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   Vol. 18 No. 35
Thursday May 16, 2019

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Trump Throws Curve Ball

Shippers planning for the summer peak season received a curve ball from American President Donald J. Trump earlier this month.
     With only a few Presidential tweets of warning, the U.S.-China trade talks that optimists hoped would bring an end to confrontation and protectionism, yielded an escalation instead as the U.S. raised tariffs on $200bn worth of Chinese imports from 10% to 25%.

Trouble With The Curve

     As global markets dipped, the U.S. threatened even more tariffs covering all remaining goods imported from China – valued at approximately $300bn. Beijing duly retaliated, announcing it would raise tariffs to as high as 25% on more than 5,000 U.S. products starting June 1.
     “The escalation brings U.S.-China trade negotiations into uncharted territory,” said an analyst from Nomura, the Asia-headquartered financial services group.
     “The U.S. had postponed raising tariffs twice after the December 2018 Trump-Xi summit and ensuing negotiation period, as both sides appeared to be making steady progress towards an agreement,” Nomura said.

Economic Downfall

     With no agreement, the economic impact is expected to be substantial. “Economic policy uncertainty in China and the U.S. has eased this year from very high levels in Q4 2018,” said Nomura.
     “Delays in reaching an agreement and a return to tit-for-tat trade protectionism could lift this gauge back to near record highs, which could hurt business confidence and investment.”
T     he almost overnight implementation of the U.S. tariff hike left no time for shippers to charter aircraft and beat the import deadline.

Shah of Flexport Tweets A Flyin’

     “This happened far too quickly for shippers to react much,” said Neel Jones Shah, SVP and Global Head of Air Freight at Flexport.
chuckles for May 16, 2019      “The tweets started flying on Monday for a Thursday midnight [9 May] implementation.
     “Even if cargo was ready, the ability to get it out of town prior to the tariffs going into effect would be tough.
     “There was also no time to schedule ad hoc charters.”
     Even so, rates to North America spiked last week across the board. On May 13, Hong Kong-U.S. rates had risen to $3.83 per kg from $3.42 per kg on May 6 and the $3.19 per kg 2019-low recorded on March 11, according to TAC Index.

Insta Tariffs

     “I can’t see this linked to a spike in demand given the tariffs were put into place very quickly,” said Peter Stallion, an air cargo derivatives broker at Freight Investor Services.
Peter Stallion     “Rates to Europe have dipped slightly, but nothing significant.”
     After the strong surge and with so much volatility, Stallion said that forwarders should consider reducing their exposure. “This is exactly the sort of situation we like to frame as completely avoidable should forwarders and carriers take out positions in the paper derivatives market that hedge their exposure,” he said.
     “My key message is that all of the forwarders engaged in Asia-U.S. air and container trades can hedge in the paper market immediately.”
     So while forward markets look strained by volatility, the latest after-the-fact volume data were more prosaic - March saw the expected post-Chinese New Year month-on-month bump, but overall first quarter volumes were a disappointment.

IATA Numbers Up

     IATA revealed that demand, measured in freight ton kilometers, increased 0.1% year-on-year in March 2019. “While this is a significant improvement on the 4.9% contraction in February, in seasonally adjusted terms, demand is still down 1.5% over the past year,” said IATA.
     Freight capacity rose by 3.1% year-on-year in March, while IATA noted that capacity growth had now outstripped demand growth for 11 out of the last 12 months.
     “Year-on-year demand for air freight edged back into positive territory in March with 0.1% growth,” said Alexandre de Juniac, IATA's Director General and CEO. “After four consecutive months of contraction, this is an encouraging development. But the headwinds from weakening global trade, growing trade tensions and shrinking order books have not gone away.”

World ACD Drops Load Factor

     Meanwhile WorldACD said the cargo load factor dropped by 1.8 percentage-points year-over-year in March, but rose by 2.6 month-over-month. “With air cargo volumes at their lowest in February 2019 [due to Chinese New Year], the month of March was bound to show impressive month-over-month figures, but even a large increase of 25% was not enough to save the first quarter of the year,” said WorldACD.
     “Q1 2019 ended with a year-over-year decrease in chargeable weight of 3.1%.”

