OCTOBER 2009 FREIGHT & TRADING WEEKLY
FOCUS FAR EAST SPECIAL feature
Focus Far East Signs of recovery
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OCTOBER 2009 | 1
As the world begins to emerge from the hard-hitting impact of the global financial recession, there are clearly signs of recovery on Far East trade routes. It’s welcome news for service providers, some of whom have recorded volume dives of up to 40%. Editor Joy Orlek Consulting Editor Alan Peat Contributors Liesl Venter Advertising Carmel Levinrad (Manager) Yolande Langenhoven Jodi Haigh Managing Editor David Marsh
Correspondents
Seafreight Page 3 Route connectivity diversifies Hoegh’s service offering
Page 16 Line confident that recession is on its way out
Durban Terry Hutson Tel: (031) 466 1683 Cape Town Ray Smuts Tel: (021) 434 1636 Carrie Curzon Tel: (021) 674 6935 Port Elizabeth Ed Richardson Tel: (041) 582 3750 Swaziland James Hall jhall@realnet.co.sz
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Page 4 Rate levels a little better as demand stabilises Page 5 Stronger rand helps revive imports
Page 6 Volumes and rates picking up nicely Page 8 Asia volumes show signs of recovery
Logistics Page 12 Buyer consolidation service set up in Asia
Page 13 Trade down at least 40% Partnership with China is crucial
Airfreight Page 11 Asian carriers worst hit by recession Page 14 Expansion matches supply to demand
Groupage Volumes steady with signs of an upturn Page 9 Rates remain low as seasonal flows pick up
Imports and exports Page 2 China has shown signs of recovery since first quarter Page 6 Development fund grows investments in Africa
Cover photo: Stock.xchng
Page 10 The signs are good … but is it sustainable?
Page 14 Global crisis adds impetus to SouthSouth trade growth Innovation is key as imports plummet
China
‘
has shown signs of recovery since first quarter’
I
n an encouraging piece of economic calculation, credit insurer Coface has revealed that China – the world’s major demand source for African-mined raw materials – has been showing signs of economic recovery since the first quarter. Signs of recovery were visible in the 2009 first quarter, and, added Coface, included reductions in interest rates and legal reserves, fiscal stimulus plans that swelled the central government deficit to three percent of gross domestic product (GDP), and the suspension of the loan
quota system. While on a year-on-year basis growth reached 6.1% in the 2009 first quarter compared to 6.8% in the 2008 fourth quarter, an analysis of the statistics on a quarter-on-quarter basis (corrected for seasonal variations) shows differently. Said Coface: “The consensus estimate is that growth reached 6% in the 2009 first quarter – up from 2% in the 2008 fourth quarter. “The credit expansion has moreover accelerated this year – up 21% in January, 24% in February, and 30%
in both March and April, compared to growth of 15% in 2008.” Investment, meanwhile, grew 30% – mainly in the public sector. Despite growing unemployment, Coface noted that sales rebounded in the first quarter in the retail, automotive, and property sectors – up respectively 16%, 3% and 9%. “China's economic growth has thus bottomed-out,” said Coface, “but weaknesses nonetheless persist. “The current recovery rests almost exclusively on public sector investment and liquidity injected into
the economy. Payment default risks are still mainly concentrated in the private sector.” There has also been a soaring expansion of bank credit, with the new loans granted by banks in the first quarter representing 94% of the new loans granted all last year. This, according to Coface, associated with an easing of the own funds-to-debt ratios of municipal investment companies, is expected to cause a deterioration of asset quality that already troubles Chinese financial regulators.
