While growth on the world’s busiest trade routes from Asia to Europe has slowed compared to highs of previous years, exports from Europe to Asia show continued strength in both the air and ocean freight markets as Europe emerges from its longest-ever recession.
“For the first time in a decade, growth in exports from the European Union to Asia is getting close to the growth in exports from Asia to Europe,” says Georges Van Hove, manager of airfreight procurement at Bolloré Logistics in Paris.
He cites figures from the International Air Transport Association showing that European cargo carriers enjoyed 5.1 percent growth in March compared to the same period in the previous year, measured by freight-tonne-kilometers. That compares to the 6.8 percent increase recorded by carriers in the Asia Pacific.
It’s a similar story in the ocean freight market. Denis Sanguinetti, sea freight procurement manager for Bolloré Logistics in Paris, sees sales of European luxury goods, pharmaceuticals and machinery as well as exports of products in refrigerated containers known as reefers as helping drive the rebound in European exports.
“The trend started at the end of 2012 and looks like continuing,” Sanguinetti says.
Despite the pick-up in demand, however, both the air and sea markets are still suffering from overcapacity, with the air freight market in particular also facing a shift by clients to cheaper ocean-container routes.
Van Hove estimates that over 400,000 tons of cargo has switched from air freight to sea freight since 2005 with the most pronounced shifts on routes from Europe to Asia and Europe to the U.S..
The increasing use of reefers is helping drive this change, says Sanguinetti, estimating that reefer cargo globally has enjoyed double-digit growth this year. From fruits and flowers to pharmaceuticals and wine, almost all sensitive cargo can now be shipped in temperature-controlled boxes, he adds.
Spare parts are another product switching to sea cargo as companies move towards the just-in-time model where they reduce their stocks and receive the goods only when they are needed. “We have floating stocks of spare parts for the car manufacturing industry moving between Japan and Europe,” says Sanguinetti. “This is a new way for companies to manage stocks.”
The air and sea freight carriers are reacting to the challenges of overcapacity in different ways. The airline industry is parking or scrapping its older, fuel-guzzling Boeing 747-400 cargo freighters but adding widebody passenger planes such as the Boeing 777s which have cargo capacity of 25 tons, the same as a small freighter, says Van Hove.
“The airlines have replaced the old cargo freighters with passenger planes of the same capacity so that has not solved the problem,” he explains.
The shipping companies are opting for mergers and alliances, although one of the biggest, called the P3 Network, was recently stopped by China’s Ministry of Commerce. Under this agreement, Denmark's AP M?ller-M?rsk, France's CMA CGM and Switzerland-based Mediterranean Shipping Co would have shared capacity on routes between Asia and Europe and across the Atlantic and Pacific oceans.
“The trend towards more alliances remains despite the end of the P3 Network,” says Sanguinetti, citing the recently-extended G6 Alliance between APL, Hapag-Lloyd, Hyundai Merchant Marine, Mitsui O.S.K. Lines, Nippon Yusen Kaisha and Orient Overseas Container Line. In addition, Taiwan-based carrier Evergreen has joined the alliance between Asia-based carriers Cosco, K Line, Yang Ming and Hanjin to form the CKYHE alliance.
German container shipper Hapag-Lloyd and Compania Sud Americana de Vapores of Chile, meanwhile, have agreed to merge some of their services on routes between the U.S. and Europe.
For freight forwarders such as SDV, the new groupings will mean rethinking the shipping lines they work with. “Our strategy is to have a diversified offer for clients,” Sanguinetti says. “Inevitably, the new alliances will reduce some of our options.”
For now, however, Sanguinetti thinks the alliances will do little to stabilize container prices. “Globally, the market still suffers high volatility,” he says.
For airlines, fuel surcharges on chargeable weights are helping raise tariffs slightly, says Van Hove, but for now not all airlines are applying the extra charges. “In high volume markets such as luxury goods coming from Italy, clients are naturally asking for airlines that still use the traditional way of calculating fuel surcharges on gross weight,” he says.