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FEATURE: ASIA'S GROWING MIDDLE CLASS - EXPORTS TO THE EAST - SEP 07
Asia's growing middle class bodes well for exports to the East (FTW interview)
THERE IS some light at the end of the tunnel for the current hugely unbalanced trade with the East.
"Asia is becoming more sophisticated," says Safmarine's Singapore-based regional executive for the region Peter Ehrenreich. "There's a growing middle class in the coastal regions of Mainland China of 350 million people with as much buying power as the entire USA. Over the next decade we will see a strong political push for wealth distribution into the remaining 1 billion Chinese in the inland provinces. We are already seeing imports picking up which is good as the imbalance of containers, export versus import, is a costly challenge."
But rates are always too low in Ehrenreich's view. "Shipping lines are struggling - we all know how the oil and steel price has gone up, which means building containers and ships is incredibly capital intensive - and the oil price is killing us.
"Shipping lines have also had to get used to no longer having the conference systems where prices would be agreed. We embrace the free competition in Safmarine but the shippers do realise shipping lines are really squeezed right now."
Rates have firmed slightly on the Asia - Europe trade, but Ehrenreich describes the Transpacific (Asia to USA) as "very difficult", "with Africa also becoming very competitive.
It's clearly a question of higher volumes with slimmer margins, and for Safmarine the volumes are there - and growing.
"In the first seven months of this year we have grown doubled volumes compared to the same period in 2006 - most of the growth is from Mainland China."
But the African market remains an important one for the home-grown line with brand loyalty, built over decades, continuing to play a key role in this growth. "South Africa was our turf, it is our turf and it will remain our turf," says Ehrenreich - and with a sad smile he admits he misses South Africa every day!
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