Archive for June, 2007

Five Star Appliance will spend RMB300 million ($39.38 million) building three logistics centers to serve its stores and Best Buy outlets in east China.

The centers will be in Hangzhou of Zhejiang Province, Nanjing and Suzhou of Jiangsu Province and will cover 80,000 square meters. The centers will be operational by next year.

Wang Jianguo, chairman of Jiangsu Five Star Appliance, said, ‘The centers will cover the distribution to the Five Star stores in Jiangsu, Zhejiang and Anhui provinces as well as future outlets Best Buy will open in these regions.’

The Jiangsu-based home appliance retailer runs 140 stores in the country, mostly in the eastern provinces. It plans to open another 45 outlets by the end of this year.

Sales have increased by double digits but Cheng Jie, marketing and brand director at Five Star declined to give detailed financial figures. She just said the company is doing very well.

Best Buy, which also opened its first Chinese store in Shanghai last December, plans to open another six to seven self-branded stores in the city over the next 18 months before expanding to the rest of China.

Best Buy, the largest consumer electronics retailer in North America, spent US$180 million last year for a major stake in Five Star. The deal gave Best Buy immediate access to Five Star’s 136 stores in China.
Source: Shanghai Daily

Sources from the supervisory division of the Xiamen Xiang’an tunnel project in Fujian province state the project for building the first submarine tunnel in China’s mainland areas — Xiamen Xiang’an tunnel — is progressing smoothly.

One third of the overall project had been completed and this tunnel will have a total length of about 9 km, including a 5.95 km submarine section. Total investment: approximately RMB3.2 billion.

The tunnel project in Jiaozhou Bay in Qingdao, Shandong province, was formally approved by the National Development and Reform Commission in January 2006. It officially started construction in December. Construction is progressing smoothly. The tunnel is about 6,170 meters in length, including a trans-sea part of 3,950 meters. This is city tunnel that accommodates six-lane, two-way traffic.

Across Dalian Bay, a 6km long submarine tunnel will be built in Dalian. Song Zengbin, vice mayor of Dalian, said that the preparations for the submarine tunnel project in Dalian Bay are essentially finished.

The project will start in October 2007, with a preliminary design of six-lane, two-way traffic, and is expected to be completed within two years.
Source: People’s Daily Online

Excerpts from speeches given by logistics industry executives at the recent Council of Supply Chain Management Professionals conference in Tianjin.

Supply chain service providers have great potential for profits if China’s fulfils its ambition to cut logistics costs.
China’s logistics costs totaled $498 billion in 2006 or 18.3% of GDP compared with 9.9% in the United States.
The mainland’s logistics industry still lags two or three decades behind advanced nations.
Domestic logistics companies are small in scale, scattered in several regions and have a low-level of operation and management.
The satisfaction rate of services on a basis of five points is 3.96 for overseas-funded logistic providers, 3.72 for private domestic providers, and 3.61 for state-owned providers.

Alan Turley, vice-president of international affairs for FedEx, Asia Pacific division, said there were poor connections between rail, road and port facilities and a lack of coordination between air, rail and communications authorities. The government, although keen to promote the industry, is hampered by a multiple-layered administration, which only adds to logistics costs.

Fan Gang, director of China’s National Economic Research Institute, said, ‘As China’s urbanization spreads from the coastal provinces to inland rural towns, opportunities will abound for state-of-the-art logistic services in the future as 900 million Chinese live in the countryside and most of the consumption has come from the urbanization process over the years.’
Source: CargoNews Asia

The idea seems remarkable — converting coal to oil. It comes down to cost. If the price of oil is high enough then it is financially viable to do the conversion. Where it will be happening in China is Erdos, in north China’s Inner Mongolia Autonomous Region.

It is happening and soon. Wang Yulong, deputy manager in charge of the coal liquefying arm of the Liquefied CoalOil Company of Shenhua Group Corporation, the country’s top coal producer which is 100% state owned, said, ‘The project is in its final stage of construction and will start production late in the year.’

Coal liquefaction is a process that converts coal from a solid state into liquid fuels, usually to provide substitutes for petroleum products. While crude oil was widely available and inexpensive then the process was not worthwhile. At current oil prices it is viable and will probably become more so in years to come.

The facility in Erdos will produce mostly diesel oil, plus liquefied petroleum gas (LPG), naphtha (a volatile, flammable liquid hydrocarbon mixture), and hydroxybenzene. On completion, it will be the largest facility in the world producing liquids from coal using a technology known as direct gasification.

