2015 looks set to be a strong year for the freight sector in South Korea.

Incheon International Airport recorded a total international air cargo volume of approximately 2.56 million tonnes in 2014, a year-on-year increase of 3.8%. Export volume rose 3.9%, while imports rose 3.6%.

“The rise in volume was led by increases in the Americas, China and Europe,” says Byung-Kee Lim, deputy executive director of the Airport City Development Group at Incheon International Airport Corporation. “In particular, express cargo has seen an increase of 44% year-on-year to 68,905 tonnes.”

Also notable, says Lim, was the recent rise in the volume of fresh goods being handled at Incheon. For the past three years, it has been increasing by about 19% annually, but in 2014, there was a growth of 28%.

One of the biggest players at Incheon International Airport is Korean Air, whose cargo division operates a dedicated freighter fleet comprising nine B747-400Fs, eight B747-400ERFs, five B747-8Fs and five B777Fs.

“In 2014, Korean Air recorded 1.43 million tonnes, which is a 5% increase from the previous year’s performance,” says ___, at Korean Air. “The biggest contribution was from the US as the economic recovery led to robust regional demand in air logistics.”

But it’s not just air freight that has been experiencing growth in Korea. Stephen Ng, director of trades at OOCL, says that the shipping line has developed some successful Asia-Europe and trans-Pacific trade services that call at the ports of Pusan and Kwangyang.

“Just recently, in January, we introduced a new intra-Asia trade product, called the New North PRC/Pusan/Southeast Asia service, or NPS, to cater to the demand and requirements of our customers” he says. “Moving forward, we will continue our efforts to enhance our services and strengthen our product portfolio involving Korea.”

Freight forwarder SDV has also performed solidly in South Korea. “SDV Korea’s activity has been growing as expected, and the scope of services that we are able to provide has increased,” says Thibault Janssens, managing director of SDV Korea. “The company has also strengthened its leadership position on the Africa route.”

Incheon is an important air freight centre. Opened in 2001, the airport now serves 26 cargo carriers flying 84 cargo routes across the world.

“We have a geographical advantage of diverse routes servicing Japan, with five cities, and China, with 11 cities,” says Lim. “We are in a very favourable position to develop as an air cargo hub.”

One significant part of the airport’s cargo operations is the transhipment business. Since its opening, Incheon has achieved a 46% transhipment rate, according to Lim. “This shows that despite its short history, Incheon Airport has faithfully fulfilled its role as Northeast Asia’s logistics hub,” he says.

Transhipment cargo accounted for 1,039,376 tonnes in 2014, a 1.6% decrease compared to 2013. The volume of originating cargo was 525,961 tonnes, while the volume of cargo destined for Korea was 513,415 tonnes.

Lim notes that there has not been much of an imbalance in East-West and West-East cargo volumes.

“The imbalance is not that profound because the transhipment cargo volume is so huge,” he says. “We have a large import volume of consumer goods and we’re also home to huge volumes of express cargo originating from the Americas and Europe.”

For routes where this imbalance is larger, says Lim, the airport is teaming up with airlines and forwarders to conduct joint domestic and overseas marketing in order to attract more shippers to send cargo by air.

Directional imbalance in lanes between the Eastern and Western hemispheres is a “chronic challenge” for air cargo carriers with one-way trips such as Korean Air, says ___. “In the case of Asia-US and Asia-EU lanes, such an imbalance gap is gradually being alleviated,” he says. “Korean Air is putting in a lot of effort to overcome this structural challenge by developing untapped markets from Europe and the Americas based on in-depth market analysis.”

In the year ahead, Incheon will have to find ways to grow its cargo business. “The main challenge for us is that cargo volume has become more or less stagnant in recent years,” says Lim. “As far as that is concerned, we are attempting to attract more express cargo and fresh goods as strategic items in order to increase cargo volumes and diversify cargo items at the Airport.”

This growth is particularly important if Incheon is to stay ahead of its regional rivals. “The development of large airports within Asia can be a potential threat to Incheon Airport maintaining a long-term competitive advantage,” says Lim. “Another worrisome factor is the deterioration of profits as competition between and amongst airlines and forwarders becomes fiercer.”

Competition presents a major challenge to shipping lines like OOCL too. “With many strong container shipping players in the Korean market competing for customers with very high demands for service quality and reliability, the competition is quite fierce for market share,” says Ng.

This competitive nature is partly influenced by Korean culture, according to Janssens. “South Korea is a very competitive country in all sectors and this starts from the school system,” he says. “South Korea’s customers expect more competitive rates and more flexibility, reactivity and availability than customers in other countries.”

Despite that, Janssens says that SDV Korea still expects to perform well in 2015. “That’s thanks to a diversified customer portfolio with a deep focus on quality,” he says. “The company also expects to benefit from previous years of investments in human resources, as well as external quality and security programs.”

As for Incheon, Lim says that the airport is expecting a modest increase in international air cargo volume by around 3% in 2015, which is in line with a projected 4% growth of South Korea’s total trade volume.

That growth will come from a variety of products. “Apart from strong performance of main goods such as semiconductors and electronic devices, we expect a continuation of the rapid increase in fresh goods, with around a 20% year-on-year increase,” says Lim.

Another contributing factor will be the rise of e-commerce. “This accounts for more than half of all express cargo at Incheon Airport,” says Lim. “The recent trend of an explosive increase in both e-commerce volumes and the number of items traded under e-commerce is expected to continue in 2015.”

 

By Jeffrey Lee

Staff Writer | Hong Kong