November: APA Market Update

Ocean Update

Hamburg Süd is continuing to make capacity adjustments on services from Asia to North America, Europe and the Mediterranean to better align with demand fluctuations. Unfortunately, this means some sailings will be blanked in the run up to the New Year. Full details can be found in our customer advisories: Advisories | News & Advisories | Hamburg Süd

Our overall goal remains to provide customers with predictability and to ensure minimal disruption to their supply chain by supplying alternative routings and coverage for the affected vessel positions. Further information about the latest changes is available here: Advisories | News & Advisories | Hamburg Süd

Changes in market demand also means we are suspending our TP23 service between Asia and the US East Coast while also adding a Charleston call to the TP17 service. The last vessel operating TP23 is Ian H that departed Tanjung Pelepas on November 23, while the first TP17 vessel to call Charleston was Axel Maersk with an ETA Hong Kong on November 27. We will continue to offer full-service coverage to minimize the impact on our customers by securing alternative connections on our other Transpacific services.

Vertical Insight: Retail

The retail lifestyle sector is facing mixed fortunes with a weakening global growth trend and growing inflationary pressure but also seeing resurgent consumer confidence in the US and Europe, according to several recent reports.

Highlighting the pessimistic outlook, global GDP growth is set to slip by 0.4% between 2020 and 2023, according to the Conference Board Global Economic Outlook 2023. That comes as inflation worsened in October in key markets such as Europe, which saw inflation rise to 9.9%, and China, with an increase of 2.8% while holding steady at around 8.3% in the US, data company Trending Economics said. Underlining the additional challenges facing China, the country’s National Bureau of Statistics said Q3 GDP growth topped 3.9% compared with a full year growth target of 5.5%.

But some retail and lifestyle sectors were more optimistic about prospects with supermarket and grocery retailers in the US expected an 8.5% compound average growth rate in Q4 monthly revenues, according to a report by the Chain Store Guide. This was due to less economic impact on staple grocery items.

Pharmacies and drug stores also expected a near 5.5% rise in monthly revenues in the fourth quarter as consumers had a renewed focus on health.

Clothing stores expected monthly revenues to remain flat in Q4, while restaurants expected to see a 4.4% monthly decline, the Chain Store Guide report said. That came as Trending Economics said consumers in the US and Europe were marginally more confident in October compared with the previous month.

Vertical Insight: Lifestyle

Home workouts have exploded in popularity since the early weeks of the pandemic, and the numbers certainly back that up. In China alone, the sales of athleisure wear have seen a 48.5% year-on-year increase since March of 2020*. Recent waves of Covid-19 and renewed lockdown measures have played their role in keeping these numbers consistently high, thanks to an increased focus on personal wellness and athletic activities among people of all ages.

Source: China Daily

Additionally, while Asia-Pacific has always been a manufacturing hub for sporting goods, the presence of global and local brands is growing rapidly in the region, helping it blossom into a viable market as well. The sports and outdoor equipment market in Asia-Pacific is projecting a compounded annual growth of 9.4% over the next 3 years*, and the potential of the region is undeniable.

Asia-Pacific’s position in the global economy has been growing and changing significantly over the past few years, particularly in its role as a manufacturing powerhouse. For instance, the sportswear market in Asia-Pacific alone was worth around USD 190 billion in 2020, a number that is expected to swell to almost USD 298 billion by 2025. Research by Global Data forecasts that the region is predicted to surpass both North America and Europe over the next decade. In that time, Asia-Pacific is expected to make up almost 36% of the global sportswear market, with numerous countries already contributing to this growth story.

Source: Global Data

As a longstanding production hub for international brands, China has had a huge role to play in Asia-Pacific’s sportswear boom. A report from e-commerce giant JD.com found that sports apparel sales in the country saw a 220% leap between 1 March and 7 April of 2022, during a fresh wave of Covid-19. The yoga equipment segment went a step further, witnessing an astounding average growth of nearly 700% during the same period*. Northeast Asia has seen certain trends of their own.

