DHL sees 45pc increase in China freight revenue

PUBLISHED : Friday, 08 April, 2005, 12:00am
UPDATED : Friday, 08 April, 2005, 12:00am

Asia chief attributes growth to hi-tech commodity production

DHL Express expects China-related revenue to grow at least 45 per cent this year as more mainland manufacturers shift to producing high-technology commodities such as electronics and computer peripherals, according to a senior company executive.

Scott Price, the new chief executive for Asia Pacific, said the company's China sales grew 50 per cent to 60 per cent last year as it moved the greatest share of the mainland's international express cargo, which analysts say is expected to reach US$1.2 billion this year.

'We are very confident that our calculations on China market share are correct and we think we're No 1 at 40 per cent,' Mr Price told the South China Morning Post.

'The fact that we are growing at these extraordinary levels reflects China's move to more hi-tech manufacturing than it has ever produced before.

'The companies have done the math and realised that the cost of shipping their products via express overnight is significantly lower than the cost of holding a high level of inventory in those goods.

'We're seeing a shift to express purely because of the move into hi-tech component manufacturing in China.'

The mainland's booming demand for express cargo services has played a large part in the initial success of DHL's US$100 million central Asia hub at Chek Lap Kok.

The hub, which has the capacity to handle 440 tonnes a day, was opened eight months ago and Mr Price said DHL had already 'indicated an interest' to the Airport Authority in expanding the facility.

'We have not begun negotiations and we have not had any detailed discussions, so it's a bit premature to say there is a deal on the table or a timetable we are committed to,' he said. 'But we're a lot closer to [having to squeeze more capacity out of operational enhancements] than we thought we would be at this point. We need to move quickly.'

Partly due to the success of DHL's Hong Kong hub, the authority expects express cargo to make up 13 per cent of local airfreight volumes by 2010, against 9 per cent last year.

Express and general airfreight last year accounted for 32.4 per cent of Hong Kong's $1.34 trillion external trade value - up five percentage points since the turn of the millennium.

In volume terms, it has held steady at about 1 per cent during the period, indicating the growing importance of express cargo to the economy.

DHL rivals Federal Express and United Parcel Service have piled capacity into the mainland market since last year's ground-breaking Sino-US air services agreement. Unlike DHL, which uses common carriage, the US operators fly their own fleets.

But Mr Price said DHL felt no pressure to match its rivals' strategy on the mainland.

'We believe our model is superior. The service levels out of China are becoming so highly sophisticated that you have to offer flexibility,' he said.

The routes on which an express operator needs uplift may shift between major commercial areas on any given day, requiring a fluid transport network that can follow demand.

'You can't do that with a one-hub system with a dedicated airlift,' he said.