Author: vietjetair.cargo

The global air cargo spot rate flattened to USD 2.19 per kg in August, its lowest level since the onset of the pandemic as another weak summer month saw chargeable weight edge -1% lower for a fourth consecutive month, according to the latest weekly market analysis from CLIVE Data Services, part of Xeneta.

While shippers and forwarders continue to benefit from the overall decline of general air freight rates, rising jet fuel prices should concern an already contracted market, with the US gulf coast jet fuel spot price jumping 21% month-over-month.

August saw global air cargo capacity rise +7% year-on-year, while CLIVE’s global dynamic load factor analysis, which measures cargo load factor based on both volume and weight perspectives of cargo flown and capacity available, climbed one percentage point about the previous month to 56%. But it is worth noting that the August global load factor continued to fall year-on-year, down 3% from last year’s level. Softened global demand and the capacity surge were the main reasons behind this.

The data dampens some industry reports of a slight spike in demand in August, leading to hopes of a rise in volumes going into the final four months of the year.

“We are picking up signals that it could take another few quarters before we see more demand on a global level,” said Niall van de Wouw, Chief Airfreight Officer at Xeneta.

“August was very quiet, like July, and we see no meaningful signals from a qualitative or quantitative point of view of any kind of peak arising this year. There might be some early peak season charter requests floating around but they are backed up by very little demand. The (low) rates and the limited timeframe that the requestors are looking for signal that they are not too concerned at the moment about getting the required capacity when they actually need it.

“The market seems to have levelled out, but still holds a lot of uncertainty, and not just for airfreight. There was also no peak for the ocean market, which typically precedes the airfreight market by a couple of months. There are even blank sailings scheduled ahead of the Golden Week period.

“There is likely to be upward pressure on airfreight rates in the second half of October as capacity is taken out of the market, but it’s getting late in the game to positively impact the industry’s 2023 performance, and the signals for the rest of the year are not good given the macroeconomic outlook hasn’t improved,” van de Wouw added.

Average general airfreight rates in August dipped as low as USD 2.13 per kg in the first two weeks of the month, although this varies by trade corridor. Of 10 major trade lanes assessed in the past month, only China-United States and Southeast Asia-United States recorded growth, with air cargo spot rates up 3% and 4% respectively on these corridors. This is attributed to a more resilient US economy with strong retail sales and, to some extent, also delayed recovery of US-China passenger bellyhold capacity, which is growing at a much slower pace than Europe-China.

Even so, due to capacity shortage triggered by various geopolitical issues, airfreight spot rates ex Northeast Asia to Middle East & Central Asia, Northeast Asia to Europe, China to the US and China to Europe remained highly elevated, still up by around 55% from their pre-pandemic levels.

Looking forward, the oceanfreight container market might shed some light on where the air cargo market is heading, given that the ocean market tends to begin its yearly peak season a few months ahead of the airfreight cycle. So far, the global ocean container market has not shown any meaningful peak season trends.

“The air cargo industry is coming to terms with the market conditions and not even the current and planned restrictions we see on container ships moving through the Panama Canal are likely to provide a noticeable uptick to airfreight volumes. Whichever way you choose to look at it, demand growth simply does not exist in this current moment or for the foreseeable future. Shippers will no doubt be tempted to fix more longer-term deals because the leveling of volumes and the imminent drop-off of some capacity means the market may not get any better than it is right now for capacity buyers,” Niall van de Wouw said. 

Source: aircargoweek.com

July 2023 global air cargo data shows a continuing trend of recovering growth rates since February with demand tracking just 0.8% below previous-year levels.

Although demand is almost flat compared to 2022, this is an improvement on recent months’ performance, particularly significant given declines in global trade & rising concerns over China’s economy.

Source: International Air Transport Association (IATA)

First appearance since the 1960s, now there are 3500 Free Trade Zone (FTZ) in 130 countries and territories. FTZ plays a role as a closed special economic zone in which goods can be stored unlimited of time, displayed, assembled, manufactured and handled, and traded between companies… under specific regulations with limited intervention by the Customs Government. Understanding these potential benefits, countries have developed many Free Trade Zone to attract export/import goods, especially capital and technology, from which to develop their industry and national economy.

An inspirative story of Costa Rica

The Republic of Costa Rica has many economic similarities with Vietnam, but the country has enjoyed a remarkable growth in GDP and FDI attraction since the late 1990s. That development is due to the emergence as well as the focus on the Free Trade Zones of the Costa Rican government.

According to the statistics from the chart above, it is not difficult to see that the GPD per capital in Costa Rica has been on an upward trend since the late 90s. This is due to the establishment and development of FTZs not only attracts an amount import goods contributing to the GDP growth, but also creates new job opportunities for the local labor forces. Moreover, with the trend of scientific and technical development, the demand for new technology, equipment or materials related to chemistry, physics or applied medicine is extremely great. However, if there are no Free Trade Zones, the establishment of research centers or simply importing goods for related activities also faces many difficulties from traditional management mechanism.

