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.”


British Steel collapses, threatening thousands of jobs

Updated 22 May 2019
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British Steel collapses, threatening thousands of jobs

LONDON: British Steel Ltd. has been ordered into liquidation as it struggles with industry-wide troubles and Brexit, threatening 5,000 workers and another 20,000 jobs in the supply chain.
The company had asked for a package of support to tackle issues related to Britain’s pending departure from the European Union. Talks with the government failed to secure a bailout, and the Insolvency Service announced the liquidation on Wednesday.
“The immediate priority following my appointment as liquidator of British Steel is to continue safe operation of the site,” said David Chapman, the official receiver, referring to the Scunthorpe plant in northeast England.
The company will continue to trade and supply its customers while Chapman considers options for the business. A team from financial firm EY will work with the receiver and all parties to “secure a solution.”
“To this end they have commenced a sale process to identify a purchaser for the businesses,” EY said in a statement.
The government said it had done all it could for the company, including providing a 120 million pound ($152 million) bridging facility to help meet emission trading compliance costs. Going further would not be lawful as it could be considered illegal state aid, Business Secretary Greg Clark said.
“I have been advised that it would be unlawful to provide a guarantee or loan on the terms of any proposals that the company or any other party has made,” he said.
Unions had called for the government to nationalize the business, but the government demurred.
The opposition Labour Party’s deputy leader, Tom Watson described the news as “devastating.”
“It is testament to the government’s industrial policy vacuum, and the farce of its failed Brexit,” he said in a tweet.
The crisis underscores the anxieties of British manufacturers, who have been demanding clarity around plans for Britain’s departure from the EU. Longstanding issues such as uncompetitive electricity prices also continue to deter investment in UK manufacturing, said Gareth Stace, the director-general of UK Steel, the trade association of the industry.
“Many of our challenges are far from unique to steel — the whole manufacturing sector is crying out for certainty over Brexit,” Stace said. “Unable to decipher the trading relationship the UK will have with its biggest market in just five months’ time, planning and decision making has become nightmarish in its complexity.”
Greybull Capital, which bought British Steel in 2016 for a nominal sum, said turning around the company was always going to be a challenge. It praised the trade union and management team, but said Brexit-related issues proved to be insurmountable.
“We are grateful to all those who supported British Steel on the attempted journey to resurrect this vital part of British industry,” it said in a statement.