Travelling through Asia makes one realise how small the world really is. The economic crisis in Europe and the slow recovery in the US are impacting the Asian economies to an extent that the Great Recession did not manage to do.
Japan has confirmed that it has entered an economic recession. Its overseas markets have pushed export-driven industrial production and GDP down.
Singapore cut its 2012 growth forecast to 1.5%, the lower end of its target range, as the economy shrank faster in Q3 than had been estimated. The forecast for 2013 is more pessimistic with even lower estimates.
The Singapore decline was also driven by sharp reductions in the export orientated manufacturing sector.
China has also found it difficult to maintain momentum. Its economy is stumbling with growth rates reduced as the domestic sector cannot make up for the downturn in the export side.
Let there be no doubt, the root cause of the global malaise is due to the premature and excessive fiscal austerity measures in Europe. The post 2009 recession growth was choked off before it had a chance to gain a decent foothold.
The repercussion of this is seen in the container transportation sector where over-capacity continues to create volatility in freight rates as well as in profitability. The port and terminal sector is also seeing weakness creeping in as volumes of containers handled is flat or even declining.
In Europe, Rotterdam has been the first to announce further discounts to ship operators, on top of the existing ones. Panic or market share strategy?
In Asia the danger of excessive container handling capacity is becoming a reality as well. Vietnam has too much terminal capacity stretched along the Mekong River and China has virtually daily announcements of new ports and dramatic percentage growth rates, but these are often for low volumes.
The real implication of all of this is that we had come to expect never ending growth and industry invested accordingly. The change to a more realistic economic projection remains painful as corporate strategies are slow to adjust.
