Barely four months after acquiring one Chinese logistics company the Indian companuu Direct Logistics India, which is based in Mumbai, is looking to make another purchase. Late last year it bought China-based Shenzhen Dida Logistics for an undisclosed amount. This was the first ever acquisition by an Indian company in the Chinese freight forwarding industry.

Direct Logistics’ financial adviser, Ambit Corporate Finance, is now in talks with a few international and domestic private equity firms arranging funds for the company’s new acquisition.

Sunil Devrani, chief executive and managing director of Direct Logistics, said, ‘We are looking at buying out a supply chain management company in China which will help us in transforming to a complete logistics solution company instead of just freight forwarding firm.’

He intelligently declined to disclose the target company and the prospective investors in Direct Logistics. Sunil Devrani said the fund-raising and acquisition would be concluded in the next three months.
Source: LiveMint.com

Dalian Port, the largest port company specializing in oil products and liquefied chemicals in northeastern China, is planning a domestic listing for as early as 2009.

As part of this move to be a listed company Dalian Port plans to increase its capital expenditure to US$140 million.

However, the listing is not yet definitive. Jiang Luning, general manager of Dalian Port, said A-share listing is possible but not definite because it will depend on the market situation and other factors.

With its investment Dalian Port plans to build 12 more crude oil storage tanks, which will have a total capacity of one to 1.2 million tonnes.

The firm expects its production of crude oil and refined oil to rise 10% this year. Last year it produced about 33.4 million tonnes.
Source: CargoNews Asia

Booz Allen says very firmly that the implications for the supply chain clear — even more so than in Western markets, companies operating in China must have different supply chains to meet the needs of groups of individual product-markets.

Edward Tse in a recent issue of Booz Allen’s Strategy + Business magazine wrote:

‘In working with multinational companies that enter China, either to manufacture goods or to sell to Chinese markets, we can almost always tell which ones will succeed and which will probably fail.
‘Too often, Western companies think they can profit in China by simply focusing on the largest and most well-known metro areas such as Beijing, Shanghai, or Guangzhou. But today that is unlikely to be enough.’

Companies frequently must set up distribution ‘into second-, third-, or even fourth-tier cities. Doing this is not as easy as, say, expanding beyond New York and Chicago to Buffalo and Peoria. As you move into China’s second-, third-, and fourth-tier markets, you’ll find a steep drop-off in infrastructure, channels, management sophistication, and disposable income.’

Procter & Gamble is already doing that and setting up very different supply chain capable of physically delivering products effectively to these more remote markets – and at a cost to make and deliver at even lower levels than is required for the first tier cities.

Tse notes that until just a decade ago, most milk outside the largest cities was consumed in powdered form, as production and distribution systems could not get regular milk safely to consumers.

But as the supply chain solved that problem, Chinese milk demand exploded — allowing a few companies to profit handsomely and continue to enjoy high growth rates. (Our illustration may not be directly associated with logistics but it is the on the opening page of the Procter & Gamble site and is dashed attractive.)

Source: SupplyChain Digest

Bosch Group has started construction of a $6.31 million logistic center in Changsha, the capital city of Hunan Province, to optimize its logistics efficiency in central China.

The new center is built on a 10,000-square-meter site with an expanded automotive logistic network. When it is completed towards the end of this year, it will coordinate all automotive products to and from the Changsha site, including on-time delivery of production materials.

Bosch (which is the company that invented the spark plug) started operations in Changsha in January, 2005, with a total investment of $89 million up to 2008. Bosch Changsha is the main production facility for electrical drivers, starters and alternators for Bosch, arguably the world’s leading car part maker, in China.

The site offers a full range of mechatronic components and body applications systems for the entire automotive industry in China including motors for ABS and engine cooling. (If, like me, you are puzzled by this new word mechtronics the definition given by Wikipedia is: Mechatronics is the combination of mechanical engineering, electronic engineering and software engineering. The purpose of this interdisciplinary engineering field is the study of automata from an engineering perspective and serves the purposes of controlling advanced hybrid systems. The word itself is a portmanteau of ‘Mechanics’ and ‘Electronics’.)

My own view entirely. Could not have put it better myself. It was right on the tip of my tongue.
Source: China Daily

Air China aims to make Air China Cargo a wholly owned subsidiary. To do that it is negotiating with Beijing Capital Airport to buy its 24% stake in the country’s largest cargo carrier.

China Airlines Board Secretary Huang Bin said, ‘We did talk with Beijing Capital Airport about the purchase of their shares in the Air China Cargo carrier, but so far no substantial progress has been made.’

In December, China Airlines announced plans to raise its stake in Air China Cargo to 76% from 51% through the purchase of Gold Leaf Enterprise Holdings’ stake in Air China Cargo shareholder Langxing Co.

In one sense this all looks a bit odd because Beijing-based Air China Cargo has had operating losses in recent years and reported a net loss of RMB382 million ($53.4 million) in the first nine months of 2007.

China Airlines, in explaining this, referred to ‘an increase of freighters that resulted in low aircraft utilization rates’ and ‘management problems.’

Note that China Airlines brought up the possibility of a cargo joint venture with China Eastern Airlines when discussing its recent bid for its rival.

China Eastern runs a profitable subsidiary in China Cargo Airlines so if Air China had been able to cooperate with China Eastern Airlines in reorganizing Air China Cargo to work with China Cargo Airlines successfully it might be possible, at a later date, to merge the two.

All of this appears to be on hold until August because China Eastern says it has a legally binding agreement with Singapore Airlines to do nothing until then.

There will be much more negotiating before this little lot is brought to a successful conclusion.
Source: ATW Daily News

The government is determined to have a better network of road and water transport and emergency response system in place by 2010 in order to reduce the number of accidents.