IATA Says Headwinds Gaining

     With global trade volumes down 1% over the past year, IATA said significant headwinds faced by air cargo included weakening global economic activity and consumer confidence. The export order component of the global manufacturers Purchasing Managers Index (PMI) has also indicated falling global export orders since September 2018.
     “Industry confidence regarding the outlook, however, remains relatively upbeat with only 13% of respondents from IATA’s Business Confidence Survey expecting to see a decrease in freight volumes in 2019 compared to 2018,” added IATA.
     Between Q4 2018 and Q1 2019, WorldACD said there had been a worldwide drop in kilograms of 10.3% with the origins North America and MESA suffering least (-3.7%), but Asia Pacific most (-16.8%).

Trump's Trade War

     “China and Hong Kong taken together decreased by more than 20%, double the worldwide drop,” reported World ACD. “Zooming in on Trump’s Trade War, volumes from China to USA fell by 21% between Q4 and Q1, whilst USA to China fell by 12.5%.”

Tariffs Throw Cargo A Curve In 2019

     The rise in U.S. and China tariffs that went into effect in May are expected to further dampen confidence and volumes.
     “Even if negotiations get back on track relatively quickly, it seems likely that the events of the last week have more or less permanently increased uncertainty,” warned Nomura.
     “This is likely to have a long-lasting effect on financial markets, business confidence and investment.”

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Dhaka Airport

AirBridgeCargo Airlines (ABC) recently added Dhaka to its international network.

     The B747 freighter that will be touching the Bangladesh capital twice a week will not only help relieve the congestion at the airport but also boost exports.

Right Service Right Time

Mahbubul Rahman     The ABC flights have come at the right time. Bangladesh – or rather Dhaka – has been facing major challenges for air cargo exports and most of it is due to lack of infrastructure.
     Meantime Bangla air cargo needs help almost everywhere else.
      Mahbubul Anam, President, Bangladesh Freight Forwarders Association (BAFFA) was candid when he said,
     “The major problems in air cargo export is the congestion (at Dhaka airport).
     “Simply put, the infrastructure in air cargo and elsewhere is not capable to match the growth of industry in the country,” he said.

Exports Up Double Digits

     He pointed out that the year-on-year growth was around 15 percent in air cargo exports.
     “The air cargo industry would be growing 125 percent in the next five years,” he said, “according to projections.”

Infrastructure Challenged

     In no uncertain terms, Anam emphasized that infrastructure in his country’s aviation sector would have to improve.
     As far as Bangladesh was concerned, “98 percent of air exports were being done from Dhaka airport.”
     He also underlined the fact that “there were fewer options to move cargo from any other airport (in the country) since most of the airports’ infrastructure had not yet been fully developed for freight movement.”

Small Numbers Big Potential

     The BAFFA chief also said that air exports out of Bangladesh accounted for only 2.5 per cent of the total exports. The overall air export volume was around 250,000 tons in 2017-18. He was quick to point out that a lot of cargo was sent out by sea during the peak season to avoid the waiting period at Bangladesh airport.

Kolkata Connection

     It was in desperation that BAFFA found a way out: through Kolkata airport in India.
     “Yes,” said Anam, “I did think about the Kolkata options and it took three months (to put the plan into effect). But, he pointed out, the Kolkata option could not be a long-term solution.
     “As there are few alternative options available in Bangladesh, Kolkata airport can be a short term solution.
     Currently Kolkata is using 60 percent of its capacity.
     Even as “the growth of air cargo has been on an ever increasing trend for Bangladesh, the Kolkata gateway can cater to a certain amount of the volume but cannot be a permanent solution for the long term as it depends on capacity and costs.”

