China’s slowdown is happening but maybe not on quite the scale some naysayers envisage, the chief executive of Hong Kong Air Cargo Terminals Limited (Hactl), tells Air Cargo Week.
The facility is taking the long-term view and preparing not so much for retrenchment but consolidation ahead of further growth, Mark Whitehead says: “Trade into and out of China has definitely slowed; although its economy is still growing faster than most other countries around the world, the reduction to six per cent growth is impacting airfreight, and particularly exports.
“Given Hactl’s position in Hong Kong, which is still China’s most important international gateway, our tonnages are naturally impacted by this situation: but, fortunately, not as much as might be expected.”
The statistics though are not entirely comfortable for Hactl, or indeed any facility, and are all the more striking given the generally improving air cargo markets. By early November Hactl had handled 1,291,166 tonnes of cargo, a reduction of 10 per cent on 2014 and one not likely to be reversed by the traditional end-of-year rally even in a good year such as this.
Hactl is not only dealing with falling Chinese exports, which are impacting many carriers’ load factors but an increasingly competitive local environment as Whitehead pointed out.
Where he is cautious is going forward is about the future. The official Hactl line is the slowdown is temporary but with effects, possibly strong ones, rolling over into next year. “If we can match 2015 traffic levels, we will be happy,” says Whitehead.
Not that there will be any battening down of hatches and waiting for the storm to pass that is not either Hactl’s, let alone Whitehead’s, style. “Business is tougher, so we are running faster,” he explains.
Whilst the facility is continuing to streamlining of procedures based on IT enhancements, provision of GDP-accredited facilities for pharmaceuticals, new services and upgrades to its terminal the main focus of further development is added-value logistics subsidiary, Hacis.
Hacis’ primary activity is providing scheduled, bonded, express road feeder services between Hong Kong and China. These operate as Superlink China Direct and mostly operate to its own, International Air Transport Association coded inland cargo depots on the mainland. “We have just increased this network to seven locations,” says Whitehead.
The latest of these is located in Nansha, in the new Guangdong Free Trade Zone, within an area designated for e-commerce – something the Chinese government is fostering through preferential tax arrangements, special customs procedures etc. The suppliers of these goods to save costs ship in in bulk and then distribute from nearer to the consumers.
“Hacis is responding with fast, secure and economical links from Hong Kong through to Nansha, which is co-located with a growing number of these ecommerce fulfilment centres,” says Whitehead.
What doesn’t seem to have hit Hactl or Hong Kong yet is the consolidation of handling agents.Whitehead acknowledges handling margins being squeezed as a by-product of low airfreight rates and revenue, something he puts down to “overcapacity on most routes,” but he himself takes a cautious, almost demure approach when asked.
“It’s not surprising that some investors are exiting the market when the opportunity arises. We have not seen this in Hong Kong yet, but it cannot be ruled out,” he explains.