SHIPPERS

TODAY JAN-FEB 2008

Vol.31#1

HONG KONG SHIPPERS’ COUNCIL ISSN 1561-1175

 JAN / FEB 2008

CONTENTS

Shippers Today © Copyright 2008

Hong Kong Shippers’ Council

Room 2407, Hopwell Centre,
183 Queen’s Road East,
Wanchai, Hong Kong
Tel: (852) 2834 0010 Fax: (852)2891 9787
shippers@hkshippers.org.hk
http://www.hkshippers.org.hk
 Staying vigilant
in 2008
2008 would be a vigilant year for
Hong Kong shippers. The outlook
f o r t h e U S m a r k e t i s g l o o m y.
Christmas sales were varied among
2007-2008 the different retailers, but generally
sales concentrated at extreme price
ends of products. There is little
argument that the extended growth
the US economy has enjoyed is now
Chairman over. The debate is whether the US
Federal Government could mitigate
Mr Willy Lin
the property market crisis and prop
up the slipping economy.
Vice Chairman

The Hon. Jeffrey Lam The European market looks better

than the US as it continues to benefit
f r o m a s t r o n g E u r o . H o w e v e r,
Members
economic growth for EU countries
Mr Clement Chen is forecast to fall below 2%. Trade
Mr Roy Chung imbalance is expected to aggravate.
And there is also worry of how
Mr H. Y. Hung
much Europe could insulate itself
Mr Matthew Lai from a worsening US economy.
Mr Kelvin Leung
On the cost front, the mainland's
Mr Simon Lum new Labour Law and increase of
Ms Katherine Ngan minimum wage are going to push
labour costs up by as much as 40%.
Mr V K Parekh
E n e rg y c o s t s a r e s e e n t o r e m a i n
Mr Y Kit Szeto high; the yuan will appreciate
Mr Cliff Sun further; environmental requirements
will be further tightened; and
Mr Alan Wong
more items will be grouped under
Mr Peter Wong the "restricted" and "forbidden"
categories in the Outward Processing
Mr Yeung Chun Fan
Trade. Hong Kong manufacturers
will be challenged by a much
Executive Director
harsher business environment.
Mr Sunny Ho Indeed, there is a clear need for the
Central Government to reduce the
surging trade surplus.
Added to the long list of new
challenges this year is how shippers
could safeguard their own interests
in a chaotic logistics market. Partly,
the uncertainties are a result of
the anti-trust activities of foreign
regulatory authorities. The EU
Competition Committee abolished
shipping conferences' anti - t r u s t
immunity in September 2006,
but its impact will be felt this
October when liner conferences and
discussion groups must officially
disband. After the two-year grace
period, shipping conferences like
the Far Eastern Freight Conference
(FEFC) that fix rates and set
standard tariffs, will cease to exist.
While awaiting a decision of whether
shipping lines should be allowed
to convene and discuss market
supply and demand after October,


