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Changing trade patterns boost intra-Asia volumes

Intra-Asia container trades were the first to be affected by the pandemic but also the first to recover. Demand in the region is now decoupled from that of the main lane trades

Changing supply chains have helped boost volumes between Asian countries and increased demand for feeder services to serve major hubs

CHANGING trade patterns and a move to shift manufacturing out of China have helped boost the intra-Asia trade lane, despite it suffering an early hit from the pandemic.

The trade, the world’s largest in terms of volumes shipped, was the first to show a return to growth following the downturn in global volumes that occurred in the second quarter.

Volumes rose by 1% in June, according to figures from Container Trades Statistics, making it the only region to show any growth in June.

“There is something of a decoupling between intra-Asia and the rest of the world,” BIMCO chief shipping analyst Peter Sand said in a webinar. “This is something to watch out for in terms of changes to global supply chains.

“What we have seen from the outbreak of the trade war in 2018 is changing patterns of imports to the US from Asia, where a number of goods have shifted production from China.”

The pandemic had seen some countries becoming more protectionist of their own manufacturing bases, but this was unlikely to make a material change to Asia’s roles as the factory of the world, he said.

“Will they bring home production to where the consumers are? Only in the case where goods can be produced by robotics and labour costs do not matter, but you cannot bring all the cargoes home.”

But moving production from China to avoid tariffs or to seek out lower labour costs would keep volumes moving in the region. Products that are labour intensive but low value are moving south to Cambodia, Vietnam and the Philippines, as opposed to high-tech products, where production has moved to Taiwan, Japan and South Korea.

This played into volumes, because the main hubs for the main lane trades to Europe and North America were served by ultra-large containerships.

“If, all of a sudden, you see exports out of many minor ports, you tend to have a higher need for feeder services, in order to bring those cargoes into the hubs and then on to the consumer markets,” said Mr Sand. “What we will see is new feeder trade lanes being established with medium sized volumes across the whole Asian region.”

These feeder services had been partially responsible for keeping containership cascading alive during the period of lockdown, Mr Sand said.

“There was concern that this would be toxic for the overall market,” he said. “But we have seen an upscaling in terms of ship sizes trading intra-Asia. This has been running ahead of actual volumes, helping maintain lower freight rates.”

Some services were using vessels of up to 6,000 teu as feeders, he added.

“It was not that long ago that that was a main lane-sized ship.”

But this is also putting pressure on terminal operators, because they need to upgrade their facilities to cater for larger ships going into smaller ports. The intra-Asia trade would likely continue to grow even without external forces.

“Asia has seen a rapid increase in economic activity, that had seen the region grow at a much higher rate than in the rest of the world in the past 10 years,” Mr Sand said.

“There is higher demand generated internally in the region. This is a market with more than 4bn people working and consuming.”

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