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OCTOBER 2009 | 3
Route connectivity diversifies Hoegh’s service offering Also targeting used vehicle and project cargo market
N
orwegian ro/ro carrier Höegh Autoliners has increased its focus on the used vehicle segment as well as the static and project cargo market in response to growing demand, head of Africa Lee Sayer told FTW. “We’ve also seen an increase in our activity here because of new trade lanes and new possibilities to connect trades together – particularly from the Far East,” says Sayer. With the introduction of these new trade lanes the line is responding to a lot of enquiries that couldn’t previously be serviced. “In the past we may have been classified as a carrier of mobile, selfpropelled or towable vehicles only. However we have invested heavily in specialised equipment, like our fleet of 20’, 40’ and 60’ mafi trailers, which enable us to carry a wide variety of large, out of gauge cargoes. The obvious advantage for cargo owners is that all cargo shipped with Höegh Autoliners is carried under deck,” says Sayer. “The Far East, particularly Japan, has always been – and remains – a
very important sourcing region for new and used vehicles. Consequently our services in and out of the Far East form a significant portion of our global business.” The high quality and relatively low cost of used vehicles sold in Japan makes it a significant source of used vehicles into right-hand drive African countries. And East Africa is an increasingly important market for used cars from Japan. “We started a Far East service to East Africa in October last year with monthly sailings into Mombasa and Dar es Salaam. This service – known as the FEMA (Far East-Middle East-Africa) service – covers ports in Japan, China, Singapore and Middle East. Jebel Ali in the Middle East is our hub port providing connections from Europe and the US to East Africa.” Japan is also a significant supplier of used vehicles into Southern Africa where the main entry ports are Durban and Maputo. These vehicles are sold to buyers across the borders of South Africa. “We can now compete for part
Lee Sayer … ‘Investment in specialised equipment enables us to carry a wide variety of large, out of gauge cargoes.’ of this business by connecting our FEMA service to our newly established MIAF (Middle East India, Africa) service in Jebel Ali. These combined services provide customers with monthly sailings from Japan, China, Middle East, India and Sri Lanka to Durban, Maputo, Luanda, Lagos and Tema,” he added. The line has established trade
routes offering regular frequency, load and discharge ports, but is in a position to consider adding ports on an inducement basis and according to market demands. While Höegh Autoliners has built its reputation as a ro/ro carrier into South Africa from Europe and the US, greater flexibility has significantly expanded its service offering.
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4 | OCTOBER 2009
Rate levels
‘a little better’ as demand stabilises By Alan Peat
T
he current scenario on the Far East sea trade is not the prettiest of pictures, according to Glen Delve, commercial director of Mediterranean Shipping Company (MSC). “As has been globally reported,” he told FTW, “shipping lines are bleeding no more so than on the Asian trades.” Volumes plummeted, rates crashed and lines had to slash capacity on their Far East services, as taps closed on world demand for export goods
from the Asian tigers. This was immediately followed by imports of raw materials to producers like China being stopped – as production capacity was cut back and companies started to survive on their stockpiles of raw materials. It all eventually led to lines declaring that rates were just not sustainable at the cut-throat levels they had reached, and they just couldn’t bear these heavy losses any longer. “Everyone in the industry agreed,” said Delve. “Rate restoration just had to take place.”
Rate levels on the SA/Far East trade are now a little better, he reckoned – while noting, along with other shipping line executives in SA, that demand had stabilised and even lifted off the bottom of the trough in certain cases. “Volumes seem to be holding up,” said Delve, “so our current tonnage will be maintained for the foreseeable period.” And, although there have been capacity cuts, the MSC services between Southern Africa and the Far East are still plentiful.
The line runs a rotation of vessels on a direct call basis, connecting Durban to Port Louis; Singapore; Xiamen; Kaohsiung; Hong Kong and Chiwan. It uses a fleet of vessels with an average capacity of 3 000-TEUs and core cargoes on the eastbound run of commodities – mainly chrome, copper, cobalt, scrap, steel, woodpulp and manganese ore. Incoming cargoes are more of the “general goods” variety – but with automobiles and car parts making a big contribution.
