Intra-Asia trade will shrug off western woes
Flagging consumer demand in the traditional markets of the US and Europe is making the economies in Asia looks to each other, creating robust trade in the region.
Intra-Asia is the world’s biggest market, an immense network of complex supply chains linking countries. It has consistently given the container shipping industry good returns, even as demand slows on the major east-west trades.
This year it is predicted that the trade will handle 22 million TEUs, growing by seven percent this year and five percent in 2012. Taiwanese carrier Wan Hai has long been the regional specialist, closely followed by Chinese carriers CSCL and Cosco.
The strong trade is set to continue as slowing exports increase the inter-linking between Asian economies. China is building up and investing in infrastructure projects around the region to improve the flow of imports and exports. Demand for logistics and freight forwarding is set to increase.
Intra-Asia trade is unique in that it is one place where, even though the world’s top logistics companies are all deeply entrenched, there is more than enough business to go around. The market is so big and so fragmented that even the biggest players, such as Kuehne + Nagel, only have a small percentage.
To effectively handle the growing cargo volumes, countries in the region are being forced to upgrade their ports. Thailand, Vietnam and Indonesia are all expanding facilities and deepening channels and berths to accommodate the trend towards larger ships.
This is urgent as so much large container ship capacity is being delivered that carriers are increasing the size of vessels operating in intra-Asia, some even of panamax size. Large vessels are mainly deployed on the Asia-Europe and transpacific trade.
But like every sector the container shipping lines operate in, intra-Asia is facing overcapacity. Demand is strong but the ships cascading into the trade will weaken freight rates and drag down profitability.
That is inevitable, but in the long term, intra-Asia is the place to be. Growing cooperation between nations, the booming economies and the many trade agreements will keep the supply chains busy even with a slump in exports to the US and Europe.