On the wires: From the Gartner Hype Cycle to... blood cobalt, hydrogen & more
Alternatives sought
© Khunaspix Dreamstime.
The question on everyone’s lips right now is what this year’s growth figures will show. While IATA is still optimistic for air cargo, with expectations of 5.5%, few others believe the market has that potential. And as capacity floods in with the delivery of more aircraft over the next few months – Cargolux hopes to get its first 747-8 in a month or so, while the 777 production line has ramped up to eight a month – the peak season could be something of a damp squib. It’s miserable out there.
Key air freight customers have also suffered. Over in the semi-conductor industry, revenue is projected to rise 5.1% this year – down from original forecasts of 6.2% growth.
According to research company Gartner, the Japanese disaster has had less of an impact on the electronics market than originally feared, but there could be some damaging affects later this year.
“Friction in the supply chain may impact some production and some surprises may occur…We expect an effort to draw down inventory, which will weaken the semi-conductor market in late 2011 and early 2012.”
PC shipments, according to preliminary figures, grew just 2.3% in the second quarter of 2011, way below earlier predictions of 6.7%. Gartner said: “Vendors …have had to deal with significant inventory build-up, changes to their product mix, and the fact that growth has been coming mostly from emerging markets. Vendors are having to shift resources away from mature consumer markets.”
One company, Acer, saw negative growth of -20.4% as it was forced to clear high levels of inventory.
This uncertainty for shippers brings to mind the age-old debate (and connection) between carriers and their ultimate customers. Both are desperate to put an end to volatility. Carriers need to know what shippers’ plans are. Shippers need to know what consumers’ plans are. Because when one, such as Acer, misreads the market, it turns into a massive inventory mistake that impacts the bottom line severely. The same is true for airlines. A massive capacity mistake will have severe repercussions.
One might think there is little either party can do – other than blame external forces. Or they can act intelligently, and with caution. Carriers can keep a sharp eye on shifting consumer trends (for example, PC shipments in AsiaPacific saw a 9.6% rise in the second quarter, China grew 10.9%, Latin America enjoyed 15% growth. The US saw declines of 5.6% while EMEA – excluding Acer’s figures – saw growth of 3%).
But more crucially, carriers can deploy a little capacity discipline. What happened to that key mantra from 2009/10? Did the profits from the 2010 peak cause industry-wide memory loss about the perils of lack of discipline?
Right now, it seems that both shippers and airlines are being buffeted by changing winds in the world’s economies, consumer volatility and market competition. But that’s not excuse enough. Surely it’s time to take back some control, and exert some discipline? Market share alone won’t keep shareholders satisfied.
(If you’d like to know the air cargo industry’s growth expectations for 2011, check out Airline Cargo Management’s latest figures from its industry-wide survey, which will be available in print and online in mid-August.)
(If you’d like to know the air cargo industry’s growth expectations for 2011, check out Airline Cargo Management’s latest figures from its industry-wide survey, which will be available in print and online in mid-August.)
Comment on this article
Shippers' Voice
July 15, 2011 at 8:03 amHi Alex
I had my own concerns recently (Shippers' Voice Light,28th June) that the optimistic voices on demand growth from carriers and IATA (echoed, coincidentally in the liner shipping sector) did not match some of the key economic indicators coming out last month. Shipping and air freight saw big increases in new orders for ships and planes when the profits started to come in during 2010 which blinded them from medium term reality somewhat. The liner shipping sector has started to cut some services; I suspect it may be only a matter of time before we see something similar in the air freight sector – perhaps you are closer to the sector than I to judge that.
Shippers and carriers do need to get closer together to assess demand and corporate strategies. Sure, mistakes will be made even then, but it might help prevent the boom and bust we keep on seeing, that does nobody any good in the long term.