AUSTRALIA↔ EAST ASIA
Of all the emerging lanes examined in this article, the smallest and least developed has been the corridor between Australia and East Asia – at least for now.
Richard Jun Zhang, president of freight forwarder REX Group Ltd., specializing in flows between China and Australia, said that air cargo trade between Australia and China is rather modest, partially due to regulations involving cross-border commerce. The y-o-y increase in trade between Australia and China was 20 percent in 2017 and will probably slow to a 15 percent increase in 2018, which Zhang said was inevitable after the rapid growth the trade lane saw in the last few years.
However, due to the increased buying power of the middle class in East Asia, Zhang said growth could rise again in the next few years. Currently, the most popular Australian commodities on the route are milk powder, health supplements and skin-care products, which most Chinese citizens prefer to buy abroad due to mistrust of domestic manufacturing standards.
Even more promising, Zhang said, is the growth of the Australia-to-Southeast Asia trade lane “in the next three to five years.” He explained that e-commerce today is “just in the beginning stages” in Southeast Asia, but Alibaba and JD.com have opened branches in Indonesia, Thailand and Vietnam, “so it’s a good chance that Australian products would go there, too.”
This summer, Qantas Freight launched a seasonal 767-300F service between Darwin and Hong Kong, providing exporters of perishables with easier access to Asian markets. The new weekly service is the only direct link between the Northern Territory and Hong Kong, and it will provide capacity to carry up to 50 tonnes of fresh produce, including meat, seafood, dairy, fruit and vegetables, as well as general cargo.
“Producers throughout the Northern Territory often find themselves transporting large volumes of perishables via road to the east coast to meet a cargo connection to Asia,” said Qantas Freight’s chief operating officer, Nick McGlynn. “This process can take up to five days, which reduces the shelf life of the product when it arrives at its destination.”
THE TRUMP EFFECT
In the background of all of this optimism about new trade lanes, there is a nagging concern about the rise in global tariff activity and its potential chilling effects on world trade. But, AirBridgeCargo’s Li said the Russian carrier does not yet see any visible effects from the tariffs placed on some commodities in the “trade war” sparked by U.S. President Donald Trump.
Avianca’s Arango generally agreed, saying President Trump and European Commission President Jean Claude Juncker “made a deal to put an end over the rumors of a trade war” between the U.S. and the European Union, with various agreements to not escalate tariffs on European automobiles and to negotiate tariffs on steel and aluminum. As a result, Arango said he is not concerned about anti-trade rhetoric in the near future.
LATAM’s Bianchi said it’s still too soon to see any major trickledown effects of the Trump tariffs on the carrier’s routes. “So far, we have seen some changes in flows that may be related to ‘tariff timing,’ but their impact has been both indirect and limited,” he said. “Over the longer term we are certainly concerned about the impact these may have on global trade.” While some commodities LATAM transports may see a temporary boost because of the tariffs, “we believe the net impact of a trade war is negative,” he added.
The greater issue, Li said, will be the state of U.S.-China relations. “This is also related to the length of the trade cycles – if the trade war continues, the effects will be stretched out over a long period of time, first with traders and buyers placing orders in other countries, and then production migrating from China.”
Businesses in Southeast Asia, Li added, would be the most probable beneficiaries of a drawn-out trade war between the U.S. and China. To all those freighters stacked up on the SGN apron, that may be the sweetest peak-season holiday music of all.