|Vol. 14 No. 17||
Monday February 23, 2015
The Flux & Fog Of Ocean
The early weeks of 2015 have seen transpacific supply chains in a state of flux. The impasse between U.S. West Coast port employers and unions continues to cause chaos—disrupting ocean services but breathing new life into air cargo and sea-air solutions, yet at a huge cost to shippers. Added into the mix this quarter has been the lead up to the Lunar New Year holidays, which started last week. This has been putting Transpacific operators under even more duress as they seek to optimize cargo flows ahead of extended factory closures in China.
SVP and Head of Air Freight in the Asia Pacific at DHL Global Forwarding Li Wenjun admits that this combination of demand spikes and bottlenecks has skewed transport markets, making the availability of customers’ transport requirement forecasts even more important to ensuring that the required space is available at the best rate.
“An accurate forecast eases up the tension in our freight planning for the tight capacity in the market during this period,” he told FlyingTypers. “We have coped well under the circumstances through efficient planning and by offering our customers different options throughout this challenging period.
“We expect air freight demand to increase near the Chinese New Year period as customers circumvent ocean freight delays related to the U.S. West Coast port situation.”
He believes that even if the West Coast ILWU/PMA stalemate were resolved today, the transport system would take months to recover given that thousands of containers are stranded along the U.S. West Coast ports and in inland depots. “Shipments that used to take between 2-4 days for clearance are now taking up to at least two months to clear,” he said. “The huge backlog will take some time to resolve once both the ILWU/PMA reach a new agreement.”
Looking further ahead, Wenjun was optimistic on air cargo logistics demand out of Asia over the rest of this year. “Although consumer sentiments across the world are fluctuating, we do see marked improvements in the U.S. market and believe that trade in Asia and the Americas will likely pick up,” he said.
He was less bullish on Asia-Europe, which will be “flatter” this year due to austerity measures in Europe, but said Oceania would see some benefits from the U.S. recovery and the strong greenback. Within the Asia Pacific, foreign investment going into countries such as Vietnam and Myanmar was also opening up new opportunities. ”The potential of their development will be huge especially in the manufacturing and production sectors,” he said. “But while production has shifted to inland China and neighboring countries such as Vietnam and Cambodia, China will still remain strong as a manufacturing base.
“It is clear that the demand for air cargo in Asia Pacific will continue to increase. The current growth and increase in demand far exceeds the increase in capacity and we expect this to continue indefinitely.
“This puts pressure on rates, costs, and profitability in a time where there is also some instability in Asia Pacific’s key trading markets—the U.S. and Europe.
“Apart from the larger markets of China, India, and Korea, we also expect key growth from Vietnam, Thailand, Myanmar, and Bangladesh, which should recover from the slower-than-expected growth in 2014.
“The technology sector in China continues to grow quickly and we also expect the retail sector to bounce back with the strengthening of the U.S. Dollar.”
As exporter strategies evolve, DHL’s policy is to move in tandem with demand.
“We will be wherever the cargo is and whenever the customer needs us,” said Wenjun. “We are currently working closely with our customers to understand their pain points and concerns and are exploring options that can meet their requirements. Using such an approach, we can utilize our global network to provide a more personalized service to our customers.
Wenjun said DHL’s customers would see more specialized and customized service options during 2015, especially Sea-Air, Rail-Air, and Door-to-More products, which could offer more flexibility to the transit-cost equation. They should also expect the decline in oil prices to filter back to them during 2015 in the form of lower fuel bills.
“With the decline in oil prices, customers will benefit from lower fuel surcharges,” he said. “We have transferred cost savings from lower fuel surcharges imposed by carriers to customers.”
DHL is also looking at how to adjust its services as the trade imbalance on key lanes to and from Asia becomes less significant as Asia’s burgeoning middle class boosts demand for imports. Wenjun is also facing up to the reality that most products moving by air are decreasing in size.
“With the current developments in the market, trade imbalance will still be an issue, but the gap will likely narrow,” he said. “Asia will still be a key exporter but due to the growing middle class, there will be an increase of imports.
“At the same time, carriers are likely to start operating smaller freighter aircrafts at a higher frequency as shipments get smaller, so we would see a shift as well.
“We see great potential in the growth of intra-Asia trade and we believe there will still be strong export trade lanes from Asia to Europe and the Americas.”
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