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Cargo

A sigh of relief

2014 has seen marked improvement for the airfreight industry, with various countries and commodities flying high. Seabury’s Marco Bloemen, SVP, and Barend Buutfeld, senior analyst, reveal the surprises of the year – and what to watch out for in the next
 

It’s been a year of some small comforts for the airfreight industry; a window of relief from the market’s stubborn refusal over the past few years to pick up. With the recent history of flat – or even contracting markets – 2014 finally brought some respite.

 

Pundits and analysts in 2013 were predicting better fortunes for this year; there were more positive outlooks than we’ve seen for some time. Nevertheless, 2014 has even surpassed the majority of those expectations.

 

While many carriers reported relatively mixed results at the start of the year, in actual fact the first few months were very strong. January to August year-to-date data reveals that global trade was up some 4% over last year – with the pace slowing a little as the year progressed. While the fourth quarter in 2013 was strong, it looks as if this year will slightly outperform the last. Overall? It looks as if 2014 will end with growth in the region of 4-4.5%.

 

So, there has been trade growth around the globe, with a few exceptions to prove the rule. Perhaps most interestingly, the pockets of cheer did not always stem from the most obvious growth drivers. As well as bringing a year of comparative relief, 2014 also contained some surprises.

 

Global oversight

Europe has arguably been the most closely watched continent since the eurozone crisis knocked both confidence and markets hard. After a relatively disappointing year in 2013, in which western Europe saw air trade growth hover over global levels at 0.8% versus 0.3%, this year Europe and its main trading partners saw higher levels of trade by air. That was true for almost all western European countries. The trend was driven by Germany, which steamed ahead with an 8.5% increase in air trade – amounting to an additional 24,000 tons in the first seven months of the year, the equivalent of 155 full 747-8Fs. The UK and the Netherlands, which tend to nestle in Europe’s air trade top five, also saw similarly impressive growth rates.

 

Even the Transatlantic – no cargo airline’s favourite route in recent years, characterised as it is by belly overcapacity and a flattening in trade in 2012 and 2013 – has shown high, albeit single-digit growth, in both directions. This is attributable to the markets for industrial consumables, machine parts, automotive trade and even salmon picking up. 

 

Europe-Asia, meanwhile, enjoyed a boost in the same commodities, racking up an impressive 9.5% growth rate, with the rise mainly driven by west to east trades – a relatively new trend, which not only saw percentage growth but also increases in absolute terms. Volumes going east now broadly match those going west, in another reprieve for carriers suffering from the previous imbalance in air trades.

 

Asia, of course, has its own 800lb gorilla – China – whose continued growth, albeit at hotly debated rates, marches on. In air volumes, the majority of the 10% export growth has been driven by the most popular commodities of the modern age: tablets, laptops and smartphones. But other commodities have also revealed healthy improvements. And the Go West policy continues year after year, more than bearing fruit: the region leapt 27% over 2013. The pace of its growth, which gives it volumes broadly matching southern China now, could also see it outgrow the north region, i.e. the markets around Beijing. The East, anchored by Shanghai, remains un-dimmed by its opposite’s runaway success, however, and still at the top, it even rose some 12.5% in the first months of the year.

 

Intra-Asian trade has boosted prospects in Japan, which has grown its export market more than 6% over 2013, after years of continuous flat-lining – but its Northeast Asian neighbours are faring less well. South Korea, whose Incheon hub is the fourth busiest cargo airport in the world, has seen lacklustre volumes. While the country is keen to turn around this stagnant – and somewhat surprising – state of affairs, 2014 will not be a year to remember for the high-tech giant, which looks set to suffer the indignity of coming in even below the cautious 2% growth rate forecasted by Seabury last year. Taiwan, too, has nothing to boast about, with air trade near flat at 0.5% in the first half.

 

Again, there was disappointment further south where Indonesia, often touted as the next big thing, failed to deliver. It may well be the world’s fourth most populous country, but its uninspiring contraction of 1.5% (year-to-date between January and July) failed to make it shine in trade terms. Its biggest decline – fashion exports – which tumbled 12% as labour costs rose, dragged down its overall growth as there were no standout commodities waiting in the wings to take apparel’s place. High-tech exports, for example, are revealed by World Bank data to have fallen significantly as a percentage of total exports from the country.

 

But if Indonesia was the most disappointing country in Southeast Asia, its neighbours fared far better. Standout growth, perhaps surprisingly, was in the Philippines, which saw a rise of 30%, the greatest in the region in the first half, giving it greater growth volumes than even Vietnam, with sufficient extra tons to fill 270 747 freighters. This, however, may be an opportunistic move on the part of airfreight providers: severe port and road congestion in Manila has left many shippers stranded. Some 20,000 containers are stuck in the jam, which is expected to take months to clear. >>


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