friction for the ship to move across long distances with such massive shipments. This is very unique to sea freight, and with the increase in global demand for these resources, sea freight’s role in their distribution will only continue to grow.
  2. Economies of scaleThe growth in ship size, and the adoption of containerization has made the cost per unit of output decrease alongside an increase in cargo.

Final Answer: Containerization

While containerization isn’t specifically tied to one mode of transport, moving away from break-bulk cargo to containerization has revolutionized the sea freight industry.

Before containerization, break-bulk cargo was used to transport goods. But the stacking of boxes, drums, and pallets not only took up a lot of room, it was costly and time consuming to load them onto the ship and back off. Containerization made it easy to stack the containers, as well as remove them efficiently at the final destination and place them onto their next mode of transport (train, or truck).
Containerization also made it possible to carry many different types of commodities. While bulk cargo dominates the industry (carrying freight that are liquid or dry not in a container, but rather in a specialized ship like a tanker), and break-bulk cargo allowed for other commodities to be transported, containers have allowed for better transport of goods. Companies can now maximize shipping their electronics from their manufacturer by strategically packaging and filling a container. It also allows for specialized containers, like those with refrigeration capabilities, to transfer medications and even food.

Containerization then has not only allowed the industry to grow by being able to physically carry more commodities, it has expanded the type of commodities it can now help globally distribute. Sea freight rates are then tied to a steady forecast of economies of scale.

Where the industry is going

Sea freight isn’t your great-grandfather’s transport mode anymore. It has only been getting faster since the 20th century, and that’s due to better ships and increased waterways.

Sea freight in our minds is often tied to unpredictable storms, gusting winds, and the misconception that these absolutely massive ships move at a turtle’s pace. But better navigation systems, and better built ships mean sea freight of the 21st century can for the most part withstand nature.

Ocean transport is also getting a little help from man. There’s the creation of canals like the Suez and the Panama (which allow the linking of oceans), as well as locks which lower and raise the water to help these massive boats get through them. Finally, there is dredging, which moves piles of sediments from one location to another in order to keep the waterways navigable. All of these advances are helping sea freight ships be more reliable, and travel faster.

In short, the industry is only getting faster thanks to technological advances in shipbuilding, navigation, and the creation and improvements of waterways. The continued demand for commodities, plus technological advances are securing a bright future for sea freight.

 

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