The Ministry of Communications (MOC) expects that the new system will help cut the death rate per 10,000 commercial vehicles by 40% and reduce the rate of major accidents per 10,000 vessels by 10%, compared to the figures for 2005.

Measures include improving highway design, setting up more injury-prevention facilities and keeping overloaded vehicles off the roads.

Efforts will also be made to improve maritime rescue and salvage operations.

Song Jiahui, the director of the MOC’s rescue and salvage bureau said once these steps have been taken, rescue vessels will take no more than 90 minutes to reach an accident in key areas such as the Bohai Bay, Qiongzhou Strait and the waters around Zhoushan Islands.
Source: China.com

Construction could start this year on three railways in the Xinjiang Uygur autonomous region. This according to sources with the National Development and Reform Commission (NDRC).

The region is bounded to the north by Kyrgyzstan, Kazakhstan, and Russia; to the east by Mongolia and Gansu; to the south by Qinghai and Tibet; and to the west by Jammu and Kashmir, Afghanistan, and Tajikistan.

The NDRC plans to invest RMB4.25 billion ($591 million) in the three railways: the Lanxin, Nanjiang and Kuitun railways.

According to Chinanews.com, work on the Jingyihuo Railway, the first electric railway in Xinjiang, has accelerated and should be complete by the end of this year,

Experts say developing Xinjiang’s rail capacity will make it easier to exploit its massive stores of energy resources. With estimated reserves of 20.8 billion tons of oil and 10.8 trillion cu m of gas, Xinjiang is seen as a strategic complement to Heilongjiang, China’s top natural gas and oil producer.

Currently the only railway linking Xinjiang with central Asia is a 460-km line between Urumqi and Alataw Pass, where it connects to Kazakhstan railways.
Source: China.com

The Economist with a major article — not all totally complimentary — on the galloping pace of building and expansion in China.

Some examples of growth.

Beijing’s new airport terminal, seen here during construction, was designed by the British firm Foster + Partners, and planned and built in four years by an army of 50,000 workers.

The terminal is 3km (1.8 miles) long. The floor space is 17% bigger than all the terminals at London’s Heathrow combined (including about-to-open Terminal Five). Part of a $3.8 billion expansion, which included the opening of a third runway in October, it is due to open at the end of this month, weeks ahead of schedule.

It is the ninth busiest airport in the world.

And it is part of the rush to improve China’s logistics infrastructure.

Between 2001 and the end of 2005 more was spent on roads, railways and other fixed assets than was spent in the previous 50 years. According to the state media, investment will see double-digit growth every year for the rest of the decade.

The world’s longest sea-crossing bridge is due to open in June: a 36km six-lane highway across Hangzhou Bay.
Shanghai is home to the current world-record holder for such a structure, the 32km Donghai bridge. This was opened less than three years ago to link the city with Yangshan port.
Yangshan is intended to be one of the world’s biggest deep-water facilities when completed at some point after 2010.
From August the 115km journey from Beijing to Tianjin, its nearest port, will be reduced to half an hour with the inauguration of a bullet-train link
Work began in January on a 1,300km line between Beijing and Shanghai which will be completed in five years’ time.
The world’s highest railway from Golmud to the Tibetan capital, Lhasa was completed in 2006.
Since the 1990s China has built an expressway network criss-crossing the country that is second only to America’s interstate highway system in length. By the end of 2007, some 53,600km of toll expressways had been built. The aim is to have 70,000km of expressways by 2020.
The World Bank says that China’s railways carry 25% of the world’s railway traffic on just 6% of its track length. In the past couple of years investment has grown considerably. This year’s target is $42 billion, compared with a total of $72 billion in the preceding five years.
The increase in air passenger traffic has been dramatic: from 7 million passengers in 1985 to over 185 million in 2007.
Source: The Economist

APL has new service where if a container does not reach its destination in the United States by the specified date there is a 20% refund.

This is probably the first day-definite, full-container-load service from Asia to virtually any US destination.

APL Logistics calls it APL Guaranteed Continental service and it connects the ports of Shanghai, Hong Kong, Chiwan, and Yantian with virtually any ZIP code in the continental US.
If it is a full-container load then it gets there on the specified date or the shippers get a 20% refund.

APL Logistics started something like this in August 2006 with OceanGuaranteed – the idea being a guaranteed service which was cost-effective, expedited surface alternative to airfreight.

APL Logistics said its new service will provide the industry’s fastest transit times between key ports in China and customers’ US locations. In some cases this will be as little as 15 days.
Source: Eye for Transport

China’s seas contributed RMB2.49 trillion ($347 billion), or 10%, of the country’s gross domestic product (GDP) last year.

A report, issued by the State Oceanic Administration (SOA), said the value of marine industries, including fishing, transport, oil and gas, tourism and shipbuilding, grew 15% year on year, more than the economy as a whole.

The marine industry employed 31.5 million people last year, 1.9 million more than in 2006.

SOA spokesman Li Haiqing said the main pillars of the rapid growth were the traditional industries of transport, tourism and fishing, which accounted for more than 80% of total output value.

Emerging industries also grew quickly. For example, the oceanic biological pharmaceutical industry, which generated more than RMB4 billion last year, was up more than 37%.

With the launch in November of the first offshore wind power station, funded and run by the China National Offshore Oil Corporation, the sector generated RMB500 million, up 17% year on year.

The gross production value in the Bohai Bay Rim Area was more than RMB954 billion, accounting for 38% of total output of the marine sector. Similarly, the gross production of the Yangtze River Delta region amounted to about RMB775 billion, or about 31% of the total output.
Source: English East Day