The global logistics industry is going through an uncertain period. The US has so far borne the brunt of an economic slowdown which shows little sign of abating. Europe has proved more resilient, although consumer and manufacturer confidence is dropping. It has fallen to the Asia Pacific market to continue to drive forward growth rates which have proved, to date at least, to be extremely resilient. The question is, will that last?

Many economists believe the Chinese economy is set for a slowdown in the next few years. However, the true extent will be very difficult to gauge as any accurate forecast depends ultimately upon calculating the true nature and depth of the US recession. It also depends a lot on structural issues in China. However, recent forecasts have downgraded growth of the Chinese economy to around 9.7% to take account of that. Inflation is presently about 7.7%, down from a 12-year high in April of 8.5%. The pressure on food and fuel prices will have implications for the whole economy.

Japan, still the largest economy in the region, has for more than a decade been rooted firmly in an economic rut and although there were signs that it would finally return to higher levels of growth, that has not materialized. Gross Domestic Product (GDP) growth is set to be around 1% for some time, although inflation is not something the country needs not to worry too much about.

Of the newer emerging economies, Vietnam has been one of the region's great success stories and as a result of opening up its markets has experienced average annual growth rates of 7.5% over the past ten years. However, the economy is now suffering from more financial instability than China, with inflation running at 25% and the Vietnam Dong depreciating significantly. Despite that, the country continues to attract outside investors and foreign direct investment has leapt over the past year from $4.4bn in the first five months of 2007 to $15.3bn in the same period this year.

South Korea, once one of the Asia ‘tiger economies,’ is also faced with inflationary pressures, although not to the same extent as in Vietnam. Rising food and fuel prices have led to inflation increasing to 4.9% and economic growth is expected to be affected — falling to 4.4% in 2008. However, trade growth is strong (around 14%), and new bilateral free trade agreements, including one with the US, could see it grow further.

From this summary, it could be said that the macro-economic outlook for the Asia Pacific region is mixed. A major factor for growth prospects will be the future level of commodity prices. If, as some economists predict, they flatten out in 2009 and then slowly reduce, inflationary pressures will fall and stronger economic growth will return.

To obtain some further insight into the future, it is worthwhile looking at how the major Asia Pacific freight and logistics companies are performing at this time.

The first quarter 2008 figures from Singapore-based global transportation and logistics group Neptune Orient Lines (NOL), which owns container shipping line APL, saw revenue grow by 27% to $2.41bn whilst EBIT jumped 114% to $137m.

NOL's figures showed that although transpacific trade into the North American west coast was depressed, volumes out of the US and into the east coast were buoyant, as were China-Europe and transatlantic traffic flows.

In the same quarter, Japanese shipping line NYK Line also delivered good results, helped by its bulk shipping business. Demand from China for coal and iron ore remained greater than the shipping sector's ability to deliver it, resulting in a 73% jump in operating profit.

Slightly more surprisingly, container trades also proved to be strong for NYK, producing a 21.4% increase in operating income. NYK hinted that uptrend was driven by the strength of Asia- Europe traffic rather than the transpacific market.

MOL, another Japanese shipping line, reported quite similar market conditions, with routes other than transpacific sectors driving up its container traffic. Bulk cargo volumes and automotive traffic were also very strong although profitability was hit by much higher fuel prices. The picture painted by ‘K’ Line was very similar, with strong demand for bulk commodities such as iron ore and coal, as well as car transport, supported by the continuing strength of container trades other than the falling transpacific market.