Investments Still Continue Even With Shipping Slump

As global trade and shipping figures continue to decline, investments into the freight sector continue. Logistics providers hope faster and cheaper routes, will help turn this slump around.

In Asia, DHL initiated an extension of its road freight services linking the previous network of Singapore-Malaysia and Thailand up with Vietnam and China. The company will now provide its less-than-truckload service across all five nations. This should greatly reduce the time it takes for goods to reach their destination.

Much has been made of the transport infrastructure gap in Asia, and the multi-billion dollar net drag it has on regional trade. Under-investment, bureaucracy, security issues and terrorism all combine to mean that sea transport can be expensive and time-consuming.

With ocean freight shipping, it typically takes cargo 13 days to travel from Shenzhen in South China to Bangkok. DHL says its new service will do the same distance in just 5 days. Even though air transit is quicker, only 4 days on average, it costs significantly more money.

Charles Kaufmann,  the head of operations for global freight forwarding at Asia Pacific, says that the expansion was designed to coincide with the development of China’s One Belt, One Road project, which will create new land and sea routes across Asia and Europe.

One Belt, One Road is expected to strengthen cross-border economic ties in markets between Europe and Asia. This should have a positive effect on the potential trade expansion in the region. Logistics plays a key role in infrastructure building and with the reported infrastructure gap in Asia, DHL sees great potential in moving industrial projects and other cargo as infrastructure investments in the region grow.

Although, the shipping slump still continues. This week, shipping giant Maersk announced a 7.3% drop in profits. The company blames the loss on the lower freight rates on the Asia-Europe trade flow. In a statement, Maersk said: “We expect the market to remain weak. We expect, with continued over-capacity, the rates will remain under pressure. We expect global container demand in 2015 to grow by 2-4% against a previous expectation of 3-5%.”

The Port of Hamburg this also announced that seaborne cargo was down 6.8% over the first half of 2015. Overall, container shipping from Asia to Europe was down 20%, indicative of the wider trend in global trade and exports.

So what do you think? Will these new shipping routes help turn this slump around?