This column is jointly written by @fayewang, @gordon_ong and @J_Chou
-Faye is both a fundamental analyst and economist by nature. She is a global thinker who’s open-minded and enjoys learning from the market.
-Gordon has a demonstrable interest in equity investments, financial markets, and negotiating deals. As @NTUInvestmentClub president, he has an understanding of what factors drive an organisation’s success.
-Jay has an interest in global macro trends, financial markets and equity research and enjoys applying a combination of the three in his investments. His eventual investing goal is to manage a risk parity portfolio and achieve true financial freedom.
Together, they are your analysts on demand!
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Picture retrieved from: Transport and Storage Services Industry Infographic
The Logistics and Transportation industry is a key cornerstone of Singapore’s economy, contributing $27.9billion or 6.9% of the country’s GDP. Its strategic location and world class infrastructure meant that Singapore is a leading logistical player in the Asia Pacific region, with World Bank ranking the nation as the No.1 Logistics Hub in Asia in the 2014 Logistics Performance Index. Currently, Singapore is a prime location for major logistics firms, with 20 of the top 25 global logistics firms such as DHL, Schenker, UPS etc. conducting their operations here. Breaking down by sectors, marine cargo is the largest contributor, generating 64.7% of total turnover in the industry followed by air cargo at 17.9% and warehousing and storage at 2.5%.
In 2016, the industry received a further boost from the Singapore government, as the Ministry of Trade and Industry launched the Logistics Industry Transformation Map (ITM) scheme which aims to optimise current logistics systems through more effective resource allocation and leveraging of technology e.g. deployment of federated lockers and cloud based supply chain management. The transformation of the industry is expected to value-add S$8.3 billion, and introduce 2,000 new PMET (professionals, managers, executives and technicians) until 2020.
Source: Logistics ITM Infographic, retrieved from:
Changi Airport is one of Asia’s largest cargo airports and the world’s 15th largest cargo hub by volume, handling up to 2 million tonnes of cargo annually. Global cargo market have been struggling to maintain sustained growth since the end of the global economic downturn in 2009, with air cargo volumes remaining flat due to slower rates of growth in key emerging markets, ongoing currency volatility and the reduce in demand for airfreight. In Asia, Singapore face stiff competition from its Asia Pacific competitors, notably China who has been growing at an annual rate of 13.6% and now dominate 48% of the transpacific cargo market. This has had a negative effect on local air cargo operators, with Singapore Airlines Group subsidiary SIA Cargo being unprofitable for seven of the past eight years, with yields in steady decline leading to consistent losses despite having scaled down on its operations. Nevertheless, recent events may suggest that the situation could be turning around. Changi has reported air cargo shipments rising 6.3 per cent in 2016 and a positive outlook is expected for 2017, and the recent launch of the S$140 million DHL Express South Asia Hub at Changi Airport further bolsters Singapore’s air freight industry.
Statistics retrieved from: SIA Investor Relations Annual News Release 2010-2017
Singapore boasts one of the busiest shipping ports in the world, and its status as a major transshipment hub has long been one of the bedrock of the nation’s economy. However, similar to air cargo, container throughput at Port of Singapore have seen a decline since 2014, with container throughput falling by 9 per cent due to increased regional competition and decrease in international trade amidst uncertain global market conditions. The global shipping industry has also seen a tumultuous 2016, with major Korean shipping line Hanjin declaring bankrupt and a wave of M&A consolidations amongst shipping companies. Recent developments by regional competitors also looks to threaten Singapore’s position. While the Port of Singapore has seen declining container throughput year on year, Malaysia’s Port Klang has seen an increase of 10.8 per cent in container throughput in 2016. Furthermore, China’s aggressive investments into Malaysian ports and rail links under its ‘One Belt One Road’ scheme which includes a new S$14 billion port to be completed in 2019 looks to further threaten Singapore’s position as the main trading port in Southeast Asia.
Despite the uncertain climate, there is still room for optimism as Singapore still holds a competitive advantage in terms of efficiency, security and the infrastructure of its ports. Looking towards the future, the country is improving its technology of its ports and shifting activities away from Tanjong Pagar and Pasir Panjang to Tuas by 2027 to improve competitiveness. The new Tuas port will carry nearly twice the capacity of the current ports, being able to hold 65 million Twenty-Foot Equivalent Units (TEUs) of containers annually, which will make it the largest port terminal in terms of capacity in the world.
Source: Karamjit Kaur et al. “Full steam ahead for new Tuas megaport”
Retrieved from: http://www.straitstimes.com/singapore/full…
Land Delivery and Storage
Statistics retrieved from: Singapore Statistics- Transport and Storage Services
Land based Storage and Warehousing and Postal and Courier sub-sectors are much smaller in scale as compared to their air and water counterparts, with annual operating receipts only constituting 4.3% of industry total. However, unlike air and water cargo, the land based sub-sectors have seen an increase in turnover for the past decade. For postal and courier sector, although traditional postal delivery continues to see a decline in demand, the rise of e-commerce will most likely lead to a steep rise in number of courier deliveries, hence overall turnover should see an increase in the foreseeable future. The warehouse and storage sector has been assisted by the growth in demand from the manufacturing sector but the looming supply glut caused by the introduction of new warehouse space in 2017 and tapering demands due to lacklustre global trading conditions may see a drop in turnover.
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