On the first business day of 2016, the world’s financial news services are leading with the story of a 7% drop in China’s CSI Index triggering the automatic shutdown of stock trading in the country.
This was followed by fears that
- The trouble in China would spread to markets in Europe and North America.
- Monday’s 7% drop would only get worse when the Shanghai and Shenzhen markets re-opened on Tuesday.
- Beijing would have to act to prop up stock prices, just as it did last summer when the bottom fell out of the Chinese stock market.
- The sky will soon fall.
- The world is coming to an end.
How much of this fear is grounded in reality remains to be seen. Likewise, the broader question of the health of the Chinese economy (as opposed to its stock markets), and its impact on demand for airfreight in 2016, will have to wait for an answer.
Of course, that hasn’t stopped anybody from making predictions.
- UK-based transport consultancy Drewry was fairly pessimistic, saying: “We are forecasting another year of flat lining growth in 2016 as international air freight volumes are weighed down by lacklustre development in global trade. Meanwhile, we expect air freight capacity to continue to expand through 2016, as increasing passenger demand drives supply of additional bellyhold capacity. The combination of zero growth and rising capacity will put further pressure on already depressed freight rate levels.”
- The International Air Transport Association (IATA), on the other hand, predicts strengthening demand for airfreight this year: “Demand for air cargo is expected to accelerate in 2016 to 3.0%, ahead of the 1.9% growth in 2015. This is slightly ahead of GDP growth which is expected to average 2.7% in 2016. Prior to the Global Financial Crisis this pace of economic growth would have generated much faster international trade and air cargo growth, but that pattern of growth appears to have stopped as companies bring supply chains closer to home. In total, the industry is expected to uplift 52.7 million tonnes of cargo in 2016.”
Here at Cargo Facts World Headquarters, it is still fairly early in the day, and we have had nowhere near enough coffee to confidently predict anything, so instead we would like to ask you to give us your thoughts on the air freight and express business in 2016.
As you look ahead, think about a couple of things:
- First, even if China’s economy grows at a slower-than-hoped-for pace – perhaps at “only” 5% – it will still be the fastest growing major economy in the world. Likewise, the US economy seems reasonably healthy, so perhaps the key lies in Europe.
- Second, there is more to “air freight demand” than the movement on general cargo across the Pacific, and between Asia and Europe. The explosive growth of e-commerce is driving demand for domestic air express all over the world, and while that may not help Singapore Airlines fill 747 freighters to and from Europe and the US, it is driving a huge surge in demand for small and medium-size freighters.
So, give it some thought, and let us know (there’s a comment box right below) how you feel about our industry’s prospects for the new year.