For instance, the demand for indoor exercise equipment in Japan went up by 21% in the months following the start of the pandemic*. Meanwhile, South Korea has seen a remarkable 169% rise in bicycle-related gear*, as people have gravitated towards more individual non-contact athletic activities in a post-Covid world.

Source: JD.com & Market Prospect

The sportswear sales numbers are very encouraging, with growth expected to continue at about 7.5% over the next 5 years in emerging markets like the Philippines and Vietnam*.

Source: McKinsey

A rapidly maturing digital ecosystem is one of the major factors behind the upward trend of health and wellness in Asia-Pacific. A McKinsey report from January of this year found that over 45% of sporting good sales in 2021 were made through online channels – even after lockdowns had eased up in various parts of the world. Around 75-80% of consumers intend to continue using online channels to discover new fitness programs, and to buy any new sporting equipment they may need.

Source: McKinsey

Inland Services Update

Greater China: Hamburg Süd has launched two new rail corridors from Changsha and Yueyang to connect three ports in South China - Yantian, Shekou and Nansha. These new links provide an alternative to traditional trucking for our customers in Hunan province. The weekly services have a transit time of 3-4 days.

Warehousing operations in Mainland China, Hong Kong and Taiwan remain normal despite the COVID-19 situation.

Customs data show that from January to August this year, Shandong Province exported electric blankets of 59.223 million yuan, a year-on-year increase of 58%; The number was 626,000, up 45% year on year. Among them, exports to the 27 EU countries reached 11.361 million yuan, up 26.5% year on year.

According to data from the General Administration of Customs, from January to September 2022, the cumulative total import and export of automobile nationwide was US$183.33 billion, a year-on-year increase of 10.8%. Among them: the import value was 68.45 billion US dollars, a year-on-year decrease of 7.5%; the export value was 114.88 billion US dollars, a year-on-year increase of 25.7%.

Japan and Korea: The trucking industry is under pressure from fuel cost increases, although capacity is stable. We expect a traditional peak season ahead of the New Year holidays.

A cross-border sea-rail service from South Korea and Japan to Europe via Central Asia and the Black Sea area was launched in November which provides Hamburg Süd customers with simple processes, consolidated documentation with one Hamburg Süd B/L. The current frequency is one train a month. The main ports served are Busan and Incheon in South Korea and Yokohama, Nagoya, Kobe in Japan.

Philippines: Typhoon Nalgae hit the country in early November which halted port operations for 48 hours in Manila, Batangas and Subic, and caused berthing delays for vessels. The recovery of operations is ongoing.

Economists predict that weaker external demand will weigh on the Philippine economy in 2023, although in the short-term, domestic demand will be sustained on the back of further reopening of the economy.

Hamburg Süd continues to enhance its omnichannel-fulfilment capabilities in the area, by adding a 100,000 sqm warehouse in Calamba, Laguna. The ground-breaking ceremony was held on November 9, 2022, and the new facility is expected to be completed by the end of 2023. The facility will integrate LF Logistics’ key service offerings into Hamburg Süd’s product portfolios. It will have a 75,000-pallet storage capacity with state-of-the-art distribution centre technologies. It will meet the needs for retail, pharmaceutical and E-Commerce customers.

Thailand, Malaysia and Singapore: Recessions in Europe and North America are starting to bite with volumes dropping by between 25-30%. Less-than-container load operations are not being hit quite that hard yet because the main commodities are FMCG/Lifestyle/apparel rather than big ticket items such as white goods, electronics and garden furniture. But co-loaders are telling us they are doing really well with an increase in bookings from freight forwarders. There are no restrictions on space nor equipment.

Indonesia: Inland volumes have been depressed for the last three months. The biggest impact has been on inland export volumes which have fallen due to a drop in orders from international buyers. We expect there could be a short rebound in volumes due to the pre-Christmas peak season. Trucking capacity is healthy.