Mode shift in perishables Mode shift in perishables – how much has shifted, and what does the future hold? Over the last decade, perishable commodities have seen a pronounced shift from air cargo transport to ocean transport. New technologies could drive this shift even further. A decade ago, tomatoes were just as likely to be transported by air as in a reefer container. Today, tomatoes are transported almost entirely in containers. The same holds true for numerous other perishable commodities. The past decade has seen a continuous shift of volumes from air to ocean, supporting ocean volume growth while detracting from air cargo growth. This has happened across multiple commodity types and trade lanes, and has not been limited to perishables. In fact, if air cargo’s share of total trade had stayed constant since the year 2000, 15.2M tonnes of cargo would still be transported by air rather than ocean. That translates roughly to an additional 1.5M TEU of cargo each year moving by ocean rather than air. There are a few reasons for this shift: Commodity mix There has been higher growth of products typically transported by ocean rather than air, such as raw materials Value effect Hgher growth of lower end versions of a product, which is a more likely candidate for sea freight. For example, higher demand growth for low end t-shirts has caused the average air share of ‘t-shirts’ to decrease Mode shift Products that used to be shipped by air, and are now shipped by ocean Of the 15.2M tonnes of cargo that ocean has captured from air, “mode shift” accounts for 5.4M tonnes, while “commodity mix” and the “value effect” account for the remaining 9.8M tonnes. In aggregate, these volumes that have shifted to ocean transport are fairly modest in magnitude relative to global ocean volumes, but are very significant for the air cargo industry. If air share had remained stable since the year 2000, air cargo would have grown at an average annual rate of 7.3%; instead, it has grown at 2.6%. Perishables have been one of the main commodity categories for mode shift, with volumes worth approximately 100k TEU per year having shifted to ocean. Nearly all of this mode shift has happened in fresh foods. May 2014 2
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