 CHAIRMAN’S MESSAGE
as proposed by the European Liner
Affairs Association (established
May 2003), shippers worry that
shipping lines would introduce
new charges or adjust charge
levels without any restrictions or
obligation in the post-conference
period. To European shippers, this
might not be a big concern since
fierce competition among shipping
lines mean very competitive terms
for them. However, Asian shippers
fear that while shipping lines are
heavily discounting to the European
shippers, the lines would seek
revenue compensation elsewhre, i.e.
from Asian shippers through layers
of local charges.
And there is room for them to
exploit Asian shippers. Asian
exporters are obliged to ship with
the nominated lines under FOB
terms and overseas buyers insist on
purchasing in FOB terms because
then, they could make use of their
large global freight volumes to
negotiate better terms with shipping
lines. Meanwhile, on the other end,
Asian shippers have to contend with
the burden of Terminal Handling
Charges along with many other local
charges.
The same situation extends to the air
freight market as well. Regulatory
authorities from Europe, the US and
with cooperation with those from
Asia, have raided offices of major
airlines as part of their investigation
into airlines' collective pricing over
surcharges and alleged price-fixing
on cargo operations. From European
media reports, BA, Air France,
KLM, SAS, Lufthansa and Cargolux
were visited in February 2006, and
some reports said Japan Airlines,
Cathay Pacific, Singapore Airlines,
LAN, Polar Air cargo, Korean Air,
 Shippers Today
Asiana and ANA also came under
scrutiny. Requests for information
were said to have been received
from both the EC and the US Dept
of Justice (DOJ).
S u b s e q u e n t l y, B r i t i s h A i r w a y s
reportedly paid up to US$700
million to the DOJ for both
passenger and cargo fuel surcharge
setting. Other airlines were also
reported to have 'settled' sums for
transgressions in discussing and
setting fuel surcharges.
Last year, anti-trust regulators once
again went scouting for law breakers
and searched several major air
cargo freight forwarders' offices, in
an extension of the airlines' probe.
EGL, Kuehne+Nagel, Expeditors,
Panalpina and Schenker were
reported in the media to have been
targetted by the investigations.
As a consequence, the local Hong
Kong Association of Freight
Forwarding and Logistics Ltd.,
HAFFA, has stopped publishing its
Ancillary Charges Guideline since
October 2007. The guideline is simply
that: a reference list of ancilliary
charges which have been put together
a m o n g H A F FA a n d t h e C o u n c i l .
Although not binding, the guideline
serves as a reference for the market
and provides caps on local charges.
Though not regulatory in nature, the
guideline serves as a sticking point
if and when unscrupulous service
providers try to levy outrageous
charges against shippers.
The Council considers that
improvement in the transparency
o f c h a rg e s w o u l d b e a b i g h e l p .
Shipping lines, airlines and freight
forwarders should be required to
publish their full tariffs that list out
all and every single itemised cost.
They should be required to charge
in accordance with their tariffs and
any violation should be punished.
To f a c i l i t a t e t h i s r e q u i r e m e n t ,
a licensing system should be in
place for shipping lines, airlines,
and freight forwarders/logistics
companies. Indeed, the Council has
been urging the SAR Government to
establish such a licensing system for
improvement of tariff transparency,
and protection of shippers against
carriers' misdeeds such as wrongful
release of cargo at destination,
c a rg o l o s s a n d d a m a g e , e t c . A t
present, protection to shippers is far
insufficient. Shippers are entrusting
millions worth of cargo to freight
forwarders who need only a normal
Business Registration to operate.
There are many cases that freight
forwarders just close their offices
to evade liabilities and are free to
just set up another company with
a new name and continue doing
the same type of business. These
freight forwarders tend to offer very
favorable terms to their overseas
agents in order to secure business
and the Hong Kong shipper would
have to ship with them under
nomination.
The Council is exploring the
feasibility of continuing to publish
a guideline of ancilliary charges to
replace that of HAFFA's. In doing
so, we hope to establish a market
reference and hope to remind all
shippers that before shipment,
it is important to ask for a full
quotation that lists out all charges–
at origin, freight, and at destination.
Shippers should pay attention also
to all other terms and conditions
to ensure that there would be no
unexpected charges, a fact of life in
an unregulated market environment.
 CHANS’ ADVICE

