Asia Rising Despite
Predictions Otherwise

Latest demand figures out of Asia again illustrate Q2 pessimists were a long way off the mark, although the excess of bellyhold capacity remains a drag on pricing.
     But could air volumes receive a boost in July due to labor unrest at U.S. West Coast ports?
     Read On . . .
     May traffic figures from the Association of Asia Pacific Airlines (AAPA) showed healthy growth, with international air cargo demand up by 4.7 percent year-on-year as export shipments by air to the U.S. and Europe gained momentum. This followed the 6.9 percent rise in freight liftings in March and the 4.7 percent gains registered by Asian carriers in April.
     Mark Sutch, Cathay Pacific General Manager Cargo Sales & Marketing, said cargo carried on Cathay and Dragonair last month had been boosted by strong demand from Hong Kong and Mainland China markets, despite incorrect rumors that a number of new products would be launched.
     The two airlines carried 138,448 tons of cargo and mail in May, an increase of 13.9 percent y-o-y.
     “Demand on the transpacific lanes remained robust, boosted by the beginning of the fruit season out of the U.S.,” he added.

Airports Proof Positive

     Figures from major airport hubs were also positive.
     Korea’s Incheon International saw a marginal year-on-year increase of just under 1 percent in May, when over 200,000 tons were handled.
     Singapore’s Changi airport handled 157,500 tons of airfreight in May, up 3.5 percent compared to a year earlier.
     China's Shanghai Pudong Airport saw cargo volumes surge 8.5 percent to 263,400 tons, driven by a 7.7 percent increase in international traffic and a 21.7 percent rise in regional cargo flows. And last month Hong Kong International Airport reported freight throughput of 367,000 tons, up 8.3 percent compared to a year earlier.
     However, not all is rosy in air freight markets.
     Cathay has trimmed back its freighter schedule to Europe, and Sutch warned momentum to the continent continued to be weak.
     “Intra-Asia demand was generally in line with expectations, though exports out of Dhaka continued to be affected by the unrest in Bangladesh,” he said.
     Andrew Herdman, AAPA Director General, said growth in passenger and freight markets reflected “generally positive economic sentiment in global markets,” but added that pricing across all segments was competitive and oil prices jumping to over the US$110 mark was another cause for concern.
     His take on pricing was also reflected in Drewry’s latest East-West Air Freight Price Index, a weighted average of air freight rates across 21 East-West trades. After two months of gains, this declined 4.5 points in May to 99.3 points, although rates are still higher than a year ago.
     Analysis in the Drewry Sea & Air Shipper Insight report said ongoing freighter capacity rationalizations had helped to stabilize the market, but rising cargo capacity from passenger aircraft remained a challenge for airlines and forwarders and would keep freight rates in check in the coming months.

July Ports Slowdown Could Boost Cargo

      In the next few weeks the air freight market could, however, receive an unexpected modal boost, at least on lanes into the U.S. The current labor contract between the International Longshore and Warehouse Union and the Pacific Maritime Association will expire at the end of this month, and many are concerned that if a new agreement is not struck then labor disputes could result in disruption to shipping schedules at ports.
     This was a topic picked up on by Wolfe Research, which surveyed 50 shippers about how the port labor negotiations might impact Q3 volumes across all modes.
     Wolfe said most shippers expect a resolution, with isolated slowdowns rather than strikes or lockouts deemed the most likely actions taken by the ILWU if negotiations drag on. Many shippers also accelerated imports into the West Coast ahead of July 1 but still expect a strong third quarter.
     But Wolfe added the rider that should the ILWU/PMA negotiations take a turn for the worse, on a modal basis there will only be one winner.
     “A work stoppage at the West Coast ports would be a material near-term positive for airfreight,” concluded the analyst.
Sky King

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