There is one in South Africa which produces transport fuel from coal but in a different way. No one, in fact, is talking in any detail about the technology being used for the new plant in China.

Listed as a key state project to help deal with China’s petroleum security concerns, the massive Erdos coal liquefaction facility began construction in August 2004. During an inspection tour in June 2006, Chinese Premier Wen Jiabao called the project a major scientific and technological experiment.

With a budget of RMB12.3 billion yuan and an annual production capacity of five million tons of oil, the project will be completed in two stages.

Wang Yulong said, ‘We’re installing the first production line and its infrastructure. On completion, the line will be able to process annually 3.45 million tons of coal into 1.08 million tons of oil, including 720,000 tons of diesel oil.’

The technology was trialed at a specially built converter in Shanghai. Wang Yulong said, ‘The project in Erdos is about 1,000 times the size of the Shanghai model.’ It is claimed that it will be environmentally friendly.

The equation is simple. 3.4 to 3.5 tons of coal can produce a ton of oil. If the price of a barrel of crude is above $35 it is worth doing. Oil prices in the international market currently hover around $70 a barrel. An amazing development and one worth watching closely.
Source: Jongo News

China, Thailand and Laos have agreed to build a bridge across the Mekong River that will directly link Yunnan province with Bangkok by road. This according to, the Asian Development Bank. The bridge will be completed in 2011 and jointly financed by Beijing and Bangkok.

The bridge will cross the Mekong between Chiang Khong, in northern Thailand, and Houayxay in Laos.

It will be the third to be built under a 15 year-old regional cooperation program to link the economies of Cambodia, China, Laos, Myanmar, Thailand and Vietnam.

Asian Development Bank vice president Lawrence Greenwood, said, ‘When this vital bridge is completed, it will be possible for the first time to travel by land directly from Yunnan, China, through Laos to Thailand.’ He said in a statement this would open up ‘tremendous potential for increased trade, tourism and the further integration of the Mekong region.’

Nowhere is mention made of a problem which is small but significant.

Laos was part of French Indo-China and so everyone drives on the right. In Thailand and China as a general rule traffic goes on the left. The Australian government built the Friendship Bridge (seen in our illustration) over the Mekong at Nong Kai in northern Thailand. It connects to Laos. Laotian truck and bus drivers coming over the bridge make life interesting. Same with Thai truck and bus drivers going the other way.

Now imagine driving from China, keep to the left; through Laos, keep to the right; into Thailand, keep to the left. The mind boggles at the traffic problems this might present.
Source: Yahoo News

Zhang Xiaoqiang, deputy chairman of the National Development and Reform Commission, Hong Kong should focus on developing the high-end logistics industry and leave the expansion of container terminals to neighboring cities in Guangdong. He said authorities should embrace a ‘regional perspective’ in building new terminals in the future.

This comes after the news published in the same source, Cargo News Asia (a most excellent trade magazine) that Hong Kong’s container ports are not competitive with its neighbors, such as Yantian, which offer efficient service at cut-throat prices.

In 2005, Hong Kong lost its position as the world’s busiest port. Shanghai nicked past. Next year Shenzhen will overtake it.

Zhang Xiaoqiang is in charge of Hong Kong and Macau affairs in the commission and he said there was a case for Guangdong to build more container terminals. He added no words of comfort for Hong Kong as a container port: ‘This would allow Hong Kong to focus more on the high-end logistics industry. . . . Retaining Hong Kong’s status as an international shipping centre means moving everything made in Guangdong to Hong Kong ports. This increases the time and cost of transporting the products.’

Zhang Xiaoqiang said diverting cargo throughput to Guangdong would be a win-win situation because the province’s economic growth had outpaced Hong Kong’s and its trade volume had expanded robustly. He said, ‘We have to look at the fact that the cake is ever increasing.’
Source: Cargo News Asia

River port operator CIG Yangtze Ports plans to embark on a $100 million second-phase expansion in central China by the end of this year.

Chairman Edward Chow Kong-fai said after the annual general meeting held in Hong Kong that CIG has an 85% stake in the two-berth Phase I of Wuhan International Terminal Port and is planning to take a 40% stake and develop four berths in Phase II.

The company, spun off from Chow’s China Infrastructure Group, has signed a binding agreement with Wuhan’s provincial government and hopes to obtain approval by the end of this year. After the Phase II expansion is completed in 2010, Wuhan International Terminal’s capacity will increase to 1.2 million TEUs (20-ft equivalent units).

It will be the largest port in western and central China, and will account for 80% of Wuhan’s total throughput.

According to CIG’s annual report Phase I of the terminal moved 107,384 TEUs of goods in 2006, an increase of 82% from 59,098 TEUs in 2005.