Richard Chan

HVR cover cargo

has been in
the shipping
industry and
in transport
liability

delivery (III)
insurance for
more than
20 years,
out of which he worked for a leading
shipping company, a P&I Club and
a transport liability mutual Club and
also insurance brokers. Throughout
these years, he has been handling
transport related claims and giving
loss prevention and transport contract
We previously wrote that the Hong was no precise date for this, it was
advice. He is now Director and co- Kong Court of Appeal on 13 July clear from the judgment of Stone J
founder of Sun Mobility Insurance and 2007 held the forwarders liable in the court below that this was no
Claims Services Ltd. which specialises in
transport liability claims, loss prevention
to pay the seller for US$873,028 later than 22 April 2003. The Court
and contract advice. Richard has plus interest and costs in the cargo of Appeal was content to use this
been very active in the transport and misdelivery claim. On 6 Nov date.
transport liability insurance industries,
and has been in much demand in
2007, the Court of Appeal issued a
giving seminars organised by insurance further short Judgment dealing with As for the rate of interest, the Court
organisations. He graduated from Hong two points: (i) interest and (ii) the of Appeal saw no reason to depart
Kong Polytechnic with a Prefessional
Diploma in Business Studies Transport
forwarders' application for leave to from what is the usual: 1% above
in 1984, and obtained the qualification appeal to the Court of Final Appeal. prime. Although the seller had
of MCIT and ACIArb. in 1987 and 2000 contended for a higher rate, there
respectively. He holds an MBA degree
awarded by University of East Asia. Interest was very little, if any, evidence to
Email: richardchan@sun-mobility.com justify this.
In the judgment handed down on
13/7/2007, damages in the sum of Accordingly, there would be interest
US$873,028 were awarded in the at the rate of 1% above prime rate
Simon Chan seller's favour. These damages, for the period from 22 April 2003
is Director
unliquidated in nature, were in to 13 July 2007 (the date when the
and co-
founder of respect of the misdelivery that took judgment of the Court of Appeal
Sun Mobility place when the seller's goods were was handed down) and thereafter
Insurance
handed to the buyer without the at judgment rate until payment.
and Claims
Services production of the bills of lading. "Prime rate" means the prime rate
Ltd. He of lending of the Hong Kong and
deals in transport liability insurance
In a contractual claim, interest Shanghai Banking Corporation from
brokerage plus provision of unique
transport risk management services. usually runs from the date of breach time to time during the relevant
He has extensive risk assessment, (the date when the cause of action period.
marketing and sales experience in
marine insurance products in Greater
accrued) but the courts are of course
China. Simon is a highly experienced entitled, in the exercise of the broad A p p l i c a t i o n f o r l e ave t o t h e
marine, multi-modal and logistics discretion they have regarding Court of Final Appeal
risks manager in Asia Pacific. Before
becoming a transport risk manager, he
interest, to use a date which may
had extensive operational experience be more appropriate, for example, The damages awarded against the
in the transport industry. He assumed where the loss does not immediately forwarders being in the nature of
managerial roles in airlines and
container shipping companies. Simon
arise: see McGregor on Damages unliquidated damages, there is no
received a B.A., （Hons） degree from the (17th Edition) at paragraph 15-065 appeal as of right under section
University of Hong Kong and attended to 15-066. In the present case, the 22(1)(a) of the Hong Kong Court of
the Institute of Chartered Secretaries
& Administrators . He was awarded
cause of action (both the breach of Final Appeal Ordinance, Cap.484.
a Master of Business Administration contract and conversion) accrued at
in Finance and E-commerce by the the time when the misdelivery took As for the application under section
Hong Kong University of Science and
Technology.
place (which was the time that the 22(1)(b) of the Ordinance, the
Email: simonchan@sun-mobility.com seller sustained its loss when it lost forwarders had advanced seven
the relevant goods). Although there grounds said to be points of great

