Keshav Tanna is a stalwart in global professional freight
forwarding, who also gives back, serving on the board of the world freight
forwarder organization, FIATA. He is Director (Airfreight), at Links Forwarders
based in New Delhi, India.
“It is clear that the industry witnessed
a softness in demand in the early months of 2019.
“Already the 50 percent of the China-U.S.
airfreight is hampered by the tariff dispute and if this were to continue
then 100 percent of all China-US airfreight would be subject to a 25 percent
tariff.
“This, because with USA wanting to
double tariffs this year to 25 percent on another $200 Billion of Chinese
imports, the negative impact on airfreight growth is imminent.
Double Digit Downer
“In the first seven months of 2019,
trade volumes between U.S. and China fell by 14 percent compared to the
same period of 2018.
“Unfortunately, the U.S. trade wars
do not end with China; the U.S. Government has imposed trade restrictions
with other trading nations such as South Korea, Mexico, Turkey and India.
New Horizons
“To focus mainly on the U.S.-China
trade wars might be myopic, as one might witness trade attacks on different
trade lanes affecting overall global airfreight growth.
“This could result in a definite shift
in manufacturing activity to other nations such as Vietnam, Thailand,
Myanmar, Cambodia. “These nations would see this as an opportunity
which would attract foreign investments.
“One is already witnessing an increased
amount of exports from Vietnam to U.S., particularly in some hi-tech Japanese
and South Korean products, which have now shifted production to Vietnam.
A Matter of Time
“However, these could be short term
measures as trade wars are politically driven and one cannot say what
could happen in the long run. China and U.S. are amongst two of the largest
trading nations, and hence no doubt the trade war between them has shrunk
airfreight numbers globally.
Deutsche Drop
“It’s not just China and the
U.S.—in July, Germany recorded its steepest drop in new export orders
since 2009 indicating the outlook for German economy remains bleak following
the negative GDP growth figure in 2Q19.
“This, in itself is an indication
of things to come, which look far from bright at the moment.
The Hong Kong Effect
“At this point it’s a bit too
soon to comment on this but the effects of this are surely perceived to
add to the current woes of air cargo.
“From what one understands, cargo
is moving in and out of the airport but because of the demonstrations
which have resulted in blocked traffic and closure of the airport for
a few days, volumes will likely be down in double-digits.
“Shippers may be wise to have back-up
plans in terms of alternative airports in the area until the situation
has been resolved.
The Leading Indicator
“Air
cargo is an extremely volatile commodity and is one of the first to suffer
when economic growth is affected.
“Vice-versa, it is also one of the
first to recover in a favourable economic environment and this could be
witnessed in the year 2016/2017 when growth was at its peak and industry
needed rapid restocking of inventories. The good times unfortunately didn’t
last too long and one witnessed poor airfreight growth in the last quarter
of 2018.
“This downgraded the forecast in 2019
and perhaps rightly so. Weakening economic growth in China and the EU
in the second half of 2018 is expected to continue through 2019.
“In fact, the IMF has also reduced
its 2020 global growth predictions from 3.7 per cent to 3.6 per cent.
Yields Take A Beating
“Yields have taken a beating and credit
terms have certainly been far from healthy.
“Additionally Digital platforms have
temporarily hit our bottom lines, but one would not see this as a permanent
setback, as e-business is the way to go and has its upside as well.
“But all in all, it has been a year
where the best is like the worst,” Keshav Tanna smiled.
Like Déjà Vu All
Over Again
“It seems the year 2020 will start
with similar challenges as there are no clear upward trade indicators
in sight, not only for India, but globally—the major challenge we
are facing right now is Brexit!
“However, Africa and Latin America
could be some bright spots.
“African airlines seem to be benefiting
from Asian trade, while Latin America is benefiting from an ever so slightly
improving Brazil.
“Caution may be expressed for Latin
America though, because it is a highly volatile market and current economic
conditions in Argentina could negatively impact the airfreight market.
The Pharma Lifeline
“We are handling pharma,” Keshav
said, “and in fact that is one of the only major commodities that
has kept the airfreight market alive.
“Volumes to the U.S. are stable. However,
to the rest of the world there has been a slight decline—at least
for us.
“This pharma commodity however, will
pick up sooner than other air cargo commodities,” Keshav assures.
Tirthankar Ghosh
For Part 1 in this series, click here.
|