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Shanghai Huakong Consulting Co., LTD.
a professional logistics consulting firm
a professional logistics consulting firm

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#Logistics China#Russia, China look to expand containerized rail partnership with new logistics centers

Russian rail monopoly RZD and the operator of the Yingkou port are looking to create a logistics center in Moscow and a logistics park at the northern Chinese port.

The memorandum of cooperation signed between the duo Russian railroad and China Yingkou Port Group Corporation builds on their respective countries’ plan to build build a new seaport in Zarubino, Russia, with an annual capacity of 2 million. The port on the Sea of Japan is roughly 11 miles from the Chinese border.

The Russian port of Slavyanka in Amur Bay will also be expanded and modernized to the tune of $200 million, providing an outlet for goods manufactured in China’s northeastern provinces. The Russian Tranzit-DV group of companies and the Chinese Zhong Xin Hun group will perform the work.

RZD has promised Chinese shipping companies it will reduce tariffs by 30 to 50 percent on the Harbin – Suifenhe (Heilongjiang) – Vladivostok route to boost containerized rail traffic.  The route is critical to China-Russia trade, because Heilongjiang Province, one of China’s largest provinces in the northeast, has no sea access, according to RZD,

Although the majority of trade between Asia and Europe moves over the water, containerized rail traffic between the continents has been growing in recent years. Shippers looking for shorter transit times, with rail transport 40 percent shorter than ocean transits, but cheaper rates than offered via air cargo services, has tapped additional containerized rail, or intermodal rail, services.

Container traffic from China to Europe via Russia will continue to grow during the next several years, because of a shift of light industry production from the Asia Pacific to Southeast Asia region, said Constantine Kuzovkov, vice president of FESCO, one of Russia’s largest container operators.

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#Logistics China#Qingdao Port International profit up 26.9%

Qingdao Port International, a listed unit of Qingdao Port Group, said its profits grew 26.9% year on year (y/y) to CNY1.1 billion (USD171.9 million) in the first six months of 2015 on cost cuts.

The company's revenues also rose 0.4% y/y to CNY3.6 billion owing to growth in financial services, logistics, and port value-added services and port ancillary services segments, a stock filing of the company said on 24 August. Excluding the gain from disposal of stake in Rizhao Riqing Container Terminal, its profit increased 13.5% y/y to CNY969 million.

The company's cargo throughput rose 2.5% y/y to 208.84 million tonnes in the first six months of 2015, with container throughput up 2.6% y/y to 8.55 million teu.

"To leverage on our position as the first domestic port where Valemax ore vessels docked at, we will co-operate with international mining companies with a view to build an ore bonding, mixing, processing, transhipment, and distribution base and to develop an 'ore supermarket," the company said.

It added that "The group will speed up the construction of a new imported oil unloading base in Dongjiakou, accelerate the construction progress of oil tanks, and further release the capacities of crude oil terminal at the Dongjiakou Port Area to expand new hinterland of the oil business.”

#Logistics China#China's logistics prosperity growth slows in May

China's logistics prosperity index slowed slightly in May but still remains at a high level.

The China Federation of Logistics and Purchasing says its logistics prosperity index for May came in at 58 percent, down 0.6 percentage points from April.

All of the LPI's sub-indexes fell in varying degrees in May as well except the sub-index for completed fixed-asset investments.

A breakdown of the data shows that the index for new orders stood at 57.1 percent, retreating 3 percentage points from that in April. 

Experts say that despite May's slowdown, the LPI remains at a relatively high level and logistics businesses are running smoothly. 

"The slow down of the logistics activity in May is mainly due to a seasonal reason. Despite that, the upward trend of growth is still underway. The logistics activity is still running at high levels," said He Hui, deputy director of China Logistics Information Center. 

Experts say the coming hot, rainy season will add pressure to logistics activity but the sector's stable position will continue.

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#Logistics China#China is Leading Global Growth in Contract Logistics

The Asia-Pacific region is set to unseat Europe as the world’s largest contract logistics market as growing consumer demand in China and other countries pushes companies to build more sophisticated distribution channels, according to a new report.

United Kingdom-based Transportation Intelligence Ltd. said it expects the overall market for firms that provided a combination of warehouse and transportation services to grow at a rate of 6.8% a year from through 2018, driven by expanding demand in emerging markets for contract logistics services.

The research group, also called Ti, said the contract logistics market grew 5.4% by revenue in 2014, faster than the 2.8% growth in 2013 and outstripping the growth pace of the global economy.

The market is led by companies including Kuehne & Nagel AG and Deutsche Post AG of Germany and Netherlands-based CEVA Logistics, a division of CEVA Holdings LLC.

Ti expects the overall contract logistics market to grow 6.8% per year from 2014 to 2018, driven by Africa, the Asia Pacific, and Central America, which are all expected to grow more than 10% a year on average. The Asia Pacific market could be larger than Europe, where sophisticated logistics services have been entrenched for many decades, by as early as 2016, the group said. And by 2018, the revenue for contract logistics in the Asia Pacific will grow to $96.1 billion, the majority of growth coming from China, while Europe will grow to $82.7 billion.

