Intra-Asia trade soars alongside China’s continuing growth

Intra-Asia trade soars alongside China’s continuing growth

China is one of the economic engines of the world and remains a dominant driver of global air cargo. But the rise of a number of Southeast Asian economies is fuelling the growth of intra-Asia trade and along with it, expanding the overall Asian cargo market, reports Donald Urquhart.

“All roads lead to Asia,” said Tom Crabtree, regional director, airline market analysis, at Boeing Commercial Airplanes, as he highlighted the forecast 4.2% average annual cargo growth rate through to 2036 — a doubling of global air cargo traffic by the year 2036 from 2016. “And where is all that growth coming from — the transPacific, Europe-Asia and intra-Asia,” he both asked and answered.

China is a key driver of this growth no doubt, but what is perhaps most striking is the rise of the intra-Asia trade lane. Crabtree noted that the intra-Asia trade has been growing steadily at an annual average of more than 4% for nearly two decades, an impressive feat given the troubles the industry has faced, particularly over the last decade.

“And of course we saw the distinct pick-up in 2016/17 which saw intra-Asia growth rates in the low teens,” he added. Boeing forecasts the trade lane (which includes the Indian subcontinent) will see growth exceeding that of the world market — at around 5.5% from 2015-2036. This will push the intra-Asia from the world’s sixth biggest air freight market to the third biggest by the end of that timeframe.

Indeed, carriers in the region are already quite familiar with the robust growth on intra-Asia routes, with Singapore Airlines Cargo (SIA) president Chin Yau Seng observing that, “demand has been strong over the past few years, and is expected to remain so going forward, with general expectations of healthy growth in trade among Asian economies”. Chin added that while sub-component cargo into China remains a key part of intra-Asia volumes, there has also been strong growth in perishables, e-commerce and finished goods, particularly electronics.

The steady growth of the intra-Asia trade lane owes much to the development of regional economies such as Vietnam, Cambodia, Philippines and Indonesia, alongside the earlier (and continuing) economic growth stories of Malaysia and Thailand. Vietnam, in particular, is the latest success story with the economy producing double-digit growth rates in recent years, partly due to some shifting of production out of China.

The air cargo market has clearly benefited with 1.1 million tonnes of cargo in 2016, rising to 1.3 million tonnes last year. The market is forecast to reach 2.5 million tonnes by 2020 at an average growth rate of 12.8% per year.

Garments, shoes, electronics, seafood and other perishables, along with the new addition of e-commerce, have been driving this. And while some 52 foreign carriers operate in Vietnam, 17 of which also offer maindeck capacity, there is no home-grown freighter capacity. VietJet Air is determined to plug this hole, moving to tap a market opportunity because of what the carrier’s vice president for cargo, Dô Xuân Quang, said is a shortfall in maindeck capacity.

The low-cost carrier will bring in two leased B737–400 freighters in the second quarter of this year, followed by two more by year-end, with widebody freighter capacity planned for next year with either A330s or B767s, Quang said.

Cambodia is another rising star in the region, with the country’s main gateway hub of Phnom Penh International Airport (PHN) experiencing a 38% growth in cargo volumes last year over 2016 to reach a record 63,000 tonnes, according to Chloé Lapeyre, general manager of PHN. In 2017, garments were the main export at 69%, followed by general goods and electronics.

Small figures compared with the region’s heavyweight air cargo, but a clear indication of where Cambodia’s air cargo market is headed.

And this has not been lost on industry giants like Cathay Pacific Cargo, Turkish Cargo, K-Mile and Qatar Cargo, who all currently operate freighters into PHN.

To accommodate this current growth and a forecast CAGR of between 2% and 6% to 2030, Lapeyre said the airport is set to embark on a cargo development plan that will see new cargo facilities including specialized perishables and e-commerce facilities.

These buoyant assessments of the intra-Asia trade are also echoed in Hong Kong with Vivien Lau, Hong Kong Air Cargo Terminal Ltd (Hactl) executive director, saying: “The intra- Asia trade will be the major growth market and we strongly believe e-commerce in China will be leading this growth in particular.”

Lau noted that with cross-border e-commerce, air cargo is growing more balanced in this part of the world. She noted there is also a lot of effort being put into developing specialized, premium facilities around the region, citing Bangkok’s building of a special premium warehouse for cargo such as pharmaceutical products. And in Hong Kong, a new premium e-commerce warehouse is also in the works.

Last year also saw Singapore Changi Airportbased ground-handler SATS open a new specialized facility known as eCommerce AirHub, which is aimed squarely at the burgeoning e-commerce logistics business.

Discussion of the growing intra-Asian trade and growth of regional economies does, however, bring up one key point — what will be the impact, if any, on China as an air cargo market.

“China is the powerhouse of the Volga-Dnepr Group — for more than 20 years the group has been in China with AirBridgeCargo (ABC) starting its first service in 2004,” said Joanna Li, VP Chartered Cargo Operation & Scheduled Cargo Operation APAC for the Volga-Dnepr Group.

Li underscored the significance of China as an air cargo market by pointing out that Hong Kong and Shanghai, “the two most prosperous airfreight markets in the region”, have together exceeded the 9 million-tonne mark, representing an astonishing 15% of the global airfreight market.

Going forward, Li expected continued growth out of China as she noted the country’s 2017 economic growth was actually larger than expected, coming in at 6.9% for the year. She also pointed to the closely watched Purchasing Managers’ Index (PMI), which has been holding above the bellwether 50 mark for at least the past two years, “something which is a positive signal showing to us that China’s growth is healthy”, she said.

She also added that silicon wafer shipments needed for high-tech electronics products have been growing at close to 10%, which is also a positive sentiment for the China air freight market.

A key development, according to Li, is the push of both Chinese forwarders and carriers into the international market. “In the past, forwarders and many of the local carriers were focused on the domestic market, but nowadays most of these are really expanding their network into international markets,” she said.

Another interesting development driving cargo growth according to Hactl’s Lau, is the growth in home-grown electronic products. “A lot of mobile phones are now made in China and the Chinese brands are selling very well overseas,” she said, citing the example Huawei which produces a whole range of electronics products like routers and other computerrelated devices, aside from cellphones.

Leave a Reply