#INTHEAIREVERYWHERE

In the next few years Chinese imports and exports by air freight will reach equilibrium, enabling airlines, forwarders, and integrators to optimize capacity usage on major trade lanes, according to one of the world’s most experienced China watchers.

     With some three decades in Chinese freight markets, not many foreigners have been so close for so long to the mammoth economic changes that have transformed China and world trade as Gerhard Blumensaat, director for Airfreight for North/Central China at DB Schenker in China.
     The affable, Shanghai-based Blumensaat is now into his 15th year on his latest tour in China and has worked there on and off since the 1980s. With a veritable lifetime of freighting hindsight, he understandably takes the long view on air cargo markets.

     For him, when China’s imports and exports by air eventually balance out, the circle will effectively have been closed. “It is easy to forget that back around 2000-2002 air freight traffic to and from China was balanced,” he told FlyingTypers. “It was only when there was a huge shift of electronics from Taiwan and other places into China that we saw the huge surge in exports. But with more imports, I’m expecting volumes to reach a balance once more in about 3-4 years’ time.”
     DB Schenker, which ranks itself third worldwide among air freight forwarders, carrying 1.1 million tons per year in 1,200 dedicated charter flights, entered Mainland China in the late 1970s. The German-headquartered transportation behemoth now has 5,000 logistics specialists working in over 60 offices across China, where it also boasts more than 90 warehouses offering some 950,000 m2 capacity.
     Speaking in mid-September, Blumensaat said the air freight market was relatively becalmed, but more activity was expected moving forward. “We will see more movement 1-2 weeks from now as products are launched,” he said. “To what extent we’ll have a peak season will depend on a lot of factors. Last season was short but rough, but there was a peak season here. Volumes always increase quite significantly out of China on the export side. I’d say year-to-date for exports has been satisfactory.”
     For Blumensaat, the air freight story this year in China is not exports, but imports. “We’ve seen significant increases year over year and lots more imports over the last three years,” he said. “This includes goods from Europe such as car parts, semi-finished goods for the solar business, pharma, and food products such as milk powder. It is this demand that will eventually bring the market back in to balance.”
     The surge of imports for China’s middle class is not the only change Blumensaat has watched over the years. More recently he notices a seismic shift in how all parties in the air freight supply chain interact.
     “Over the last two years the market has changed in such a way that it is now completely transparent,” he said. “I remember the days when you built relationships with SMEs. This was characterized by good personal relationships. They would check your offer against the market every 3-4 months. As long as they were happy with your rate and service, then they would continue working with you. Even if you were slightly off the best possible bidder then you would get a second or third chance. This does not happen now.”
     Aside from the largest shippers, which operate under annual contracts with 3PLs and so tend to avoid the spot market, he said everyone now knows how much it costs to move five kilos by air from A to B. “So now there is no loyalty,” he explained. “SMEs now just purely go for the lowest price. This leaves us to react to it, accept this change, and move quickly to manage the market.”
     Asked if this service commoditization had only affected forwarders, he countered that it had spread up and down the supply chain. “It’s the same for suppliers,” he added. “Carriers act much faster to the changing environment than they did before. If bookings are strong in central China for 3-4 days, then rates go up immediately.
     “When there are rumors of U.S. West Coast port strikes as there have been this year, then Transpacific rates go up 3-5 RMB/kilo based on that rumor. That is what has been happening.”
     DB Schenker has followed its customers inland over the years, and also seen many of its Chinese clients gradually move up the value chain. “The South used to be textiles, then it was electronics,” he said. “There was some semi-conductor and solar business in the South but that has normally been around Shanghai. In recent years there has been a shift of electronics to Chengdu and Chongqing.      Chengdu is also now strong in automotive while Xi’an has attracted a lot of high-tech, semi-conductor and solar business. But it’s a very mixed picture and changes quite quickly.
     “In the future I see China moving further up the value chain. The manufacture of semi-conductors and electronics will happen in China for quite some time to come. It is mostly automated assembly now in these industries so it’s not about the labor cost; it comes down to logistics, energy, and know-how.
     “When I came back here in 2000 everyone was saying industry would move to Vietnam in 6-7 years. But even now Vietnam doesn’t have the infrastructure—especially the energy supply—that these assembly plants need. Some manufacturing will move, but there won’t be a big rush and most will stay in China, in my view at least.”
SkyKing

     Air France-KLM-Martinair Cargo and va-Q-tec Ltd. signed a agreement that enables forwarders and shippers to rent va-Q-tec containers directly through Air France-KLM-Martinair Cargo and return containers at 80 airports worldwide.
     va-Q-tec rental containers, called va-Q-tainers and va-Q-cases, are passive and utilize vacuum insulation technology in the container shell and phase change materials inside.
     Shipment temperatures can range from -50°C to +25°C and provide safe transportation of APIs and other healthcare products without dry ice, providing an unbroken cool chain.
     “Through this cooperation, Air France-KLM-Martinair Cargo has targeted the replacement of single use packaging in its network to minimize waste of valuable resources worldwide,” said Eelco van Asch senior vice president Sales & Distribution at Air France-KLM Cargo and Martinair Cargo.
     “The partnership with va-Q-tec supports Air France-KLM-Martinair Cargo’s market leadership in Reliable Passive Cold Chain Solutions targeting the replacement of single use packaging.
     “In certain cases, these solutions fulfill customer needs even better than active containers,” Eelco declared.
Flossie

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     When you think of Germany, what comes to mind?
     Neuschwanstein Castle, probably, the annual Richard Wagner Festival in Bayreuth, and meticulously maintained buildings representing a rich and varied history.
     Germany also makes the world think of capable engineers, cars, and machinery products, and a stable social system. And lately, it also makes us think of passengers stranded in German airports because of striking pilots, flight attendants, and ground support staff.
     It looks like Germany has another and rather unique if not dubious distinction as well—it won’t deal in anything but the German language.
     As the German weekly SPIEGEL reported in its latest edition, a district attorney in Berlin, Ulf-Hartwig Hagemann, has refused to press charges against a high-ranking manager of the Federal Printing Corporation who stands accused of bribery.
     The German Federal Printing Corporation—Bundesdruckerei, in German—is among other things tasked with printing bank notes, ID cards, and passports, not only for the German state, but also for a multitude of foreign countries.
     As for the reasons the alleged bribery is not being investigated further, Hartmann insists:
     “The documents were made available to us in English and Spanish language.
     “I must insist that the language of the court is the official German language.
     “In particular the legal principle here that the state is obliged to investigate a possible crime by no means can be interpreted as a requirement that the state must substantiate such charges by employing translators.”
     He went on say that “based on the documents made available to the enforcement agencies in question in the German language, there is no evidence to support the presence of a crime or wrongdoing on the side of the accused and thus no requirement for further investigations.”
     You can’t make this stuff up.
     All of this makes us think that since a number of airline officials have learned the hard way that price fixing and illegal cartels can deliver penalties and even imprisonment, conducting certain meetings in the English—or any other—language might prove advantageous in Germany.
Jens