DTI markets SA products in China By Liesl Venter The Department of Trade and Industry (DTI) remains committed to increasing relations with China, evidence of which was a recent investment and trade mission. The delegation visited the Chinese cities of Hong Kong, Beijing, and
Shanghai before culminating in a national pavilion at the China International Fair for Investment and Trade (CIFIT) in Xiamen. Some 33 exporters and 17 South African companies seeking investment partners participated. The aim of the mission was to create market penetration for South African
value-added products and services in China, while also promoting South Africa as a trade and investment destination. With 80% of the delegation being funded by the DTI through its export marketing and investment assistance scheme, the ITI forms part of the DTI’s export promotion investment
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OCTOBER 2009 | 5
Stronger rand helps revive imports
T
he sea trade between SA and the Far East has taken a real battering so far this year, according to figures released to FTW by Maersk Line. “Container traffic to-and-from SA has seen a significant drop in volume of around 20% from 2008 to 2009,” said MD David Williams,“this being reflected in the Transnet National Ports Authority (TNPA) statistics when comparing year-to-date volumes – with the largest downfall in imports. “The Far East, being the largest container trade, has experienced its share of the downturn, both in terms of volume and freight rates. Far East import volumes for Maersk Line have dropped compared to 2008 fuelled by a weaker rand during the period from the fourth quarter of 2008 to the second of 2009 (Q4/08-Q2/09) as well as a decline in confidence in the retail sector.” Also, he noted, exports to the Far East have been hard hit by the commodity price downturn in Q4 2008. Base loads such as ores, minerals and metals have dropped significantly compared to last year’s loadings. The drop in demand for space on vessels has forced several carriers to rationalise their capacity on the Far East-SA trade. Although markets are starting to stabilise, this capacity will not necessarily be replaced in the short- to medium-term.
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Third quarter recovery of imports and exports. “As of beginning Q3 we have seen a recovery in both in- and outbound volumes,” Williams added. “Aggressive fiscal and monetary stimulus has assisted to revive domestic demand in markets such as China, Thailand and Indonesia. Even though these economies are only starting to show signs of an upturn, there is an evident increase in demand for raw materials and commodities from SA.”
Maersk’s market analysis also showed that the strengthening of the rand had assisted in reviving imports to an extent. Lines are currently experiencing capacity constraints out of the Far East following the China export peak season which Williams expected to last up to at least October/November. “The good news out of all this,” Williams told FTW, “was that those much-needed ocean freight rate
increases are being achieved on both inbound and outbound cargo.” In addition to its extensive coverage from Southern Africa to the Far East, Maersk Line is also introducing a fortnightly (induced) call of its West Africa-Far East service (string 1) into Richards Bay for exports. “The call offers a reliable and competitive service linking the Richards Bay market directly with the Far East,” he said.
6 | OCTOBER 2009
Volumes and rates picking up nicely By Alan Peat
S
hips are now sailing full regularly, with new demand for cargo to the Far East, according to Rhett van Zyl, MD of CMA CGM Shipping Agency. “There’s currently a big demand coming in for sailings from SA to the Far East,” he told FTW, “with freight rates picking up quite nicely.” Both CMA CGM’s outbound
services – one sailing directly from Durban, and the other linking Maputo-Beira-Nacala to the Far East – are sailing loaded to the gunnels. And Van Zyl said they were busy looking for extra capacity to meet this growing demand. “Two services from West Africa to the Far East have been calling for bunkers in Durban,” he said. “But both have been converted into commercial calls because of the large
demand.” The Mozambique calls are also proving themselves, with the Port of Maputo being the pick of the bunch. “There’s a big demand for cargo out of Gauteng through Maputo,” said Van Zyl. Imports from the east have also been quite tidy in recent times. According to Van Zyl’s records, the market has taken off in the last six-toeight weeks.
“Although it’s hard to say whether it’s just the normal peak season, or a real, sustainable upturn, it doesn’t matter. Whichever it is, it’s good.” This has also seen CMA CGM Shipping Agency sniffing around for extra incoming space. “We’re getting a lot of enquiries for imports into SA,” said Van Zyl, “and we’re looking at turning one of the West African services into an import call in Durban as well.”
Development fund grows investments in Africa SA office creates more opportunities By Liesl Venter South Africa and China may be thousands of miles apart, but the two countries have much to offer each other. With trade and investment relations continuing to grow since the commencement of diplomatic relations in 1998, more opportunities are created year on year. More recently in the form of the opening of the first South
African office of the China-Africa Development Fund (CADFund) in Johannesburg earlier this year, which saw China bolstering the fund by an additional R19.8 million. Based in Beijing, the CADFund, an equity investment fund supporting and encouraging the investment by Chinese enterprises in Africa, has a total fund size of $5 billion. Established in June 2007 following a pledge by Chinese President Hu Jintao to deepen Chinese aid to Africa, the fund
has more than 20 investments in Africa totalling nearly R3.9 billion at present. According to a spokesman for the fund the Johannesburg office was opened in order to boost economic development between China and Africa. “The creation of the representative office in South Africa is a further step in the Cadfund’s” investment expansion in Africa,” said the spokesman. “In the future the CADFund will
gradually establish representative offices throughout Africa in order to increase investments by Chinese enterprises in the region, promote economic cooperation between China and African countries, and realise mutual benefits.” Projects that have seen the light thanks to the fund include the Ghana Power Plant, the Lekki Trade Zone in Nigeria, the Egyptian Suez Trade Park and the Ethiopian Hanson International Glass factory.
