Exciting times ahead as China grows, Agility Logistics chief says

PUBLISHED : Tuesday, 22 February, 2011, 12:00am
UPDATED : Tuesday, 22 February, 2011, 12:00am

Rising wages and productivity, a shift away from lowest-cost manufacturing and increased buying power from the mainland's burgeoning middle class will make for a 'really exciting time over the next five years', a top logistics player says.

Hans Hickler, Agility Logistics' Asia-Pacific chief executive, said the mainland's minimum wage was set to double over five years. As a result, 'productivity is going to matter' as China's future involved moving from 'lowest cost to not lowest cost'.

Hickler said there would also be fundamental changes as people bought middle-class or luxury items such as yachts or recreational vehicles.

He said Agility Logistics achieved 'good growth last year' and was 'bullish again' this year, without citing specific volume figures.

Giving his first media interview since being appointed chief executive in March last year, Hickler said the firm's growth levels were buoyed by its mainland chemicals logistics business in Shanghai.

The firm opened a 66,000-square-metre logistics hub in Shanghai in June that will import and distribute 600,000 tonnes of polyolefins a year from the Borouge plant in Abu Dhabi.

The polymer resins will be used to manufacture pipes, cabling, vehicle parts and household appliances in China and other Asian countries. A 30,000-square-metre polymer compound manufacturing plant has been built next to the logistics facility.

Hickler said the company had seen 'fairly strong' growth in volumes in both air and sea-freight volumes. But rising fuel prices, with the resultant increase in shipment costs, had led to a shift in cargo from purely air transport to a combination of sea and air from China through Dubai to Europe.

He added that China's growing links with Southeast Asian countries, through the free-trade pact that came into force last year, offered opportunities to develop road-air or road-sea cargo transport links with neighbouring countries.

Hickler would also 'entertain' plans for a door-to-door trucking delivery service, but 'how we scale it is too early to tell'. He pointed out that it was still 'early days in China' for the type of return logistics operation firms like UPS or FedEx offer Amazon or Hewlett-Packard customers. 'I certainly see ourselves as doing it' as 'a natural extension' to the firm's logistics operations.

But while Hickler pointed to buoyant growth for China's logistics trade, a recent Agility report warned of longer-term concerns about the country as an emerging market for freight forwarding services.

'Western investors are starting to look beyond China due to continued worries about its economic prospects,' the 28-page survey of emerging logistics markets said. 'Although growth in both domestic demand and export activity is still very high, the signs of overheating continue to emerge.

'There is the probability that an unstable China will result in an acceleration of the shift of manufacturing export production away from southern China. This in turn could also lead eventually to a realignment of trade patterns, with many other low-cost markets benefiting. In fact, 2011 could well be the year when many emerging markets come of age.'

The study, done in association with consultancy Transport Intelligence, said these markets included Vietnam, Saudi Arabia and Turkey as manufacturers moved closer to the areas of consumption.