Cargo giant

Shanghai took a huge step toward its target of becoming the most promising international air cargo center in the Asia-Pacific region last week after DHL announced decisions to build its North Asia express delivery hub in Shanghai Pudong International Airport.

The announcement means the airport will be the first in the world with two international express delivery hubs. United Parcel Service Inc (UPS) is also building a facility at Pudong.

The General Administration of Civil Aviation of China and the Shanghai Municipality launched a strategy in 2004 to build Shanghai into a leading international air cargo transportation hub, which is also part of China's 11th Five-Year Plan (2006-10). Attracting world-leading express and logistics giants to establish their operations in the city plays a crucial role in realizing this ambition.

The airport, which currently handles 63 percent of China's international cargo, has been busy expanding its capacity and is the world's fastest-growing international airport for handling cargo.

It was only ranked the 26th largest cargo airport in the world in 2002 with cargo throughput of 635,000 tons, according to Airports Council International (ACI). But by 2006, it raced up the rankings to become the sixth-largest in the world with cargo throughput of 2.17 million tons. ACI is a non-profit association with 573 members operating over 1,640 airports in 178 countries and territories.

"Our target is to handle six million tons of cargo a year by 2015," says Wu Nianzu, the Shanghai Airport Authority's chairman and president.

"DHL's decision shows that China is playing an increasingly important role in the world economy and Shanghai has an irreplaceable position in the global air network," Wu says.

DHL, a unit of Deutsche Post AG of Germany, will spend $175 million building its hub to serve China and the vibrant North Asia region. The German courier estimates that as early as 2012, China and other countries in North Asia will account for 30 percent of global express delivery volume, up from about 18 percent today.

DHL selected Shanghai from among 133 possible sites for its North Asia hub after two years of rigorous analysis. The company says volume growth rates and flight connections are two major criteria.

Shanghai is a promising option because of booming commercial activities in the Yangtze River Delta region, says Stephen Charles Fenwick, senior vice-president of DHL Express Asia Pacific.

The Yangtze River Delta, one of China's major manufacturing centers and economic growth engines, contributed 41 percent of the country's total trade volume last year.

The establishment of the North Asia hub will result in transit time improvements across the region and, in particular, benefit customers in the Yangtze River Delta, DHL says. With the air connections to and from the Shanghai Pudong International Airport, DHL will be able to leverage regional and international flights to provide added flexibility for its customers with time-definite morning delivery for more major cities in North Asia.

"It will play a catalytic role to boost DHL's growth in Asia Pacific and give us an even greater competitive edge in managing the huge and complex global trade that is being routed to this region," says Dan McHugh, CEO of DHL Asia Pacific.

McHugh says the new hub will complement DHL's Central Asia hub in Hong Kong and other distribution facilities in the Asia, Pacific region, including Bangkok, Incheon, Singapore and Sydney.

DHL, UPS and FedEx are all fighting for a bigger share in China's booming express delivery market, which DHL estimates will maintain an annual growth rate of 30 to 35 percent in the coming three years.

A major driver for the fast growth is China's position as a nexus of global supply and demand. China is no longer just a manufacturing center for low-tech, inexpensive consumer products. It is now attracting numerous sophisticated, hi-tech factories. The country's climb up the value chain is creating increasing demand for modern logistics services. At the same time, as their pockets get deeper, Chinese people have a growing appetite for all types of imported products.

FedEx announced plans in 2005 to build a new Asia-Pacific hub at the Guangzhou Baiyun International Airport with a total investment of $150 million. It will start operation at the end of next year. UPS' international air hub at the Pudong airport will also begin service next year.

The DHL North Asia hub is scheduled to be completed in the second half of 2010. It will be located near the Pudong airport's third runway, due to be completed by the end of this year. The hub will have a total area of 88,000 sq m. and be equipped with an automated sorting system to maximize operational capability and enhance efficiency. It will be able to sort conveyable shipments at a peak capacity of up to 20,000 parcels and 20,000 documents per hour.

(China Daily 12/01/2007 page2)