Plunge in China’s high tech exports growth spells trouble for air carriers

by John Manners-Bell on 2012-03-03 23:08:42

Latestt official figures provide an insight into why China’s air cargo sector has been struggling. In 2011 the export growth of China's electronic products fell by 17.4 percentage points.

Latest official figures provide an insight into why China’s air cargo sector has been struggling. In 2011 the export growth of China's electronic products slowed markedly to 11.9%. The data shows that the growth rate was 17.4 percentage points lower than that of the previous year.

The export value of electronic products accounts for nearly 35% of the nation's total export value with computers and cell phones being the top two categories of exported electronic products. In 2011, computer and mobile phone exports increased by 11.1% and 34.3%, respectively.

Likewise the growth rate of imports of electronic devices saw a sharp decrease of 23 percentage points in comparison with that of 2010. Despite this it hit a new high of $468 billion, up 11% year-on-year.

The official figures of course have to be adjusted for inflation – a statistic which is never reliable in China. However the impact of the slowdown can be seen on the main airports and air cargo carriers in the region.

Last year Hong Kong Air Cargo Terminals handled a total of 2.7 million tonnes, down 6.2% on 2010. Exports were down 9%, and imports were down 8.8% - volumes were only held up by the increased level of transshipments.

Looking at the performance of airlines, combined tonnage for Cathay Pacific and Dragonair, the largest air cargo carrier in the region, dropped by 8.6%.

Singapore Airlines was also heavily impacted. In the last quarter it reported a loss of $32m as it missed its breakeven factor by 4.5 percentage points. It filled only 64.7% of capacity in the quarter, compared with a breakeven factor of 69.2%. The breakeven factor is 8 percentage points higher than last year due to higher fuel costs and lower rates.

Meanwhile China Airlines Ltd., Taiwan’s biggest carrier, says that it intends to park a third Boeing 747 freighter because of the demand slump.

The air freight sector of course relies heavily on exports to the European and US consumer markets, both still struggling with economic woes. The launch of the new iPad3 later in the year and re-stocking of high tech equipment should help, but nobody is expecting much movement before the second half of 2012. This may be slightly pessimistic given that recent data from these regions is more positive than expected.

A key question which the figures raise is why, if exports are still growing, has the air cargo sector been so badly affected? There may be a number of explanations. Firstly it could show a migration of high tech export volumes from air cargo to sea freight as shippers seek lower cost options.

Secondly, whilst high tech goods may be growing, other high value exports which tend to move by air may have been much worse affected.

Thirdly, the figures may reflect the true state of inflation in China. Whilst officially it is only at 4.4%, this level doesn’t seem to make sense when there is a double digit export volume increase, compared with a tonnage drop of between 6-8%.
At any rate now that the Chinese New Year is over, all eyes will be on the performance of the air cargo sector when true year-on-year comparisons can be made in March.

Source: Ti
JMB
China
Air cargo
High tech

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