Air Freight Rates Rise Amid Red Sea Crisis

An employee checks freight at a ramp of Frankfurt airport, Germany, November 27, 2020. REUTERS/Ralph Orlowski/File Photo Acquire Licensing Rights
An employee checks freight at a ramp of Frankfurt airport, Germany, November 27, 2020. REUTERS/Ralph Orlowski/File Photo Acquire Licensing Rights
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Air Freight Rates Rise Amid Red Sea Crisis

An employee checks freight at a ramp of Frankfurt airport, Germany, November 27, 2020. REUTERS/Ralph Orlowski/File Photo Acquire Licensing Rights
An employee checks freight at a ramp of Frankfurt airport, Germany, November 27, 2020. REUTERS/Ralph Orlowski/File Photo Acquire Licensing Rights

Global air freight rates have climbed for the first time in seven weeks as attacks on Red Sea shipping prompt companies to secure costlier air cargo space.

The Baltic Air Freight Index, which shows general cargo weekly transactional rates across a number of routes, rose 6.4% in the week to Monday, price reporting agency TAC Index said, reversing declines since a mid-December seasonal peak.

Attacks by Yemen's Iran-aligned Houthi group on vessels in the Red Sea, launched to express solidarity with Palestinians in Gaza, have forced shippers to take longer routes that can add weeks to delivery times, Reuters reported.

"The increase is in line with expectations that rates may spike following disruption to ocean shipping in the Red Sea, though sources also point out that rates often rise in the run-up to Chinese New Year," TAC Index said.

Many factories in China close for the 8-day holiday which begins this year on Feb. 10 and companies push to get stock out to customers ahead of this.

Air freight rates out of Shanghai rose 8.8% week on week on Monday, led by big increases to Europe. Rates out of Hong Kong gained 5.9% and rates out of Southeast Asia jumped 10%.

The Red Sea, which leads to the Suez canal, lies on the key east-west trade route from Asia's manufacturing hubs to Europe and then on to the east coast of the Americas.

In recent weeks freight companies have been securing more air cargo space and some customers have begun shipping goods wholly or partially by air to avoid delays.

However air freight prices had remained relatively stable as the shipping crisis coincided with a post-Christmas lull in demand.



Saudi Arabia's Digital Advertising Boom: Addressing Economic Leakage, Boosting Local Content

A digital advertising event recently held in Riyadh (Asharq Al-Awsat)
A digital advertising event recently held in Riyadh (Asharq Al-Awsat)
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Saudi Arabia's Digital Advertising Boom: Addressing Economic Leakage, Boosting Local Content

A digital advertising event recently held in Riyadh (Asharq Al-Awsat)
A digital advertising event recently held in Riyadh (Asharq Al-Awsat)

Saudi Arabia’s digital advertising sector is experiencing rapid growth, but a significant portion of its revenues is leaking to foreign platforms. To maximize the impact on the national economy, experts are calling for strategies to curb this outflow and redirect it to local channels.

The importance of retaining digital ad revenues lies in the substantial size of this market. It is estimated that approximately $1 billion in ad spent is lost annually to foreign platforms, representing a considerable loss to Saudi Arabia’s economy.

Dr. Ebada Al-Abbad, CEO of Marketing and Communications at Tadafuq, a Saudi digital advertising network, told Asharq Al-Awsat that the problem stems from the fact that although advertisers, products, and audiences are often local, the largest share of financial gains goes to foreign platforms. He estimated that 70-80% of the $1.5 billion spent on digital advertising in Saudi Arabia in 2022 went to global platforms such as Google and Facebook. This results in the national economy losing nearly $1 billion annually from this sector alone.

Al-Abbad noted that government agencies in Saudi Arabia also contribute to the outflow. He explained that public sector spending on digital advertising, intended to raise awareness among citizens and residents, frequently ends up on foreign platforms. Government spending makes up about 20-25% of the total digital ad market in the Kingdom, meaning hundreds of millions of riyals leave the country annually, weakening the local digital economy.

Al-Abbad argues that Saudi Arabia needs strong local digital ad networks to keep this revenue within the national economy. These networks would help create jobs, drive innovation, and promote cultural diversity in digital content. Developing local platforms would also enhance Saudi Arabia’s digital sovereignty by ensuring that data remains within the country and is not controlled by foreign entities.

Moreover, local networks would reduce dependence on international platforms, ensuring that the economic benefits of digital advertising remain in the Kingdom, he said, stressing that this would align with Saudi Arabia’s broader Vision 2030 goals, which emphasize building a robust, diversified economy driven by local industries and digital transformation.

Globally, the digital advertising sector is growing rapidly. In 2022, worldwide spending on digital ads reached $602 billion, and it is projected to hit $876 billion by 2026. In the Middle East and North Africa (MENA) region, the digital ad market grew to $5.9 billion in 2022, with Saudi Arabia’s market accounting for over $1.5 billion.

In other countries, the digital ad sector plays a crucial role in boosting national economies. For example, in the United States, the digital advertising industry contributed $460 billion to the GDP in 2021, about 2.1% of the total. In the UK, the sector accounted for 1.8% of GDP in 2022. This shows how important digital advertising can be in driving economic growth.

One of the key challenges facing Saudi Arabia’s digital ad sector is the dominance of global platforms like Google and Facebook, which control 60% of the global digital ad market, Al-Abbad told Asharq Al-Awsat. This dominance results in a significant outflow of revenue and allows these platforms to control digital data and content. He warned that this could undermine Saudi Arabia’s national sovereignty over its digital economy.

To counter this, he emphasized that Saudi Arabia needs to build competitive local networks that can retain a larger share of the market. This will not only keep more revenue in the country but also strengthen the Kingdom’s control over its digital data and content.