Business Bayani PH

In a forecast for the coming year, Dimerco Express predicts a shift in the dynamics of Asian supply chains, foreseeing a decline in rates on block space agreements (BSAs) out of Asia. However, this reduction is counterbalanced by an upswing in demand, as revealed by Kathy Liu, senior director of global sales and marketing at Dimerco Express.

In an article originally published at The Loadstar, Liu highlighted the increased demand for import and export routes in Southeast Asian countries. She pointed out that Taiwan’s exports to the US have experienced a noteworthy surge in trade volume. Additionally, there has been a shift in China’s orientation towards Europe, while the proportion of Taiwan’s exports to Southeast Asia has risen.

Liu expressed confidence in the growth of their business in the intra-Asia cargo sector. She noted that capacity has been rapidly reintroduced into the market, and there have been no reported space issues throughout 2023. 

Liu anticipates that this stability will persist into the following year, contingent on the absence of any unexpected events. Emphasizing the reliability of intra-Asia cargo spot rates, she highlighted their steadiness compared to the fluctuations experienced during the pandemic period.

Anticipating future trends, Liu identified India as a potential hotspot for inbound and outbound cargo in the coming years. Dimerco has observed a trend among US consumer electronic brands, such as Dell, Apple, and HP, diversifying their supply chains by moving product lines out of China. This diversification includes destinations like Vietnam, India, Thailand, and even Mexico.

While raw materials continue to be produced in China, there is a noticeable trend of exporting these materials to Southeast Asia and Mexico for the production of finished goods destined for the US market. Hua Chuang Securities’ report on China’s trade revealed a 15% decrease in exports to the US, Europe, and Japan in August, contrasting with a 15% increase in overall exports to Southeast Asia.

Dimerco, relying on block space agreements with major Asian carriers, acknowledges the return of belly capacity, which increases supply in the market. However, with demand remaining steady, this may lead to a lower rate of BSAs in 2024, aligning with market levels, according to Liu.

Liu noted that the Block Space Agreement (BSA) rate for this year has exceeded initial market expectations. Anticipating an increase in supply in 2024, particularly with the rise in flights between China and the US, Liu expects the BSA rate to return to market levels. She emphasized the importance of basing future forecasts on demand, aiming for a more realistic projection aligned with the actual market dynamics.

Beyond Asia, Dimerco has expanded its US network, completing an investment in BC Logistics to establish a presence in Phoenix. Operations have also been extended in Savannah (Georgia), to cater to the semiconductor, automotive, aerospace, industrial equipment, energy, healthcare, and other time-critical, service-sensitive transport industries.

Liu highlighted the increasing congestion at the US-Mexican border, with carriers deploying more capacity. She cautioned against extreme overcapacity, which could lead to a crash in freight prices, emphasizing carriers’ adaptability in adjusting capacity and service loops to meet market demands.

Responding to the shift from air to sea freight, Dimerco is adopting multimodal solutions. Aligned with China’s Belt and Road Initiative (BRI), the company continues to focus on both cross-border train and road freight, with Liu noting that rail freight is on average 70% cheaper than air, up to 20 days faster than ocean, and can be GPS-tracked more effectively.

In conclusion, Liu observed that rising manufacturing costs in China, high interest rates, conflicts in Ukraine and Israel, and trade tensions between the US and China have prompted consumers to exercise greater caution in their decisions. As Dimerco Express navigates these shifts, the company remains vigilant and adaptable to meet the evolving landscape of global supply chains. ◼