As circumstances change, it may be time to widen the conceptual scope of the intra-Asia trade
 No one, but unsung visionaries 20 years ago thought Asian goods would go through the Suez Canal for delivery to the east coast of North America. Twenty years ago only a few thought of doing the same via Panama.
Today it is commonplace and unremarkable, and these east-west trade routes have been long established. Perhaps it is time to think of the sprawling, high volume, low value intra-Asia trade as ready for such radical change.
Drewry, London's venerable maritime research house, now sees the intra-Asia trade as spanning a global surface from the Middle East to New Zealand. Why not a step further? What if one were to enlarge it to include east Africa and the west coast of South America?
While South America is a bit of a stretch today - literally - Africa is already being included by major intra-Asia players like Hong Kong's Gold Star Line. What induces us to widen the intra-Asia's trade scope in considering such an expansion are the trends currently in play that indicate such a direction.
The intra-Asia trade corridor is the fastest growing trade and represents 25 per cent of Asia’s total of US$6 trillion annual exports. For instance, intra-regional trade with China now accounts for more than 37 per cent of the Association of Southeast Asian Nations (ASEAN) total trade.
The drivers of this growth are varied. At an institutional level, bodies such as ASEAN are helping to further regional economic integration. Member countries have recognised that a large part of their future economic growth is dependent on increased economic and trade cooperation with emerging and developing economies.
This would include Africa today, and as prosperity grows in the world, it is fair to say the west coast of South America can be included in the relatively short term.
Dr Mark Yong, business development director for BMT Asia Pacific, said the emergence of bilateral trade deals between individual countries in the region reinforcing existing agreement such as the ASEAN Free Trade Agreement (AFTA), is evidence of this.
Trends in China are also accelerating regional economic integration and boosting intra-regional trade. Rising prices and shortages of skilled labour in China are encouraging companies to expand their production to other parts of Asia, such as Vietnam, Indonesia and Cambodia.
Dr Yong said more production of low value goods is being relocated to these countries, while high value goods are still predominantly being manufactured in places such as China due to better infrastructure and sourcing factors. However, this diversity places new demands on supply chains that require close integration of suppliers and production networks across the entire region.
As Drewry sees it, intra-Asia trade encompasses container business moving between Saudi Arabia and New Zealand on an east/west axis.
Many ocean carriers include Middle East and Australasia, though Drewry's top analyst Neil Dekker cautions that the situation is governed by different supply and demand factors and the Asia-Mideast trade has become a major east/west route in its own right.
Also affecting the growth of this trade - but with less impact on container volume - are China's growing imports of raw materials from its neighbours. More relevant to the box trade is the shift of the manufacture of low-cost items such as footwear and toys to Vietnam, Cambodia and Myanmar.
Such new supply chain trends help change carrier routings and impact on future port developments.
The intra-Asia trade is a combination of regional local business as well as feeder traffic and often the two become mixed. Drewry has stripped out this business and identified the regional traffic, but has also analysed the separate importance and influence of the huge feeder market.
India is also a major factor since so many intra-Asian services are now extended west of Singapore to encompass this market not to mention the gargantuan size of the opportunity the subcontinent presents.
Another change noted in the intra-Asia trade is the increasing volume of goods going to end-users via e-commerce within the region versus destinations in other parts of the world.
Intra-Asia trade will increasingly benefit from the rapid growth of consumption in Asia as a higher percentage of cargo is shipped to end markets.
That was a key conclusion of an IHS Global Insight report, which also highlighted the growth of e-commerce in the region and its impact on the development of logistics infrastructures.
“China and India’s share of world consumption is set to rise from 12 per cent in 2016 to 27 per cent by 2035, said IHS economist Rajiv Biswas. “We’re also going to see very rapid growth in consumption in emerging Asian markets over the next two to three decades, with Asia Pacific consumption as a share of world consumption forecast to rise from 27 per cent in 2016 to 39 per cent by 2035.”
These figures translate into rapid growth in the intra-Asia containerised trade, which is forecast to grow at 5.1 per cent per year to 2018. Total containerised trade in East Asia is forecast to rise from 25.9 million TEU in 2014 to 31.6 million TEU in 2018.
The link between rapid growth in consumer spending and online sales will be a primary driver of growth in cargo transportation and logistics services in the region, particularly in China and India, said the report. The Chinese e-commerce market is already the largest in the world, having overtaken the US, with an estimated 400 million Chinese consumers already buying online.
Chinese online retail sales of goods and services in the first quarter of 2016 reached US$158 billion, up 27.8 per cent year on year, driving rapid growth in China’s logistics industry. The Indian e-commerce market is also growing rapidly, with e-commerce sales estimated to have risen tenfold over seven years.
In southeast Asia, e-commerce is also growing rapidly, buoyed by the rapid growth in the size of the middle class. IHS Global Insight forecasts that Indonesia will grow at about five per cent a year over the next decade, with GDP forecast to reach $3.8 trillion by 2030, up from $930 billion in 2016.
“The Indonesian ecommerce market is already estimated to be worth $6 billion in 2016, dominated by online sales to Indonesian consumers for travel-related spending, notably on airlines and hotels,” said Mr Biswas.
Supporting the expansion of consumer spending will be the development of more manufacturing in the region, with southeast Asia set to continue to enjoy growth in the lower-end manufacturing segment, including products such as garments and electronics, much of it at the expense of China.
“China’s rising wage costs make it difficult for coastal provinces to compete at the lower end of the manufacturing sector,” said Mr Biswas.
“This is an inevitable consequence of becoming a middle income economy, but China’s manufacturing sector is also shifting towards more complex products.”
With projected growth of 7.5 per cent per year to 2020, India will be increasingly important in terms of the region’s GDP growth.
“A key objective of the Indian government’s focus on infrastructure and manufacturing is to boost the manufacturing sector share of total GDP,” he said. “This is currently just 15 per cent in India, well below that of East Asian countries including South Korea and China, where the share is about 30 per cent.”
A major player in this trade lane is Hong Kong's Gold Star Line, a ZIM unit, which has now extended the intra-Asia concept to Africa. Like Asia, Africa is cell phone savvy and e-commerce rates are soaring.
Long stagnant economies are being revived with sales of horticultural produce to Europe from East African and oil to China and the world from West Africa not to mention China's extensive Belt and Road projects that enhance connectivity and increase consumer spending.
Gold Star is operating a weekly rotation providing a direct connection between China, South East Asia and South Africa. Its SA1 service will have a 63-day rotation comprising eight 3,300-TEU vessels with intermodal services to inland, primarily via Durban, provides direct access to agricultural and industrial regions of the continent.
Gold Star is keen to develop a growing demand for fresh fruit from South Africa to the Asia. Reefer services will be provided for this trade with Hong Kong as a direct port of call, said Gold Star managing director Danny Hoffmann.
One can see this time as analogous to early days - 15 years ago - when the Port of Savannah began marketing itself as an Asian import gateway, much to the amusement of those who thought such an idea was preposterous. It was a time when all thought that the US west coast was the only way to access North America from Asia. And then, the even more incredible, was the utilisation of the Suez Canal, which inched its way into being through the use of wayports to deliver cargo to the east coast of the Americas.
Now it is time to consider a similar radical development in the intra-Asian sphere, now the biggest, but still the poorest of the major trades. With hinterland incomes rising fast, China's Belt and Road projects creating the basis of new supply chain economics, the way is open to view a much expanded intra-Asia trade.
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