The projection of rapid growth for the higher-end services in China and emerging markets suggests deeper changes in those economies, including greater demand for pricier consumer goods and perishable foods that require logistics management that includes better security and handling.

Contract logistics has traditionally been centered on developed economies with high domestic consumer demand and a longer history of outsourcing such services, while companies in most emerging markets have kept those operations in-house for lack of good infrastructure and third-party logistics options, the report said.

“Infrastructure is still very poor in many of these countries, and the potential is great. That’s where the population growth is, and the middle class is expanding in these markets,” said Cathy Roberson, Roswell, Ga-based analyst for Ti. A lot of companies are moving into these markets to meet growing demand, which leads to growth in demand for contract logistics.

A string of recent mergers and acquisitions in the industry is expanding the reach of some providers, and will likely continue to do so, the group said. “Overall, the market is highly fragmented,” but “the market will gradually become increasingly concentrated over time,” the Ti report said. “This process could accelerate in the coming years, especially as the appetite for major logistics acquisitions intensifies.”

This consolidation will expand logistics services to more regions and fuel the growth in Asia and emerging markets, as well as more global connections. For example Japan Post Holdings Co., Japan’s state-owned postal service, announced in February that it would acquire Australian logistics company Toll Holdings Ltd. for $5.1 billion, which gives it international reach.

“They basically have acquired Toll [customers] not only in Asia, but in the U.S. and Europe as well,” entering the logistics and freight forwarding business, Ms. Roberson said.

#Logistics China#Kerry Logistics jumps aboard China’s trade strategy train

 Kerry Logistics has formed a strategic partnership with China’s state-owned rail operator as it begins to tap into Beijing’s One Belt One Road national trade strategy that was announced in March.

Kerry Logistics (China) signed an agreement with China Railway Import and Export Company, a foreign trade-focused unit under China Railways, the Hong Kong-listed logistics company said in a filing to the stock exchange.

The agreement that was signed in Beijing earlier this month will enable Kerry Logistics to integrate its strong network in Southeast Asia with the rail company’s extensive domestic network and growing international connections. The strategic cooperation follows the national “going out” development strategy that encourages China’s large-scale enterprises to take full advantage of growth opportunities brought on by the trade initiative.

Chinese premier Xi Jinping said in late March that the initiative will build on the routes linking Asia, Europe and Africa. It has two parts — a new Silk Road economic belt linking China to Europe through Central Asia; and the maritime Silk Road that links China's ports with Africa, the Mediterranean and Europe via the Suez Canal.

In a joint statement, general manager of China Railway Huo Hongguang and president of Kerry Logistics (China) Edwardo Erni said the move was “an important measure” taken under the new national strategy for both companies to strengthen their capabilities.

“In the future, to realise the potential of the One Belt One Road strategy, both sides will work together closely for the long-term growth and development of their businesses,” the joint statement said. “They will jointly explore new growth opportunities by broadening their strategic partnership, in an effort to contribute to China’s growth and advancement on the global stage.”

Delivering the company’s 2014 financial results, Kerry Logistics management made repeated references to the One Belt One Road strategy, and said it would be a strong boost to trade in the region.

The company said in a statement that although the global demand for logistics services was expected to remain flat in 2015 as a result of slowing growth across major economies, the group saw opportunities in the ASEAN and Greater China regions along with increasing intra-ASEAN trade propelled by China’s international trade development.

Citi Research said Kerry Logistics was continuing to build out its regional network. “We also see the potential for significant contract wins associated with the New Silk Road investment plan,” the bank said in a note to customers.

Since the company was listed on the Hong Kong Exchange in December 2013 it has been in aggressive expansion mode. Last year, Kerry Logistics developed facilities and acquired logistics companies or formed joint ventures in Indonesia, Vietnam, Thailand, Canada, Australia and the UAE. During the year the company spent $250 million of the $300 million net proceeds from its listing and expects to use the balance for acquisitions this year.

According to the Kerry Logistics statement, China Railway Import and Export Company mainly focuses on foreign trade and has operated international projects including railways and maintenance in Saudi Arabia. The company was incorporated in 1988 under the approval of the former Ministry of Railways and the former Ministry of Foreign Trade, and through investments in railways, it was established as a state-owned foreign trade enterprise.

#Logistics China#China's logistics revenue surges in 2014

  The revenue of China's logistics sector rose 6.9 percent year on year in 2014, driven by the online retail sales boom, new data showed on Friday.

  The total revenue of the sector topped 7.1 trillion yuan ($1.16 trillion) last year, according to a joint statement by the National Development and Reform Commission, the National Bureau of Statistics and the China Federation of Logistics & Purchasing.

  The total value of goods transported by logistics services in 2014 increased 7.9 percent year on year to 213.5 trillion yuan, according to the statement. The growth rate was 1.6 percentage points lower than in 2013.

  The slowdown was consistent with the pace of GDP, which registered a slower growth rate of 7.3 percent in 2014.
China's online sales of consumer goods, which are considered to be a boon to logistics as more and more people choose to shop online, soared 49.7 percent to 2.79 trillion yuan in 2014 from the previous year.

