International trade has been forced to adapt since the financial crisis. In a period of rapid growth and demand, Maersk sparked a spending fury for mega-ships, vessels capable of handling 8,000 or more 20-foot-equivalent container units. This spending spree, combined with a slowdown in global trade, resulted in overcapacity and historic declines in rates. A similar situation exists for airfreight, while there was no increase of airplane orders, the market has suffered from weak demand, overcapacity and rate declines. Only in situations such as the U.S. West Coast port slowdown have we seen demand outpace the market for airfreight.
Capacity needs to match market demand in order for rates to recover. Ocean capacity is slowly declining thanks to scrapping older vessels and industry consolidation. Providers of airfreight are targeting specific industry needs such as temperature-controlled goods and high-value items. It’s likely these measures will be enough to set both markets on equilibrium by 2020. However, shippers may discover other means to meet their needs within the next three years.
The reemergence of the Silk Road linking Asia to Europe, and perhaps eventually the Middle East and Africa, is an alternative to ocean and air transport. As an alternative, rail combined with either trucking, short air, or ocean transport is used. Some opponents hint at political motives behind the Silk Road, but for countries involved, investments are being made in infrastructure such as ports, airports, roads, rail lines and warehousing. By 2020, the Silk Road will have expanded its reach and taken freight from what would have traditionally been moved by air or ocean. In addition, more logistics providers will add Silk Road capabilities as part of their service portfolio.
As global trade evolves, intra-regional trade is on the rise. No other region in the world exemplifies this more than Asia. According to IHS, intra-Asia trade will increasingly benefit from the growth of consumption in Asia as a higher percentage of cargo is shipped to end markets in the region instead of to destinations in other parts of the world. IHS indicates that consumption in Asia-Pacific as a share of world consumption will rise from 27 percent today to 39 percent by 2035. China and India’s share of world consumption is set to double to 27 percent over the next 20 years.
Western countries, such as the U.S., Germany and the U.K., will also benefit from intra-regional trade but remain dependent on global trade.
Even though the IMF projects little growth in global GDP from 3.4 percent in 2017 to 3.8 percent by 2021, globalization will continue to evolve beyond 2020. Intra-regional trade will flourish while trade between regions will be conducted through a variety of transport modes and by way of new technologies. By 2020 and beyond, businesses will utilize technologies to be more efficient as well as collaborative with logistics suppliers.
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