Pressure To Build Up Capabilities

     BAFFA and similar bodies have been trying their utmost to boost infrastructure.
     “The pressure to boost the infrastructure,” said Anam, “is coming from all the relevant bodies that are associated with the cargo movement. The pressure is from the business community and from international and local business associations.”
     He was optimistic since the “Government has taken the initiative and was building a new state of art cargo village at HSIA (Dhaka Airport).”
     BAFFA has noticed that other than readymade garments, there are other commodities that have huge potential for exports.
     While “readymade garments make up around 85 percent of the country’s total exports, perishable cargo makes up the rest. Future demand is mostly in the pharmaceuticals and leather sectors,” he said.
Tirthankar Ghosh

Gordon Lightfoot

     I saw Gordon Lightfoot at Town Hall in New York yesterday with my son, Geoff, and spent a couple of hours singing along some songs written by this long-time kindred spirit from Canada.

Geoff and Geoff Arend II

     Gordon is on an “80th Anniversary Tour” celebrating achieving both that hallowed age, and still out there, singing his great ballads.
     Gord, most recently, ducked the The Watchman (a great ballad Gordon wrote in the 1960s), thumbing his nose at the grim reaper and staying alive after suffering a stroke that left him in a coma for six weeks.
     Gordon came through that ordeal, but had to rebound all the way from a frozen arm to other severe conditions affecting his voice.
     But there he was up on the Town Hall stage triumphant, filling that great room with his supple, rich music that has always landed on my ears as a classic cross, building upon and advancing Pete Seeger and Stephen Foster.
     Gord shared all the great ones including Sundown, Carefree Highway, Early Morning Rain, and some new music as well.
     Early Morning Rain is the quintessential 'early morning, cold, overhung, alone at an airport, looking at the airplanes through a wet rain soaked window during layover,' ballad.
     This night, Gord delivered a superb reading of this classic song that was also recorded by Elvis and others back in the day.
     As we all stood and cheered, Gordon wheeled about and raised both of his arms acknowledging his excellent back up band, and then he turned and smiled at the cheers saying softly to the full house of devoted fans:
     “I’ve sung that song 5,000 times and you never know when it will sound like that.”
     After the concert we split to PJ Clarke’s for a hamburger. Just at midnight, a soft early morning rain began to fall.
     Gordon Lightfoot, who has been out there in big venues and juke joints across North America for the better part of six decades, held us in the palm of his hand last night in New York City.

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Shippers planning for the summer peak season received a curve ball from President Trump earlier this month.
With only a few Presidential tweets of warning, the U.S.-China trade talks that optimists hoped would bring an end to confrontation and protectionism instead yielded an escalation as the U.S. raised tariffs from 10% to 25% on $200bn worth of Chinese imports.

At Cargo Network Services (CNS) Partnership in Miami last week, we spoke to Sterling Transportation founder Keith Davis who developed an original idea into a quarter century success story, connecting Los Angeles to Miami with big trucks carrying cargo.
Later we spoke to an old friend named Warren Jones, who delivered to an air cargo conference something rarely seen—a shipper!
Irish Ken Ryan told us that cargo flown into Rockford, Illinois for UPS and Amazon and others, most often reaches destinations in Chicago faster than the same shipments that land at O'Hare International Airport.
Finally from our "Reporter's Notebook," we take a trip back to recall Slammin' Sam Snead.


If You Missed Any Of The Previous 3 Issues Of FlyingTypers
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Access specific articles by clicking on article title
Vol. 18 No. 32
The Shah Of Flexport
Chuckles for May 3, 2019
Turhan Takes On TIACA
TWA Constellation Is A Piston Pounder
Harmonize Your Next Cargo Meeting
Vol. 18 No. 33
Opening Night At CNS
Lionel Gets And Offer He Can't Refuse
Carmen Darn Charmin'
In Golfer's Paradise

Vol. 18 No. 34
Qatar Has Pole Position
Warren Jones Towering Example
Chicago Delivered By Irish Ken
Sterling Is Silver At 25
Why CNS Partnership

Publisher-Geoffrey Arend • Managing Editor-Flossie Arend • Editor Emeritus-Richard Malkin
Film Editor-Ralph Arend • Special Assignments-Sabiha Arend, Emily Arend

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