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ACA/SCA 2023


787dreamliner001While IATA is forecasting growth of 2% in 2020, Cargo Facts Consulting’s expectations are more pessimistic, although there is upside for companies operating in the right business segments and markets.

Our pessimism comes from the outlook for world trade. In October, the International Monetary Fund said it expected 2019 world GDP growth to hit 3% and about 3.4% in 2020.

Those are relatively strong numbers, but the growth the IMF is expecting will not be evenly spread, with most of the big economies across Europe, the Americas and Japan finding scant trade expansion. It is the world’s 10 fastest-growing economies in 2020 that will propel the world economy, and as pointed out in Economist World in 2020, they will all be in Asia and Africa.

Most of the weakness in airfreight will come on the big intercontinental lanes: Europe to Asia, Transpacific and Transatlantic. This is not just linked to ongoing trade tensions which even after the latest deal are far from resolved. The US, now in the 11th year of an economic expansion that is already the longest since 1945, will be heading into a presidential election that creates uncertainty, and that may inhibit business investment.

Germany, meanwhile is dealing with a slump in manufacturing. Seasonally adjusted October industrial production was down 6.3%, while overall EU industrial production figures were down 0.5% compared to a month earlier and 1.7% compared to October 2018. While some parts of the EU have been doing well, the trend has been on a downward slope since the beginning of 2018.

We recently took a detailed look at the growth prospects in the air express business as well as opportunities for e-commerce logistics. In our medium-term outlook for international express for 2019, we forecasted international express shipments to grow by 3.3% and by 5% per year for the next five years. This is also driving growth in some regional express networks such as Europe. Much of this growth is driven by increased business to consumer traffic. This type of traffic has and will also continue to be beneficial for global air mail volumes and cross border e-commerce consolidations.

US domestic express has recently shown extremely high shipment growth for what used to be a mature market. Average annual growth between 2013 and 2018 has been 3.4% and we expect 2019 growth to come in at just over 9%. In the near term we see these levels coming back down to earth as Amazon in-sources more of its shipment volumes.

The downside of additional e-commerce driven growth has been declining yields. This is harder to stomach for express carriers than postal companies, which operate at lower yields. As Alibaba and Jd.com expand their international operations, this will provide more e-commerce logistics growth, but only for operators with competitive unit costs. Regional platforms such as Jumia (Africa) and Mercado Libre (Latin America) will require capacity to facilitate their expansion plans, but for the moment both platforms are losing money.

International Express has been hitherto dominated by DHL, FedEx and UPS, but SF Express is expanding its international operations. We also note that regional express operator Aramex continues to post strong growth and that that profit margins have been steadily increasing over the years.

CSAFE Global



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