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OCTOBER 2009 | 7
Volumes
steady with signs of an upturn Groupage operator continually looks at more direct options
By Joy Orlek
D
espite the harsh economic climate which has seen volumes from the Far East on a steady downward slope, independent consolidator CFR Freight has a different story to tell. “For us volumes have remained steady over the past year and we’re beginning to see a slight upturn,” director Peter Schmidt-Löffler told FTW. In times of recession shippers generally opt for smaller volumes more often to keep inventory at a minimum, which is why consolidators tend to be less affected than forwarders in an economic squeeze. CFR has consistently built up its direct service portfolio from the Far East and specifically from China, with Shanghai, Ningbo, Hong Kong, Guangzhou, Qingdao, Shenzhen and
Peter Schmidt-Loffler ... Xiamen service on the planning boards.
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Tianjin on offer. “Part of our business is to continually look at opening new direct services and Xiamen is one of the new routes we’re looking into.” Schmidt-Löffler is optimistic about the outlook and expects to see a 5% increase in volumes over next few months. But with shipping lines introducing a general rate increase (GRI) and a peak season surcharge effective since September 15, shippers will need to dig deeper. “There’s always a tendency in a tight market for service providers to under-cut each other when it comes to rates. We’ve always been flexible in our pricing to assist our clients to remain competitive, but rates also need to be sustainable.” One of the challenges in trading successfully in the Far East is the cultural barrier, says Schmidt-Loffler. “By operating through the offices of our partners in the World Wide Alliance we are able to avoid any communication obstacles.”
Tel: 011 882 7300 www.compu-clearing.co.za FTW4386
8 | OCTOBER 2009
Asia volumes show signs of recovery
S Grant Daly … ‘Third quarter volume growth from Asia to Africa has been the most positive of all Safmarine’s ex-Asia trades.’
afmarine’s South African-born Asia region executive, Grant Daly, says the company’s third quarter volumes from the Asia region have improved. “It’s the result of unprecedented low inventory levels and subsequent restocking of orders coinciding, rather timeously, with the traditional peak season,” he told FTW.
Daly says volumes have increased significantly on all Asia trades through the peak and revenues are up as a result of rate restoration initiatives on all services. “The rates needed to go up. The current market conditions for container shipping remain poor and are totally unsustainable.” Daly says third quarter volume growth from Asia to Africa has been the most
positive of all Safmarine’s ex-Asia trades. However, accompanying the increase in Asia-Africa volumes is an increase in competition on a number of Africa trades, notably the Asia-West Africa route. “We view the increased competition as an opportunity to demonstrate and further refine the personal attention and service that has been Safmarine’s key differentiator,” he says.
‘Avoid the number four at all costs’ Understanding the culture is integral to success By Liesl Venter Knowing and understanding Chinese culture is integral to success in doing business with the country. Experts agree that China can be a daunting market to enter and doing one’s homework is advised before pursuing business ventures. Hubert Hopkins writes on the China Success stories website that this involves understanding simple issues – from the slight bow that often accompanies a handshake to the fact that Chinese
names are reversed from Western names. The surname is said first and then the given name. Chinese associates should be addressed by their surname followed by their title until given permission to use their first name. Undoubtedly one of the most important aspects to remember on a first visit to China is one’s business card. “Business cards are routinely exchanged at the first meeting. Carry a bilingual business card with one side Chinese and the other in English,” writes Hopkins. “When receiving a
business card, receive it using both hands and compliment the card itself. Instead of immediately putting it away like in the West, the card should be kept out during the meeting.” According to Forbes.com it is important to do research not just about the business deal but also about the cultural aspects as the two are inextricably linked. Chinese Business Solutions advises people to take note of colour and numbers when doing business. While red is considered lucky, writing to someone in red symbolises
the demise of a partnership. Also avoid the number “four” at all costs when scheduling dates for meetings or contract signing as the pronunciation is similar to the Chinese word for death and is therefore seen as unlucky. Other general rules include making general conversation first when meeting someone for the first time before turning to business, as well as knowing that come lunchtime you will possibly find yourself sharing food from a number of dishes placed in the centre of the table.
