Hong Kong Freight Transport Report Q3 2012

Hong Kongs freight transport sector is in for another tough year, with 2012 set to be a year of slowing trade growth in the best case scenario and declines in the worst case. The souring macroeconomic climate, both globally and in Hong Kong has led BMI to revise down all of its freight forecasts for 2012, with port throughput the only sector projected to post positive growth for this year.

Hong Kongs role in both the maritime and aviation sector as a transhipment hub for Asia exposes the countrys ports and airports to the tough global trade environment, where demand has been muted by a crisis and projected recession in the eurozone, low growth in the US and slowing economic growth in China.

The impact on these two freight sectors is already being felt, with air freight volumes in Hong Kong down 1.26% year-on-year (y-o-y) for the first four months of 2012 and total tonnage port throughput at the Port of Hong Kong down 0.2% for the first two months of 2012.

This decline in throughput is also impacting the countys internal freight sectors. On top of the global slowing in growth, Hong Kongs freight transport sectors must also navigate a slowing in domestic demand, with economic growth slowing y-o-y to a projected increase of just 2.2% in comparison with its growth of 5% in 2011.

Despite being the only internal freight network – now that demand for rail freight has dried up – the road haulage sector is still struggling with declining volumes. In 2011, road freight volumes decreased by 7.9%; this trend has continued into 2012, with volumes for the first three months of the year down 6%.

Headline Industry Data

- 2012 air freight tonnage is expected to decrease by 5%.
- 2012 Port of Hong Kong tonnage throughput is forecast to grow by 0.10%.
- 2012 road freight is forecast to decline by 10%.
- 2012 inland waterway freight is forecast to decline by 8%.
- 2012 total real trade growth is forecast at 3.6%.

Key Industry Trends



HKIA Showing The Impact Of The Slowdown

As the worlds largest air freight hub, Hong Kong International Airport (HKIA) was always going to feel the brunt of the global slowdown in trade. The airports cargo operations started the year poorly, with a 17.4% y-o-y decline in January. While the facility recovered somewhat in February due to a full month of operations, the trend for decline has set in over the last two months, with March volumes down 0.3% y-o-y and April cargo levels falling by 0.9% y-o-y.

HKIA Expanding With Third Runway

Hong Kong Air Cargo Terminal Limited (Hactl) has welcomed plans outlined by Hong Kongs government to develop a third runway at HKIA. The projected increase in capacity will likely lead to further cargo terminal expansion plans, with Hactls annual capacity already exceeding that for which the terminal was built.

Going Green

While plans for a third runway may run counter to green strategies, the Airport Authority Hong Kong (AAHK) and 40 business partners have pledged to make HKIA the worlds greenest airport. HKIA has committed to cut its carbon emissions from 2008 levels by 25% by 2015. The airport is well on its way to achieving this plan, with the facility achieving a 10% reduction in emissions in 2011.

Is A Tenth Box Terminal Needed?

The need for a 10th container terminal at the Port of Hong Kong, known as CT10, has been debated over the quarter. Congestion once again became an issue at the port in 2011, leading some to call for the need for further expansion at the facility. However, the slowing global trade growth in 2012 and movement inland of the manufacturing sector have raised questions of whether there is a need for more container terminal capacity in Hong Kong.

Air-Road Freight Options Quickening

Hactls road feeder and added-value services arm Hong Kong Air Cargo Industry Services Limited (Hacis) is to fit all of its air cargo feeder vehicles with the new Intermodal Transhipment Facilitation Scheme (ITFS). It aims to facilitate faster transit for intermodal cargo between Hong Kong Airport and mainland China. Hacis fleet operates a SuperLink China Direct daily service that links the airport with six inland cargo terminals located in Chinas Pearl River Delta and Fujian region.

Risks To Outlook

The major short-term risk to our outlook is the threat of a deeper recession in the eurozone than currently predicted, a stymieing in the US recovery and a hard landing in China. Each of these scenarios would negatively affect Hong Kongs freight transport volumes.

In the medium term, a move away from transhipment - although in BMIs opinion unlikely - would also have a negative impact on Hong Kongs freight transport sector. While we note that Chinese mainland ports and airports are becoming better connected, with direct flights and container services, we believe Hong Kong still has a transhipment role to play. With Cathay Pacific developing a new cargo hub at the countrys airport and the Port of Hong Kong added as a port of call on Maersk Lines planned route for its new fleet of 18,000 twenty-foot equivalent unit (TEU) mega vessels, the countrys role in the global supply chain appears to have the support of the major operators in the sector.

The price of this market report covers 4 quarterly reports on this sector. This quarterly report will be downloadable instantly as a PDF document, with the 3 remaining reports delivered at regular intervals throughout the year.