Vietnam has the advantages of a 3,200km coastline and a favorable location in the East- West economic corridor, many locations that can be developed into international seaports, which can help Vietnam fully meet the factors of become a major logistics center. However, facing the current inadequacies in the supervision of export/ import goods, transit cargo, domestic import/ export by the State management agencies. It is possible that we need a new mechanism to restore the current declining output of goods, contribute to attracting investment as well as turning Vietnam into the focus of commodity production in the region.

The reason why Vietnam is behindhand in developing Free Trade Zones.

 The first reason is that the legal corridor for the formation and development of Free Trade Zones has not been regulated yet. The fact that society does not properly understand and clearly distinguish terms such as Non-Tariff Zone, Economic Zone, Industrial Park, Export Processing Zone, Bonded Warehouse or Free Trade Zone according to international definition is also a barrier. This is also the reason why the Free Trade Zone has not been properly recognized in terms of the benefits that come from their impacts from an economic as well as a demographic perspective.

Global minimum tax policy and WTO commitments
The establishment and operation of Free Trade Zones is not only about attracting import and export goods, but also related to the tariff policies of each country and international regulations. The term Global Minimum Tax (GMT) is coined by the Organization for Economic Co-operation and Development (OECD) and is currently an opportunity as well as a challenge for developing economies in general and Vietnam in particular.

Deputy Minister of Planning and Investment Nguyen Thi Bich Ngoc remarked that in response to the global minimum tax policy, Vietnam is studying and adjusting investment policies to adapt to this tax rate and attract new foreign investors. If the global minimum tax policy is applied, all previous and current incentives that Vietnam offers to businesses such as tax exemption, preferential tax rate below 15% will no longer be effective. And obviously this will significantly affect Vietnam’s policies and means of attracting investment.

According to the provisions of the global minimum tax (GMT) policy, any corporation or company with a turnover of 750 million Euros or more will be subject to a tax rate of 15% regardless of whether it does business in any country.

According to KPMG, there have been actions of support from the US Treasury Department for the global minimum tax policy, including raising the federal interest rate to 28% and redesigning the GILTI regime (applied global minimum tax policy in the US).

However, whether the application of the above policy is contrary to the commitments of members when joining the World Trade Organization (WTO) is still an open question. In addition, bilateral and multilateral trade agreements (FTAs – Free Trade Agreements) as well as priority business programs such as (CTPAT, CFS, WLP…) are also aiming to eliminate tariff, non- tariff barrier and compliance processes throughout the global supply chain. Thus, we think that the application of global policies should also be considered from many different perspectives in order to create a balanced and effective international business environment.

Source: vlr.vn

Vietnam’s gross domestic product (GDP) grew about 3.72% year on year in the first half of this year, according to the General Statistics Office (GSO).

The expansion is only higher than the 1.74% recorded in the first half of 2020 during the 2011 – 2023 period, the GSO told a press conference on March 29.
In particular, the agro-forestry-fishery sector expanded by 3.07%; and the industry and construction sector, 1.13%.

Notably, the services sector secured the highest growth, at 6.33%, fueled by domestic consumption stimulation and tourism promotion policies. It was largely contributed by wholesale and retail sales (up 8.49%), transport and logistics (up 7.18%), finance-banking services (7.18%), and lodging and catering services (up 15.14%).

In the agro-forestry-fishery sector, agriculture saw a year-on-year increase of 3.14% in added value, forestry 3.43%, and fisheries 2.77%.

GSO General Director Nguyen Thi Huong said that the growth that the country posted in the first half is not high but major economic balances are ensured, the macroeconomy stable, and inflation controlled at an appropriate level in the context that Vietnam faces many difficulties and challenges both at home and abroad. 

In addition, the supply of essential goods is guaranteed, and goods procurement and domestic consumption promoted. The agriculture, forestry, and fishery sector maintained a stable growth rate, ensuring the supply of food and essential goods. 

The progress of disbursement of public investment capital has been improved markedly, the trade surplus maintained, and social welfare ensured, she said.

Huong added that policies to stimulate domestic consumption and promote tourism have contributed to maintaining the growth of the service sector. Accordingly, the added value of the service sector in the first six months of 2023 increased by 6.33% compared to the same period last year, higher than the increases of 1.18% and 4.53% in the same period in 2020 and 2021, respectively.

She also said that entering the third quarter of 2023, Vietnam will continue to face many difficulties and challenges, including changes in the world’s economy and politics, energy security, food security, natural disasters, climate change, and diseases.

This will pose a big challenge for Vietnam to achieve the growth target [of 6.5%] for 2023, she said./.

Source: vietnamplus.vn