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OCTOBER 2009 | 9
Rates remain low as seasonal flows on Safari pick up
S
easonal import volumes on Safmarine’s Safari (SA-Far East) service picked up as expected during the third quarter, although the increase in volumes was below that experienced in 2007 and 2008, says Safmarine’s South Africa trades executive Alex de Bruyn. “Safmarine provided two extraloaders (on a round-trip basis) as part of its Safari 1 service at the end of August and early September to serve the additional/seasonal demand for capacity. A third extra-loader was expected to be provided before the end of September subject to demand.” De Bruyn expects import volumes from Asia to South Africa to follow the ‘normal’ seasonal import volume trends for September and October 2009, with import volumes from the region tapering down towards the end of October. Although he does not foresee a change in capacity for the Safari service for 2010, the decision to upgrade capacity would depend on demand and affordability. He also said
that as demand equalled capacity, lines would give preference to higher paying cargo. “There is a need to up the rates on the Safari trade. We saw a huge and dramatic drop in freight rates on the SA-Far East trade in 2009 and the current levels are simply not sustainable.” De Bruyn believes the drop in rates on the Safari trade was the result of offpeak flows being lower than normal due to the global slowdown, but it was also most likely influenced by the huge decline in rates on the East-West trades. “While the market may expect the rate trend on the north-south Safari trade to follow that of the larger eastwest trades, the truth is that the northsouth trades in general – and the endto-end South Africa-Far East (Safari) trade in particular – are very different (size and cost-wise) to the large eastwest trades trade between Asia and Europe/USA. Simply put, the trade is unable to sustain the dramatic rate declines we saw during 2009.” Alex De Bruyn … ‘The trade is unable to sustain the dramatic rate declines we saw during 2009.’
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10 | OCTOBER 2009
The signs are good … but questions raised over sustainability of commodity boom By Alan Peat
T
he signs of the times are good, but whether sustainable is the question with no current answer, according to Richard Brook-Hart, director of Alpha Shipping, agents for the Argentinian line, Maruba. But, he told FTW, he tended to be more optimistic than otherwise. On imports, things are looking busier, with the lines getting into the pre-Christmas peak season, and rate restoration now in place.
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On exports, Brook-Hart currently noted a shortage of capacity – albeit, like all other lines, after a major (50%) capacity cut in the last year. This he attributed to the now three-month old commodity boom – with China buying all it can get of manganese, chrome, cobalt, copper, and iron ore. “Initially, China stopped buying, so we went for some months without exports,” Brook-Hart added. “But things have got better since June, along with a much-needed rate restoration.” The question is: Is the commodity
China buying all it can get of manganese, chrome, cobalt, copper, and iron ore ... but is it sustainable?
boom sustainable? extra tonnage at this stage.” “Are they going to continue Alpha has two Maruba services buying?” Brook-Hart asked, “or will linking SA with the Far East. they suddenly announce they are One is an alliance with China once more overstocked, and cut Shipping and CMA CGM, and links orders again?” up South America-Durban, SA-Far And the answer to that will East on the eastbound leg – currently obviously dictate when it is feasible for using 10 vessels of 2 100-TEU lines to again start introducing more capacity. ships into their services. The other is a joint service with “Commodity traders don’t seem to Hapag Lloyd and China Shipping, really know,” said Brook-Hart, “and and has five vessels on the Far Eastwhile things still remain somewhat Durban-West Africa-Durban-Far Project2 7/22/08 12:40 PM Page 1 uncertain, I don’t see lines putting on East rotation.
