Matson is seeing “continued air-to-ocean freight conversions,” CEO Matthew Cox said in a Q1 earnings call on May 4.
Dive Brief:
- Matson is seeing “continued air-to-ocean freight conversions,” CEO Matthew Cox said in a Q1 earnings call on May 4.
- Elevated freight costs due to higher jet fuel prices and reduced air cargo capacity in select markets drove some shippers to convert from air freight to ocean, Cox said.
- Other factors included growing e-commerce shipments from South China, Cox said. “E-goods volume picked up in the post-holiday due to strong demand for data center servers and racks, which has continued into the second quarter.”
Dive Insight:
Cox said higher fuel costs from the Iran war were driving some shippers to switch from air to ocean freight, as the “air freight markets have been significantly dislocated … especially in places where they primarily import their jet fuel.”
The U.S.-based ocean carrier has seen ebbs and flows in air-to-ocean freight conversions for a few years, he added, in part due to Matson’s expedited freight service offerings.
The carrier offers a China-Long Beach Express or CLX shipping service, which competes with other air freight services, according to a Matson Logistics’ LinkedIn post. That ocean service links to Matson’s air network, connecting freight services from more than a dozen Asia countries.
“We think we’re entering a period where we’re going to see more airfreight conversions, some of which will be temporary and some of which will continue to convert,” Cox said.
Cox also mentioned that the increase in passenger flight cancellations have somewhat of an impact on air cargo capacity. Although not Matson’s core market, “50% of the airfreight flies in the bellies of passenger planes,” he said, which he sees as a catalyst for the company.
However, air cargo capacity seems to be returning, signaling some pricing relief for shippers, according to a Xeneta report. While some airlines consider reducing flight frequencies due to fuel shortages, it’s not expected to drastically impact air cargo, Xeneta Chief Airfreight Officer Niall van de Wouw said in the report.
On the other hand, the ocean market is facing its own set of headwinds as shipping through the Strait of Hormuz continues to be a challenge for ocean carriers. The price of oil continues to remain elevated, and ocean carriers are “seeking to raise rates in part to recover those costs,” Cox said.
While Matson has not seen impacts on its operating performance or service levels, it is seeing impact on fuel prices across all its markets.
“We expect fuel price volatility to impact our near-term earnings due to a timing lag between when we incur fuel costs and when we can fully recover these costs through our fuel surcharge,” Cox said.
Source: Supply Chain Dive
Compiled from international media by the SCI.AI editorial team.