Edward Chow Kong-fai said Hong Kong was charging a fee of $200 per TEU compared with Shenzhen, which charges RMB1,000 yuan ($131, and Shanghai, which charges RMB600 ($79.)

He added, ‘Wuhan International Terminal charges less than China’s average of RMB425 ($56) per TEU, so there is still room to increase terminal charges.’

Terminal charges accounted for 75% of the company’s total revenue in 2006, while logistics business accounted for 15%.
Source: The Standard

Greg Knowler is the editor of CargoNews Asia. In an editorial he dismisses Hong Kong as a major port with a major future.

A strongly edited version of what he wrote follows. The full account is in Cargo News Asia.

Hong Kong hosted the general meeting of the influential Baltic and International Maritime Council (BIMCO) last week. Its influence could be seen by the name topping the list of opening session speakers — none other than Hong Kong Chief Executive Donald Tsang. A shipping conference would usually be fronted by an official of lesser stature than the boss himself.

Tsang informed the BIMCO delegates that the national government fully supported Hong Kong’s position as an international maritime centre. . .

Then came the denial. He said Hong Kong was rising to the challenge from these ports by ‘improving the quality of service and upgrading the skills and knowledge of our maritime professionals’.

If the chief executive really believes that by improving service quality and skills, the port will fend off the challenge being posed by Shenzhen, then he needs to sit down and read the research reports by consultants his government paid for.

Because no matter how efficient Hong Kong becomes, no matter how many container moves its cranes can make an hour, no matter how high it can stack boxes and turn around ships, it still costs around US$250 more per FEU to truck the box across the border than to export it via the Shenzhen port of Yantian.

This has seen Hong Kong’s market share of South China direct exports plunge from 80% in 2000 to less than 50% last year.

Hong Kong port’s best days are behind it . . . and in the absence of any meaningful cost-slashing cross-border initiatives, its inexorable decline will continue.

Source: Cargo News Asia

Industry analysts believe competition will be fierce for upcoming shipping contracts. These are expected after the Chinese government encouraged the buildup of the country’s oil shipping capacity out of concerns about energy security.

Of the oil the country imported last year only 16% was brought in on Chinese tankers. The assistant director of the China Association of the National Shipbuilding Industry, Yang Xinkun, said the country aims to raise that level to 50% by 2010.

Yang Xinkun said, ‘However, the companies that export oil to China all have their own shipping subsidiaries and affiliated tankers, and they all want to make profits, so it will be difficult for the new Chinese oil carriers to secure contracts.’

Peng Cuihong, a researcher with the Institute of Comprehensive Transportation under the National Development and Reform Commission, China’s top economic planner, told state media that at least 60% of oil import transport capacity should be filled by Chinese tankers in order to avoid any potential supply disruption. The same report quoted an official from the Ministry of Transportation as saying that China will build more oil tankers to meet rising import demand and reduce its dependence on foreign carriers.
China currently owns around 25 very large crude carriers (VLCC), which carry about 300,000 tons of oil each.

Domestic shipyards, including Dalian Shipbuilding Industry and China Ocean Shipping, the country’s two largest, have been busy building such vessels, as well as making orders to foreign ship builders in a bid to reach oil transportation capacity equal to 50% of the country’s oil imports by 2015.

The Hong Kong newspaper Singtao Daily said as many as 65 VLCCs are likely to be ordered before 2012 at the cost of $7.1 billion.

It seems something of a confused scene which will only clarify with time.
Source: Interfax

Matson Navigation, the US shipping firm operating in the Pacific, is ‘actively exploring opportunities’ for a second route to China. Last year the company invested $365 million in vessels, containers and terminal assets to inaugurate the China-America route. This has port calls in Ningbo and Shanghai and then on to Long Beach, California.

Allen Donae, the company’s chairman says that the 15-month-old container shipping route ‘exceeded our expectations’, with revenue now accounting for about 15% of Matson’s business turnover.

The weekly service, which handles 50,000 containers annually, passes through Ningbo and Shanghai and then takes 11 days to get to Long Beach.

James Andrasick, Matson’s president and CEO, said, ‘Our first route is near capacity but we have no plan to add capacity to the existing route at the moment.’ But a second China-US route is now part of the company’s strategic planning. No specific route has yet been chosen.

Matson has no plan to invest in Chinese ports as other international shipping giants, such as Maersk, have done in China. James Andrasick said, ‘We are a relatively smaller player in the Chinese market and we don’t want to run before we can walk.’
Source: Cargo News Asia