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OCTOBER 2009 | 11
Asian carriers worst hit by recession … but they’ll bounce back in five years
The region’s carriers are the first to benefit from reviving Asian economic growth and the modest restocking of inventories in the West. By Liesl Venter
A
sia-Pacific carriers may have been worst hit by the global recession, but the region is growing so significantly all
indications are they will be the biggest market within the next five years. This is according to Giovanni Bisignani, CEO and director general of the International Air Transport Association (Iata), who says that
while the US is currently the biggest market in the world, the capacity of the Far East means they can expect double-digit growth in years to come. “Asia-Pacific was worst hit by the recession and fuel hedging losses
at the end of 2008, but the region’s carriers are the first to benefit from reviving Asian economic growth and the modest restocking of inventories in the West.” With expected losses for the coming months at about $3.6 billion, the launch of a massive recovery programme is paying off. “China and much of the AsiaPacific region did not expect the economic downturn to hit them so hard. When the credit crunch started in the US many thought that it was just going to affect the US and Europe,” said Bisignani. “But China has hit back and one can already see that they are recovering quickly.” According to Bisignani the growth in the Asia-Pacific region brought with it many opportunities for other regions, especially the US and Europe. “Airlines need normal commercial freedoms to merge where it makes sense and to access markets and global capacity like any other business. Governments need a wakeup call to create a policy framework that supports a competitive air transport sector capable of driving economic expansion.”
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12 | OCTOBER 2009
Access sets up buyer consolidation service in Asia Mineral volumes on the up and up By Alan Peat
I
t’s good news time as far as the Far East is concerned, according to Kevin Louden, group CEO of Access Freight International. “Our Africa mineral volume are exceptional, showing us that the recession is fast waning,” he told FTW. “Access has experienced major import and export growth within the Far East regions.” He attributes much of this to the upturn in commodity prices resulting from increased demand for these raw materials. “It has been generated, in the main, by improving demand out of China,” Louden added. It’s also a driving force in the success of Access. “We are one of the largest movers of minerals out of Africa, and continue to capitalise on our position by offering clients exceptional service and reliable capacity, even in boom times.” Not that it’s been a boom recently, according to Louden. “The manufacturing sector has been hard hit as a result of falling demand from the developed world and SA has not escaped unharmed. A recent trend identified was the move to smaller
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Kevin Louden ... ‘We are one of the largest movers of minerals out of Africa.’ inbound shipments – and a consequent increase in the need to consolidate these shipments from multiple points within China.” In Louden’s view, fulfilling this consequent result means that Access’s ability to supply consolidated services
to clients has grown substantially. “With our established agency partnership in China,” he added, “the opportunity arose to establish a ‘buyer consolidation service (BCS)’ in Asia – originating out of Shenzhen, Ning Bo and Hong Kong.
“We believe that these are the ideal locations from which to source, consolidate and export. Sufficient knowledge and expertise reside in these areas to support the varied needs of our clients’ local and global supply chains.”
OCTOBER 2009 | 13
‘Partnership with China is crucial’
Far East trade down at least 40%
By Liesl Venter
Unpredictability the greatest challenge By Liesl Venter
W
ith Far East business dealings down by at least 40%, the outlook for the months ahead in this particular market remain moderate, says Sue Wood, operations director of Cargocare Freight Services. “Almost all the markets, with the exception of Hong Kong and Taiwan, slumped quite significantly,” says Wood. But much is expected with the development of the BRIC (Brazil, Russia, India and China) initiative by the Department of Trade and Industry that is intended to improve volumes once the global economy improves. “I think in this period of time, for everybody, not just people in our industry but across the board, the greatest challenge is the unpredictability of what is happening at the moment.” And while the global recession according to predictions may have
bottomed out, the recovery is going to take time. Having watched and monitored the situation on a day-by-day basis, Wood says that while there are plans to expand and develop new markets in the Far East, one has to be careful at present not to make long-term changes and alterations. “One only has to read the number of articles about the number of empty containers sitting outside Singapore to know that services have been cut back. Shipping lines are trying their best to control and even manipulate the markets to their own benefit.” Wood says there is no doubt that even though the global economic downturn did impact on Cargocare’s business the company remains strong – thanks to customer relationships and trust built up over the years. “We may not be having as good a year as we had last year, but we will definitely come out of this the better for the experience.”
Sue Wood ... ‘Recovery will take time.’
