Hong Kong is a key global hub for the logistics sector, shipping goods by sea and air around the world. A year on from the beginning of the Covid-19 pandemic, how has the industry been affected and what is the longer term outlook?
George Edmunds, General Manager Cargo Commercial at Cathay Pacific Airways, noted at a Chamber webinar on 19 January the huge impact of the pandemic on airlines, with Cathay’s passenger level at around 9% of normal. This has affected the cargo segment, because about 50% of cargo is normally carried in the bellies of passenger aircraft.
“Overall, we lost 14.5 million tonnes of capacity in 2020,” Edmunds said.
Global air trade dropped by 11.2% in 2020 compared with the previous year, however, one exception was Mainland China, which actually saw a 6% increase.
The types of goods being shipped throughout 2020 reflect the lifestyle changes brought by the virus, he added: “People across the globe were adapting to the new work-from-home environment, so we saw an increase in sales of laptops and other high-tech goods like speakers.”
To increase capacity, airlines removed the seats from some passenger planes when it became clear that the pandemic would not be over quickly. However, despite the efforts to find more capacity, the overall total air cargo trade was still below 2019. And while there are hopes that travel will start to recover this year, Edmunds does not anticipate a return to normal for some time.
He explained that companies have been using data to forecast the path to recovery: “In every single scenario, the passenger network will not have recovered to anywhere near 2019 levels by the end of 2021. Vaccines, testing and the ability of people to travel freely is going to take time to rebuild.”
Without a return of passenger travel, cargo capacity will remain constrained. But besides capacity issues, the pandemic has had a broader effect on the air freight sector.
“The major impact is that we have been exposed to risk in ways we never expected,” Edmunds said. “In the past, we made business continuity plans in the hope they would never have to be used. In reality, we have all had to use these plans, and learned a huge amount over the course of the year about how to cope with the challenges.”
Looking forward, it is not just pandemics that companies will have to plan for, with other risks including climate change, trade tensions and social unrest. Edmunds expects to see more diverse and robust supply chains, more digital enhancements and more automation in the future.
Looking beyond 2021, however, the picture is brighter. Demand is expected to continue to recover, and the e-commerce sector is still growing rapidly, he said.
Angelina Lei, Customer Service Director of Hongkong International Terminals, considered the outlook from the shipping perspective, noting that the maritime sector handles 80% of global shipments.
She introduced the Hong Kong Seaport Alliance (HKSPA), which comprises the four companies that jointly operate the 23 berths at Kwai Tsing Port, and has enabled them to improve the terminal’s efficiency.
“This has helped us ride out the volatility brought by the pandemic,” Lei explained. “In 2020 we managed to maintain our overall volume at pre-Covid levels of 15 million TEUs throughput.”
Lei explained that global container trade experienced a sharp decline of 13% year-on-year in May last year, but bounced back quickly and registered 6% growth in September. Although the official numbers for 2020 had not been released, Lei said she expected a 3% decline globally for the whole year. The recovery has been led by the Asia Pacific, particularly China, and this region is also expected to be the main driver of growth going forward.
“In terms of goods, perishables, high tech and consumer goods grew the fastest and are expected to end the year above 2019 levels,” she added.
Besides the continuing Covid-related disruption, other concerns include the global economy and geopolitical tensions, and Lei expects the industry to continue to evolve.
“A new normal in the sector appears to be taking hold, with moderate growth, flexible supply chain restructuring, a larger role played by technology, and an accelerated need for a sustainable agenda,” she said.
Hong Kong will continue to be a key hub for maritime trade due to its location, links to Mainland China and efficiency, Lei said, noting that, despite the disruption to shipping schedules in the past year, Hong Kong has continued to be able to quickly berth vessels. And amid congestion and closures at other ports, Hong Kong has offered capacity to other vessels, and in 2020 handled more than 450 unscheduled calls.
However, there is still room for improvement, such as through increased digitalization. In fact, the pandemic has helped to spur the industry’s technology upgrade.
“In the past, for us to push digitalization has been difficult, because we are in a very fragmented market and some of our customers have been reluctant to change,” Lei explained. “For example, when we implemented electronic release orders, some people were very hesitant to use them. But now, with social distancing and minimising human interaction, shipping lines and end users are more welcoming of these measures.”