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#Logistics China#Cross-border e-commerce a boon for China's bonded logistics properties

Cross-border e-commerce that enables consumers to buy directly from merchants around the world and save taxes is rapidly gaining popularity in China.

While online shopping growth is emerging as a threat to retail property owners, the new trend is expected to boost bonded logistics property developments, say property consultants.

"Rents of bonded logistics developments [in Shanghai] have been rising in the past four to five years" because supply had not caught up with demand, said Carlby Xie, the head of China research at Colliers International.

The average rent for a bonded logistics facility in Shanghai was about 1.26 yuan per square metre per day last year, according to Colliers' latest report on the outlook of the bonded logistics sector. That compares with an average rent of below 1.10 yuan per square metre per day in 2010.

"Chinese online shoppers buying goods from overseas have the potential to benefit bonded logistics property because e-commerce operators that conduct overseas business may choose to store [frequently purchased] goods in bonded warehouses where they will not incur customs duties," said Rita Wong, an international director of valuation advisory services at JLL. She said examples of this practice had been observed in bonded logistics areas in Ningbo and Hangzhou with firms selling baby and children's goods.

Popular products bought through cross-border sales include cosmetics and skin-care products, women's apparel, baby milk powder and food supplements.

In 2012, the central government rolled out a pilot programme and set up trial zones for cross-border e-commerce businesses to allow consumers to shop on foreign websites and have their orders shipped under the supervision of China Customs.

Qualified e-commerce companies are allowed to buy goods from abroad and store them in bonded warehouses in the pilot zones. Tariff payments are made after the goods are sold to consumers, according to a report by the Fung Business Intelligence Centre.

Before this arrangement, Chinese online shoppers bought overseas goods through agencies or directly from overseas websites in foreign currencies.

Colliers said the new pilot zone system improved the cross-border e-commerce trade by cutting delivery times and avoiding smuggling. The pilot zones have been established in Shanghai, Chongqing, Hangzhou, Ningbo, Zhengzhou, Guangzhou and Shenzhen.

However, Wong said the scale of such trading was still small.

"As to whether this activity will provide a boost to bonded warehouse markets, it is too soon to tell," she said.

Xie said the value of imports from online trading was small but rising.

Research has found that the value of imports was only about 13 per cent, or about 53 billion yuan, of the total cross-border e-commerce trade, with exported goods and business-to-business e-commerce contributing the majority.

"As consumers in China adopt new online shopping habits, this figure will undoubtedly grow" to the benefit of bonded logistics properties, Xie said.

"The rental growth in bonded logistics properties will be faster than non-bonded logistics properties due to the rapid growth of cross-border e-commerce trade."

Investors are free to enter the bonded logistics market as long as they can afford the land price and have the legal entity set up as a logistics firm, according to Xie.

In Shanghai, the major players include Mapletree, Goodman and Global Logistic Properties.

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#Logistics China#Air China profit up 17% to USD 622.6 million as revenues rise 7.8%

Air China has posted a 17% net profit increase to CNY 3.82 billion (USD 622.6 million) in 2014, drawn on revenues of CNY 105.88 billion, an increase of 7.8%.

Higher profits were largely attributed to "sustained growth of international air passenger market, steady recovery of the air cargo market and lower fuel prices."

Cargo traffic volume rose 6.6% year on year to 1.55 million tonnes (mt), while passenger numbers rose 6.9% to 83 million with an average load factor of 79.9%, down 0.93 points over 2013.

Air China took delivery of 67 new aircraft and phased out 24 old planes last year. The carrier operated a total fleet of 540 aircraft with an average fleet age of 6.08 years.

"The improving development trend of the global civil aviation industry, the continued economic growth under "new normal" conditions and the increase in consumption standards and change of consumption structure of Chinese citizens have opened new scope for development," said Air China chairman Cai Jianjiang.

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#Logistics China#Goodman inaugurates Chongqing Airport Logistics Park in China

Logistics property group Goodman has inaugurated $130m Chongqing Airport Logistics Park in Western China.

Located near the Chongqing Jiangbei International Airport, the park covers 190,000m2 area with eight warehouses.

The strategic development is well-connected to the Chongqing-Chengdu economic corridor and Chongqing downtown.

Danish pump manufacturer Grundfos, Japan's Nikkon Logistics, China's Best Logistics and Chinese express delivery firm Yunda Express are the customers of the facility.

Goodman managing director for Greater China Philip Pearce said: "Goodman Chongqing Airport Logistics Park is our flagship development in Western China, an area of growth for us and where we see growing demand for prime logistics space.

"There is surging demand for and a lack of supply of quality transport and prime logistics space in Chongqing, propelled by the city's robust economic growth. We look forward to further expansion in this region and to securing high quality opportunities for our customers and investors."

Australia Governor-General Peter Cosgrove AK MC (Retd), who inaugurated the park, said, "This logistics park is a landmark Australian investment and a tangible example of Australia's strong presence here in Western China."

Up until now Goodman has developed 110,000m2 of the Chongqing Airport Logistics Park. It still needs to construct another 80,000m2 at the site.

The logistics property developer plans to invest $400m in western China within the next three years.

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Action plan on the China-proposed Belt and Road Initiative
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