Facilitating the exchange of information between South Africa and China is key to growing the economic relationship between the two countries. Catherine Grant, director of trade and policy at Business Unity South Africa (Busa), says with China being one of the largest economies in the world and having the biggest population, partnership with this key world key player is crucial. “The global economic crisis has resulted in the contraction of other key economies, such as the US and Japan, but China is still expected to post growth rates of around 6% to 7% in 2009,” says Grant. “China provides a more stable market for exports and investments from South Africa in current times.” Grant says Busa actively participates in various forums to encourage trade with China such as the upcoming Forum on China Africa Cooperation (FOCAC) that will be held in Egypt in November this year. This is a day set aside for private sector discussions and the results are fed into ministerial meetings. At a national level the organisation regularly engages with government and labour at Nedlac on the strategic approach of South Africa to the economic relationship with China.
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14 | OCTOBER 2009
Linex expansion
matches supply to demand By Alan Peat
A
lthough the world recession has tended to hit trade, the Far East must still be seen as an area of growth and expansion for Linex Air Services, according to director, Martine Forbes. “In response to growing demand,” she said, “we have expanded our network and, in the past year, have opened new offices in Saigon, Colombo, Sri-Lanka, Penang, Ho Chi Min City, Pakistan and Bangladesh.” And, with that second office in Vietnam, the Linex network shows that country having recorded a big increase in both imports and exports. It’s very much a case of matching supply to demand, according to Forbes. “The company footprint is growing internationally to keep pace with business growth,” she told FTW. “And it’s an on-going process, in which the group will continue to invest money in opening
new offices.” Matching demand also requires Linex to keep pace with the service developments conducted by its partner airline company. Said Forbes: “We will continue to follow the lead of our partner Cathay Pacific, and will have a presence in all the countries in which they operate. We have sufficient volumes internationally – both on imports and exports – to justify our continued expansion.” In this international air network, Linex is the general sales agent (GSA) for Cathay and its sister airlines, Dragon Air and Air China. With these tentacles into the orient, the company sees the East as a huge potential growth market. “As specialists in this market,” said Forbes, “we are using all our skills and resources to ensure that we are prepared for current and future growth. “The Eastern markets are evermoving and ever-evolving, and they are aggressive in the pursuit of business routes.”
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Global crisis adds impetus to South-South trade growth By Liesl Venter The importance of South-South trade should not be underestimated with or without a global financial crisis. According to Allesandro Teixeira, president of Apex-Brasil, the Brazilian Trade and Investment Promotion Agency, developing countries such as Brazil, India and China have in the past been very reliant on the USA and Europe for external trade. “In the case of Brazil we took a strategic decision in 2003 to diversify our trade partners and it was a very good decision in light of the economic crisis because had we not, the country would have been bankrupt.” Up until 2003 some 75% of Brazil’s trade balance was concentrated in the USA, Italy and France, all countries that are currently in a bad shape economically. South African Minister of Trade and Industry Rob Davies says that the global financial crisis only accelerated the trend of South-South trade and there is no doubting the importance economies such as China, India and Brazil will play
in the future. Expectations are that more than half of the world trade in coming years will be between developing countries. Dr Mills Soko, a senior lecturer in business at UCT and CEO of research company Mthente Consulting, says while South Africa should not de-emphasise the importance of Western markets, we do need to diversify as it makes economic sense. In an interview with TradeInvestSA, Soko said it was important for South Africa to manage its relationship with China. “It provides a wonderful opportunity for African countries to extricate themselves from the economic mess. The demand from China will however reach a saturation point, it won’t be there forever, but it does provide a great window of opportunity.” He agrees that South-South trade is a good thing to pursue saying that infrastructure development has been on the increase throughout Africa thanks to Chinese investment. “Of course there is self-interest there, but I think it is a practical manifestation of South-South cooperation. It’s not only trade, but financial cooperation and infrastructure development.”
