KPMG: Less Trade Growth Ahead

Maersk
File image courtesy Maersk

By MarEx 2016-04-06 22:10:37

Consulting firm KPMG's transportation practice has issued its annual Transport Tracker report on the state of the industry – and, reflecting on the trends of a poor 2015, the group predicts less growth ahead. 

A slowing of emerging market growth (particularly in China) is a main contributor, KPMG says, but more broadly, the firm sees a future of diminishing benefits to globally distributed production. "The new [slow] consensus can . . . be explained as a plateau effect of globalization: Where trade growth has traditionally outpaced GDP rates by a factor of two to three, the ratio has now converged to 1.5x and is expected to remain stagnant in coming years. It now seems that globalization has reached a stage in which supply chains can hardly fragmentize any further as the advantages of offshore production and the subsequent shipping of products to consumers become smaller amid rising salary and transportation costs."

Like other observers, the agency sees continued pain for shipping in a future of slowing trade. For container carriers, with tonnage growth expected to exceed demand growth by one percent of the global fleet this year, KPMG expects rates to stay low, leading to combined operating losses in excess of $5 billion.

Air freight hasn't done much better; volume was up by two percent, but rates have been soft, reflecting the state of global trade and – as in maritime shipping – excess carrier capacity. 

In stark contrast, though, passenger aviation performed quite well in 2015, on the back of inexpensive fuel and strong demand growth of 6.5 percent, well in excess of capacity growth. Average operating margins grew by an enviable eight percent. As airlines unwind hedges and take full advantage of current spot prices for jet fuel, and as ever more passengers are expected to fly, 2016 is expected to be even better, KPMG says.