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    Vol. 14  No. 75
Monday September 21, 2015

Bubble Bursts in Thailand

Bubble Bursts In Thailand     Slowing Chinese and Thai economic growth and weak global demand for Asian exports are seeing faltering air freight demand from Thailand.
Stewart Sinclair     Stewart Sinclair, senior vice president Asia and managing director of Bangkok Flight Services, a leading handler at Bangkok’s Suvarnabhumi Airport, said BFS was expecting volumes to remain largely in line with last year’s performance of 370,000 tons.
     “It’s a combination of the Thai economy, which is currently stalled, the Chinese economic slowdown, which has seen exports from China fall to under 6 percent, and the global malaise,” he said. “Markets have been preoccupied with the effects of the Greek crisis on the Eurozone and slow growth in the U.S. economy, too. At present we don’t anticipate any near term change to this outlook.
     “Exports are down about 4.6 percent year-on-year so none of the trade lanes or commodities are doing well—it’s just an overall malaise. Last year we had a good last quarter driven by the iPhone 6 launch and the west coast port strikes, but this year nothing much is happening.”
     The weakening of the Thai Baht against the greenbacks could further complicate projections in the months ahead. “The weakening of the THB has been recent, so the effects of this will not materialize for 3-6 months in the supply chain as this is how long it takes to change decisions on sourcing,” he said. “It will perhaps weigh heavier on Thai products against other regional exporters.
     “There is also a bit of ‘wait and see’ to see as to what effect the ASEAN [The Association of Southeast Asian Nations” Economic Community) freer market has, come Jan 1st 2016, when it is due to be launched.”

Thai Airways
     The downturn in rates on major lanes to and from Asia has mainly taken its toll on BFS in the shape of freighter operator volumes. “There is always downward pressure on rates from our airline customers,” added Sinclair. “Even with reduced cost of fuel it seems there is a continual challenge to balance supply and demand to attract a decent yield and this obviously has the airlines looking at all of their costs and the viability of operations. This is particularly true of the freighter operators and we have seen a reduction by some carriers over the past three years.”
     As for a traditional spike in demand towards the end of the year, Sinclair was not hugely optimistic.      “As far as I am aware there are no major tech product launches planned for the second half, and without those it is difficult to see what would drive a spike in the market… except for perhaps another west coast port strike,” he said.
     But despite the bearish outlook, BFS has continued to invest in facilities at its South East Asia hub.      After previously investing $8.5m over 2012-14 on new cargo handling and x-ray gear, upgrading its ground fleet and installing vertical carousels for small parcels, this year a further $3m is being spent on a new Automated Storage and Retrieval System (ASRS) system.
     “This comprises racking, fast moving cranes and storage bins,” said Sinclair. “It allows us to use the vertical height of the building to increase our storage capacity, especially for imports, where they may be left in the warehouse for 2-3 days before being collected.
     “They are highly efficient for increasing capacity and they also operate very quickly and are automated. We just scan an AWB and within seconds the shipment is delivered to the import collection area.”
SkyKing

 

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