The Asian Logistics & Maritime Conference (ALM) held on November 7th at the Hong Kong Convention and Exhibition Centre (HKCEC) is rapidly establishing itself globally as one of the “must attend” events for the maritime industry. This the 3rd annual ALM, organized by the Hong Kong SAR Government and the HKTDC in association with the Hong Kong Logistics Development Council, Hong Kong Maritime Industry Council and Hong Kong Port Development Council, drew over 1,500-attendees from 33-countries. The ALM assembled a high profile collection of speakers from around the globe - notably including Hong Kong’s Chief Executive CY Leung, who has championed the region’s logistics and maritime sector. Leung set the stage for the conference and in a wider sense laid out the importance of the logistics & maritime sectors to Hong Kong’s economic future when he said, “the growth of overseas logistics companies will enhance our city’s role [Hong Kong] as the (italics) super-connector linking the mainland of China to the rest of the world.” In his remarks Leung, in something of surprise to the audience, said that Hong Kong was “preparing to negotiate a Free Trade Agreement with ASEAN (Association of Southeast Asian Nations)” reinforcing Hong Kong’s position as an economic bridge to China. HKTC Executive Director, Fred Lam, noted that Hong Kong’s logistics and maritime cluster has to “move up the value chain” to retain the region’s competitive edge. He also pointed out an often-overlooked advantage of CEPA, [China and Hong Kong’s] “Closer Economic Partnership Arrangement” for foreign logistic firms. CEPA is “nationality neutral” Lam said, “meaning foreign firms incorporated in Hong Kong have the same rights as any other Hong Kong company working in China.” This makes Hong Kong an important platform for logistics companies working in China. Dr. Patrick Low, Vice-President of Research for the Fung Global Institute and former chief economist at the WTO (World Trade Organization), presented the keynote address, speaking on trends and prospects for intra-Asian trade. Dr. Low said trade performance over recent years was “mixed” explain that for the twenty leading up to the “Great Recession” international trade increased by 5.5% annually whereas in the seven years since only 3.5% and more recently 2.5 %. Although he isn’t forecasting much growth this year Dr. Low projected a 4.5% global trade growth figure for 2014. However, Dr. Low noted that the intra-Asian trade has been growing at 20% in recent years and more importantly “trade in both directions with China.” Another very interesting observation made by Dr. Low is on how trade figures themselves are assembled. Dr. Low argues that looking at imports as a static statistics gives a false sense of transactional value – for example is the US trade deficit with China really that large or are there other factors that mitigate the value of the import? He used the example of the IPhone. The IPhone shows as a gross hi-tech import from China. However China’s main contribution is the assembly, roughly accounting for 5% of the retail cost. The components come from places like South Korea, Japan, Germany and even the US. The “intangibles” in the products production such as IP, design, advertising etc. reside principally with the US. Looking at the product though the “value lens” how much is real transaction versus the gross import value? Sessions The conference also featured four forums, including a spotlight on the potential of the Chinese mainland and a look at the state of global shipping. The afternoon Maritime Forum session entitled “Keeping Faith: Seeing A Rebound in 2014, was particularly intriguing. The first half of the forum featured an “Outlook On Liner Trades” with a panel of Randy Chen Director of Wan Hai Lines, Alan Murphy of SeaIntel Maritime Analysis, Hua Joo Tan of Alphaliner and Rahul Kappoor of Drewry Maritime Services Ltd. All of the participants concurred of one key point that there was little chance of a rebound in liner shipping in 2014. Most of the panel agreed that recovery wouldn’t come sooner than 2016 - with a number of caveats. Randy Chen of Wan Hai, one of the few carriers to show a profit and the only carrier on the panel, had a number of keen observations on the line market. Wan Hai, which is predominately an intra Asia carrier, has still shown a profit in these difficult times. Wan Hai also hasn’t joined the new order frenzy. Chen said carriers shouldn’t book “bad business” – that is to say freight that doesn’t fit into the carriers’ best interests on the bottom line. While he readily admits that with the larger ships this can be difficult, it is more reasonable to book the business that works best for the carrier than to lose money filling the slots. He also made another comment about bringing the fleet into balance. He said if the owners really laid up ships – truly took them out of service, which involves completely shutting down the engine room and related equipment, rather than laying up vessels that can easily brought back into service at the slightest upward tick in the market, there would be a chance of bring supply and demand back into equilibrium much faster and with less of a roller coaster effect. All the panelists weighed in on P-3 the operational alliance between CMA-CGM, MSC and Maersk. Hua’s view was that the alliance would have little impact on the issue of over capacity and that it is unclear whether the individual parties would add tonnage to their business outside of the P-3 alliance. Hua also said that without consolidation of carriers he saw little reason to believe that the industry can bring capacity into balance with demand. He suggested that mergers for political reasons would be difficult citing nationalistic purposes ahead of economic realities. Also, all of the panelists are unsure how the alliance would impact rates, as the service structure of all three lines was very different. Would all three follow a Maersk style (Maersk Daily etc.) or still pursue their own methods. Additionally the panelists expressed the belief that the What all the panelists seem to fear is that with little differentiation between steamship lines in the P-3 or any alliance the commoditization of freight rates would be a race to the bottom. ALMC The ALMC is only in its third year, and with the high quality of its speakers and the importance of the subject matter, has already established itself as one of the better global venues for the logistics and maritime industries. It is easy to envision this becoming a two or three day conference.