Analysis: Intra-AsiaÆs growth linked to rest of world
For the first half of the past decade, the transpacific lane was the foundation for growth for global container carriers.
In 2007, slowing growth on the transpacific turned the Far East/Europe trade into the star performer. Now, with Far East/Europe trade slowing and rates plummeting, intra-Asia trade is seen by some as the theater in which growth will have to come over the next couple years, a period expected to be quite lean in terms of demand.
But it’s important to consider that there are two distinct drivers for intra-Asia trade: raw material movement from Asian countries to China, and consumption-based goods movement driven by growing economic clout in Asia’s cities.
The second driver is where high hopes lie. Even with Asian economies being buffeted by the global slowdown, there’s expectation that growing urban centers in China, India and Southeast Asia will push volumes higher in coming years.
But the first driver could hit intra-Asia growth right between the eyes. With the transpacific and Far East/Europe trades in a decidedly flat stage, the effect could be felt in the countries that supply raw materials to China to produce its massive quantities of exports around the world. A major component of intra-Asia trade is the production integration between closely grouped nations. A chip made in Vietnam and a motherboard in China might eventually go to Malaysia for final laptop assembly. These separate movements, in a large way, drive intra-Asia volume. But if there’s no end-consumer for the laptop, there’s little need for the supporting cargo movements.
A clue as to how the most recent economic wobbles might hit intra-Asia is to be found in Singapore. The world’s busiest port is, above all, a conduit for trade from East Asia to Southeast and South Asia, as well as the Middle East and Europe. The port said earlier this month that volume through the first three quarters of 2008 was up 10 percent — a huge rise considering Singapore will move close to 30 million TEUs this year, and considering that global growth has been underwhelming on the whole.
But in late September and early October, volume has dropped. The port hasn’t yet released figures, but anecdotally, a contact in Singapore told Shippers’ NewsWire that volume has been so sparse in mid-October that the sprawling port has sent employees who are unusually idle for unscheduled training in a bid to make use of their time. On Thursday, boom after boom was up on the port’s cranes, again not a usual sight.
This is but one narrow example, but before anyone starts thinking of intra-Asia as the panacea to rough times ahead, it might be wise to think again. A big part of intra-Asia trade is very much linked to the rest of the world. ' Eric Johnson