Asia air cargo market gets e-commerce boost as US-China trade war yet to bite

Large Asian cargo carriers including Cathay Pacific Airways rely on freight for around a quarter of revenue. (AFP)
Updated 19 October 2018
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Asia air cargo market gets e-commerce boost as US-China trade war yet to bite

  • E-commerce is growing at pace in populous Asia, driven by Chinese behemoth Alibaba Group and rival JD.com
  • Boeing on Monday forecast air cargo traffic would double over the next 20 years
JEJU, South Korea: Strong e-commerce demand is fueling Asia’s air freight market, with the US-China trade war having minimal negative impact so far and in some cases even boosting shipments, industry executives said on Friday.
E-commerce is growing at pace in populous Asia, driven by Chinese behemoth Alibaba Group and rival JD.com, as well as others such as Japan’s Rakuten, sponsor of Spanish soccer giants FC Barcelona.
But the flow of goods has been threatened this year by the United States imposing import tariffs on billions of dollars worth of Chinese goods to redress what it regards as unfair trade relations — with China’s government responding in kind.
“I think right now we are probably going to see a pretty strong fourth quarter,” Randy Tinseth, Boeing Co’s vice president for commercial airplane marketing, said on the sidelines of an industry conference.
“The economy today has been very, very strong. Frankly in anticipation of this geopolitical situation I think people are just going out and moving (cargo) quickly.”
Asia-Pacific air cargo volume rose 4.8 percent in January-August, showed data from the Association of Asia Pacific Airlines (AAPA). That was lower than last year’s 9.8 percent but came off a higher comparison base at a time of record shipments, said AAPA Director-General Andrew Herdman.
“Given this short-term effect of scrambling to meet deadlines for tariff imposition and so on we are seeing pockets – lanes and channels – where demand is stronger than expected. For the next several months the cargo picture remains relatively robust. The question is what will the outlook for next year be.”
Asian airlines have an outsized role in air freight, accounting for nearly 40 percent of the global market as the region is a major manufacturing hub and e-commerce is growing.
“E-commerce is changing the way people are buying stuff, especially in countries such as Indonesia and the Philippines,” said Jean-Francois Laval, Airbus executive vice president, Asia sales. “It is coming from China, from Korea, it is coming from other parts of the region. You need a huge amount of cargo space.”
Boeing on Monday forecast air cargo traffic would double over the next 20 years, growing at an average rate of 4.2 percent a year.
To meet that demand, the aircraft manufacturer expects the world freighter fleet to expand over 70 percent to 3,260 planes. Around half of air cargo is carried in the bellies of passenger jets, with the remainder flown on dedicated freighters.
Some large Asian cargo carriers including Cathay Pacific Airways and Korean Air Lines rely on freight for around a quarter of revenue.
“Last year the cargo market was extremely hot. In 2018 it still grew. The trade tensions in the world will have some effects but we haven’t seen it yet. I see constraints coming in a very short time. However, we are preparing for it,” Korean Air President Walter Cho told reporters on Friday.
“Anything from the US to China and vice versa is going to be affected. We are looking at alternate markets to China and the US as well.”
Japan Airlines President Yuji Akasaka said the trade war had made no change to the cargo market to date and he only expected an impact if “extremes” occurred.
“If it does happen it may affect us in the future but as of right now we haven’t seen it and hope it will cool down and go back to normal,” he said through a translator.
In the short term, trade war impact has not been too visible because initial tariffs were on items not typically transported by air such as metals, AAPA’s Herdman said. That is starting to change, however, as duties apply to more goods.
“I heard one example ... Seafood from the US to China is subject to retaliatory tariffs, so demand in China is down. Guess what? Demand for Canadian seafood is doing just fine.”


Russia’s RDIF to boost investment deals in Saudi Arabia

Updated 17 January 2019
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Russia’s RDIF to boost investment deals in Saudi Arabia

  • Fund's CEO Kirill Dmitriev leads a delegation of more than 20 Russian business figures to the Kingdom
  • The delegation discussed projects in oil refining, petrochemical, gas chemical and oilfield services

RIYADH: Russian sovereign wealth fund RDIF said on Wednesday it would significantly boost its investments deals with Saudi Arabia in 2019.

The fund’s CEO Kirill Dmitriev led a delegation of more than 20 Russian business figures to the Kingdom to discuss new projects.

Saudi Energy Minister Khalid Al-Falih met Dmitriev in Riyadh and expressed his happiness on the progress they made in the talks and the cooperation between the two countries. 

“Its not only commercial cooperation, but we are also working on scientific research, and we have opened a research center in Moscow University,” Al-Falih said.

The minister said the Russian delegation will also meet officials from Saudi Basic Industries Corporation SABIC and mining company Ma’aden among other companies during their three day visit to the Kingdom.

The delegation discussed projects in oil refining, petrochemical, gas chemical and oilfield services sectors, a Russian Direct Investment Fund statement said.

Al-Falih added that the Russian side has started a rubber plant project in Al-Jubail with Total and Novomet.

RDIF already has a $10 billion investment partnership with the Saudi Public Investment Fun (PIF), with more than $2 billion already invested in projects.

“We extend our cooperation not only on oil cuts but to cooperate in oil services, technology, LG and petrochemicals,” Dmitriev said. “We believe Saudi Aramco can be one of the greatest partners of Russia.”

The CEO said they were continuing to cooperate with PIF in Saudi Arabia through a number of energy investments.

Russian companies are also keen to invest in the Kingdom’s planned $500 billion mega-city NEOM.

“We have companies that have interest to invest in NEOM, we would like to build a port in NEOM, it can be a big port,” Dmitriev said.