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OCTOBER 2009 | 15
Innovation is key as imports plummet by 50% No upturn expected this year – it’s still survival mode By Liesl Venter
T
he global economic downturn has impacted heavily on Gauteng importers especially where non-essential products are concerned. According to Marcela Irimescu of Klaus Klein Exclusive Designs, an importer of products from the Far East, the economic crisis saw volumes drop dramatically, while in many warehouses products were gathering dust as no one was buying. Smaller companies have been particularly vulnerable, having to find innovative solutions to continue trading. “It has been very slow going for retail since the end of last year – in fact our imports of sanitary ware this year (for stock) are at least 50% less compared to the same period in 2007.” The company imports customdesigned sanitary ware and home products for the building industry from China. Designed in South
Africa by Irimescu and her team, the custom-made modular bathroom units, steam showers, massage baths and other products are manufactured in China and shipped to South Africa. In fact there was such a dramatic decline in business that the company decided to scale down its showroom and upgrade its website. “We started off selling to wholesalers but this has since been reversed to the online market.” And to compensate for the tough economic climate they have taken to importing and exporting directly to the West African market. “The market for our specific products as well as others in South Africa all but dried up, forcing many importers to turn to other avenues of business to make up the loss in revenue. “People have been very cashstrapped and in the building industry we saw a remarkable slowdown, with deals sometimes taking months to be concluded.”
She said in some instances interest was shown as early as March, but products were only purchased in August. “I don’t believe we will see an upturn this year for the retail sector. It is more likely that we will see the volumes only start to increase early next year. “Consumers either don’t have the credit or are just not spending money at present unless it is on essentials such as food.” She says the company is targeting projects for the supply of sanitary ware and hotel furniture for new hotels as well as for the revamping of existing hotels in the run-up to 2010, while also looking at ways of increasing its exports into the African market. “We have found the manufacturing in China to be excellent and have a good relationship with the shipping lines and transporters bringing our containers in. It is all about being creative in difficult times.”
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16 | OCTOBER 2009
MOL confident that recession is on its way out Rate restoration will continue By Ray Smuts
A
s the world claws its way out of the worst recession in 50 years and encouraging signs emerge of slow but sure economic recovery, shipping lines continue to hurt on all trades – and the pain is clearly not over. The past year has been underscored by numerous rate increases of one kind or another to keep the lines afloat. Mitsui OSK Lines (MOL), a dominant player on the Europe/West Africa/Far East and East Coast South America trades to and from South Africa, is no different from its many competitors – it’s really all about survival. The Japanese shipping giant, the world’s largest in terms of global fleet of all ship types, has already deemed it necessary to impose three increases relating to emergency bunker and heavy cargo surcharges as well as a general rates restoration (GRR) on Asia/South Africa cargo between August 12 and September 1 and a further GRR of US$200teu on the same trade from October 1. Increases have also been imposed on the strong South Africa-Asia leg over the past three months. That is not where it ends, however, so shippers be forewarned. In conversation with FTW last month, ironically the first anniversary of the collapse of Wall Street’s Lehmann Brothers, Hirohiko Okada, director for MOL South Africa and responsible for trades into and out of Southern Africa, makes clear further rate restoration is a certainty. “The rate level has declined rapidly, by more than half since 2008, and without seeking further increases we cannot survive or serve the customer,” he says simply. Many carriers have removed a lot
Ships sailing almost full. of capacity in South Africa and also most global trades as unsustainable freight levels and lower cargo flows have made this a necessity for survival. Of concern, too, is the price of oil, presently hovering upwards of US$70 a barrel, which may well give rise to further MOL bunker increases. Quizzed on the outlook for the year ahead, Okada believes the global recession is on its way out. “We are at the turning point and foresee volumes picking up between South and West Africa and Asia.
“Our ships are almost full, exports from South Africa to China having improved dramatically in recent months. Imports from Asia are less strong but continue to improve and NPA statistics for August showed a welcome national 12% increase in import flows month on month.” While MOL’s Asia/South Africa/ West Africa business remains key, the ongoing aim is to introduce further services between South/West Africa and Indian Ocean Islands to Asia. MOL’s current fiscal year ends March 31, 2010, and Okada is hopeful
this will signal the beginning of better things to come. “This has been a difficult year for MOL but it’s time for an improvement and we expect to recover from next year onwards.” Youthful-looking Okada – he’s actually 42 with a son of 15 – is a graduate in international law and joined MOL 18 years ago. He has worked in many different devisions since then, including car carriers, business process systems, financial and accounting and trade management, his current portfolio.
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