Hactl sees shippers switch from air to sea, weakening air cargo sector
THE shift in the shipment of hi-tech products, such as mobile phones and tablet computers, from air to sea freight is eating into the profits of air cargo operators, reported the South China Morning Post.
"Supply-chain management is much cleverer now, and electronic products don't necessarily go by air for their entire product life," chief executive of Hong Kong Air Cargo Terminals Ltd (Hactl) Mark Whitehead.
Along with falling consumer demand in the West, the shift in transportation mode is the reason why Hactl will report a dip in air cargo volume this year to 2.7 million tonnes from 2.77 million tonnes last year, its first decline since 2009 when the global economic crisis weakened demand.
Air freight tends now be used to cover for the first 10 days of new product sales, Mr Whitehead said. The remaining shipments throughout the average six-month product life of smartphones or personal electronic gadgets will be moved by sea.
He said importers might turn to air freight again only if there were delays in production or sales exceeded expectations, a trend that could explain why the peak season for air freight had become shorter and the seasonality had flattened out in the last two years, the report said.
"Margins of certain smart devices are being squeezed, and so logistics as a percentage of their total costs must come down, which means turning to sea freight," said Asia-Pacific at DHL Global Forwarding chief Kelvin Leung.
Rival United Parcel Service suffered a four per cent decline in second quarter profit compared to the same period last year due to its customers opting for lower cost logistics solutions, including sea freight, instead of express shipment services for iPhones, high-fashion merchandise and spare parts.
The shift from air to sea freight is also affecting the major airports in greater China with Hong Kong International Airport recording growth of just two per cent in air freight in the first half of this year, following a flat year in 2012, while Shanghai Pudong International Airport reported a drop of 2.9 per cent.
THE shift in the shipment of hi-tech products, such as mobile phones and tablet computers, from air to sea freight is eating into the profits of air cargo operators, reported the South China Morning Post.
"Supply-chain management is much cleverer now, and electronic products don't necessarily go by air for their entire product life," chief executive of Hong Kong Air Cargo Terminals Ltd (Hactl) Mark Whitehead.
Along with falling consumer demand in the West, the shift in transportation mode is the reason why Hactl will report a dip in air cargo volume this year to 2.7 million tonnes from 2.77 million tonnes last year, its first decline since 2009 when the global economic crisis weakened demand.
Air freight tends now be used to cover for the first 10 days of new product sales, Mr Whitehead said. The remaining shipments throughout the average six-month product life of smartphones or personal electronic gadgets will be moved by sea.
He said importers might turn to air freight again only if there were delays in production or sales exceeded expectations, a trend that could explain why the peak season for air freight had become shorter and the seasonality had flattened out in the last two years, the report said.
"Margins of certain smart devices are being squeezed, and so logistics as a percentage of their total costs must come down, which means turning to sea freight," said Asia-Pacific at DHL Global Forwarding chief Kelvin Leung.
Rival United Parcel Service suffered a four per cent decline in second quarter profit compared to the same period last year due to its customers opting for lower cost logistics solutions, including sea freight, instead of express shipment services for iPhones, high-fashion merchandise and spare parts.
The shift from air to sea freight is also affecting the major airports in greater China with Hong Kong International Airport recording growth of just two per cent in air freight in the first half of this year, following a flat year in 2012, while Shanghai Pudong International Airport reported a drop of 2.9 per cent.