The Canton Fair is as good a barometer of global
economic trading welfare as any indicator FlyingTypers can think
of. The latest Fair—the 111th China Import and Export Fair, to give
its full title—concluded on May 5 in Guangzhou.
Transactions of $36 billion represented a 4.8
percent decline on the 112th edition, and this despite increased visitor
numbers.
The main cause of decline was a 15.5 percent
reduction in transactions with European buyers compared to the previous
Fair. European sales were also down by 5.6 percent compared to last autumn‘s
fair.
Given that Canton Fair is usually a highly accurate
precursor of what is to come, the paucity of deals with European buyers
bodes ill for airlines, particularly European carriers which have already
had to cope with a Q1 contraction in Chinese exports to the continent.
Freighter specialist Cargolux said the ex-China
market was currently “volatile, with low visibility”, notwithstanding
a tonnage improvement in March, while a spokesman for Lufthansa Cargo
said “Asian markets including China, remained challenging”.
He added that Lufthansa had reduced capacity
on Asian/Pacific routes “drastically in the first quarter to secure
the load factor”.
One upshot of this bearish demand from Europe
has been a major decline in rates into Europe, which are now at HKD$15-17
per kg ad hoc net of surcharges on some China-Europe lanes, according
to one insider, with some forwarders understood to be offering rates in
single digits. This compares to the HKD$20-22 per kg this time last year
and is not far off the HKD$13-14 per kg rates available during the depths
of the global financial crisis in 2009. Interestingly, rates to the U.S.
“are in the HKD$13-15 range and still moving north,” according
to one forwarder.
However, irrespective of tardy sales at the Canton
Fair, airlines are hopeful that freight markets will pick-up.
The Lufthansa spokesman forecast “a recovery
in the course of the year with stronger demand, but overcapacities in
India as well as in China make these markets tough”.
A Cargolux spokesman said managers were “hopeful”
for the quarters ahead “but it is too early to know whether there
will be some form of pick-up later in the year.
“Even though several large operators, including
Cargolux, have reduced capacity [out of Asia], there is still oversupply,
not least due to constant addition of belly capacity by various carriers.”
One bright spot is the continuing rebalancing
of trade on Chinese lanes explained the Cargolux spokesman, with imports
to China’s avid consumers continuing to rise, providing welcome
backhaul relief.
Lufthansa Cargo echoed that analysis.
“The general strong developments of imports
into China will remain driven by both private and industry demand,”
said the spokesman.
“However, we still do not expect balanced
cargo demand for inbound and outbound flights.”
He noted that China’s ‘Go West’
policy of encouraging interior development which is encouraging the migration
of manufacturing away from the coast, was creating new opportunities.
“Cities like Chongqing and Chengdu will
develop and might in some years even reach the level of the established
cargo-hubs like Shanghai or Beijing,” he explained.
“Asia, especially China, will remain the
biggest airfreight market in the world and we at Lufthansa cargo are well
positioned and keen to further develop this market. Therefore we opened
Chongqing as a new freighter station in March this year served four times
a week with our MD-11 freighters.
“Shenyang and Tsingtao also further increase
our network with both cities now served by our passenger aircraft.”
But until Europe shows signs of a sustained recovery,
global shipper confidence will remain uncertain and this will be reflected
in ongoing volatility in freight markets.
Liu Jianjun, spokesman for the Canton Fair, said
86 percent of the deals signed at the show were short-term orders.
“Buyers are still holding a cautious approach
in signing long-term orders with Chinese exporters due to the global financial
crisis,” he added.
SkyKing
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