Report predicts 10pc rise in China's air freight volumes

CHINA Freight Transport Report Q3 2010, published on markets.com, has found that consolidation has been the order of the day in the nation's strongly recovering aviation and air freight market.

China Eastern in March took a controlling stake in rival airline Great Wall. The merger followed a series of ties between Chinese air freight carriers in the preceding months. China Eastern now owns three air cargo subsidiaries, namely Great Wall, China Cargo Airlines and Shanghai Airlines, having acquired the last of these in June 2009. The move follows a series of recent mergers within China's air freight sector.

In February, two of Asia's largest air freight operators, Air China and Cathay Pacific Airways, signed a joint venture (JV) agreement that saw Cathay buy a 49 per cent stake in its rival's air cargo business in return for four Boeing 747-400 freight carriers worth CNY1.7 billion (US$249 million).

The report said that the consolidation of a number of smaller companies has given China a more robust air freight sector with a core number of major international cargo carriers, similar to that of the US and Japanese markets.

"Despite its recent growth, we expect sluggish consumer demand in developed markets over the next few years as countries such as the US look to rebalance their economies and put a stop to spiralling trade deficits. With weaker demand from the West, it is hoped intra-Asian trade will comprise a greater share of firms' revenue as consumer spending in China and other developing markets increases. We caution, however, that a period of painful readjustment is likely over this period, during which there is a risk of over-capacity, particularly on routed services to the EU and US," it said.

"As the economy matures export-led growth is moderating. Imports are now more dynamic than exports. Indeed, over the next five years we expect import growth to run at above-GDP levels, while exports will lag behind GDP," it added.

"Over a one-to- two-year period we expect the growth of cargo handling to drop from the high double digits to low single digits, reflecting the combined effect of the expected 'double dip' recession and the longer term rebalancing of foreign trade."

The report predicts that in 2010 air freight volumes will increase by just over 10 per cent and to continue to experience low-end double-digit annual growth for the rest of the forecast period to 2014.

Rail freight growth rates are beginning to moderate. "Double-digit annual growth in tonnage volume is now unlikely looking forwards. This year, total cargo volume will rise by 7.6 per cent. Going forwards, we expect tonnage to grow at an annual average of 7.7 per cent, just below the 7.9 per cent number we are predicting for GDP as a whole."

It continued: "Road transport has become the backbone of the Chinese freight transport system, expanding rapidly as road connections across the country improve, the number of vehicles grow, and the pattern of freight demand shifts in a lower bulk/higher value direction. This year, we project that cargo hauled on Chinese roads will rise by 8.1 per cent, growing thereafter by a faster-than-GDP average of 8.1 per cent in the period to 2014."
(Source:www.schednet.com)