 Shippers Today
 CHANS’ ADVICE

general or public importance.
The Court of Appeal refused leave
under section 22(1)(b) of the
Ordinance. The Court of Appeal
referred to the Grounds of Appeal
set out in the Notice of Motion
taken out by the forwarders:
(1) The first two grounds related
to the argument on the differences
between straight and negotiable
bills of lading. While the Court
of Appeal accepted that this did
involve an area of law that is
important, the Court of Appeal did
not see that the contentions raised
by the forwarders were reasonably
arguable for the reasons gone into in
the judgment given by the Court of
Appeal on 13 July 2007.
be shown: see Chao Keh Lung For the above reasons, the Court of
v D o n X i a ( 2 0 0 4 ) 7 H K C FA R Appeal dismissed the forwarders'
260. None existed in the case in application for leave to appeal to the
question. Court of Final Appeal.
Simon Chan Richard Chan
Director Director
E-mail: simonchan@sun-mobility.com E-mail: richardchan@sun-mobility.com
10/F., United Centre, Admiralty, Hong Kong.
Tel: 2299 5566 Fax: 2866 7096
E-mail: gm@sun-mobility.com Website: www.sun-mobility.com
CIB A MEMBER OF THE HONG KONG CONFEDERATION OF INSURANCE BROKERS
Multi-modal transportation involves far more complicated liability regime than port-to-
port or airport-to-airport carriage. Pure international sea or air transport often affords
better protection by international conventions. Conversely, multi-modal transport entails
a variety of operational risk elements on top when the cargo is in- transit warehouse
and during overland delivery. Fortunately, these risks are controllable but not without
deliberate efforts. Sun-Mobility is the popular risk managers of many multi-modal
operators providing professional assistance in liability insurance, contract advice, claims
handling, and as a matter of fact risk consultant for their staff around-the-clock.

(2) The next three grounds

related to the construction of the
particular bills of lading that had
to be considered in the case in
question. The Court of Appeal saw
no points of great general or public
importance there: the outcome
depended on the particular language
used in the terms themselves. It
seemed at the end of the day that the
forwarders were simply contending
that the Court had construed the
terms too strictly.

(3) The final two grounds dealt

with the forwarders' counterclaim
relating to freight. This claim was
resolved on the facts. The Court
of Appeal repeated paragraphs
134-144 of its Judgment of 13 July
2007. The forwarders advanced a
number of points based on pleading
practice and set off but, in the Court
of Appeal's view, no points of great
general or public importance arose
there.

The forwarders finally relied on the

"or otherwise" ground in section
22(1)(b) of the Ordinance. But
exceptional circumstances have to

Shippers Today 
 LOGISTICS

Hong Kong holds its

ground in logistics
By The Hon. Miriam Lau Kin Yee,
Legco member for the Transport Functional Constituency

Once again, I am asked to forecast

what the future holds for logistics in
Hong Kong. I do not have a crystal
ball, but I do not need a crystal ball
to foresee that Hong Kong logistics
will continue to face many challenges.
Having said that, I am glad to say
that Hong Kong logistics appears to
be holding its ground. Although the
growth rates have somewhat fallen,
our container throughput in terms of
absolute numbers remains good, and air
cargo remains strong.

Although Hong Kong is no longer the

busiest container port in the world,
container throughput handled by our port
in 2006 recorded 23.5 million TEUs,
which is 4.1% higher than 2005. This
means that although we are still beating
our own record year after year, other
ports have grown much faster than us.
For 2007, the prediction is that we may
still hold our ground, and perhaps even
achieve a miniscule growth of 1-2%.
In the area of air cargo, my prediction
for 2006 was 6%. The year ended with
a growth rate of 5.2%, which in terms
of absolute numbers was a phenomenal
volume of 3.6 million tons - the envy of
the world. We still remain the leading
airport in terms of international air cargo.
For 2007, although air cargo throughput
was somewhat sluggish during the first
few months, this picked up in the second
half of the year. The prediction is that
for the whole year, we may be able to
achieve a growth rate of around 4%.

 Shippers Today

It must be mentioned that although
the total number of containers moving
through Hong Kong has not fallen, the
composition of container traffic has
shifted over the past few years. Ocean
freight is not growing, and may even
be falling slightly, while transshipment
cargo has surged and the growth of
river trade appears to be tapering off.
This change is worth noting as it affects
the strategies that Hong Kong should
adopt to face future challenges.
Despite much effort over the past few
years to narrow the price differential
for cargo handling between Hong Kong
and the Shenzhen ports, we have not
been able to make further reduction
beyond the existing differential of
around US$260 per container. Fuel cost
remains a nightmare as international
fuel prices continue to escalate.
Although DTTN (Digital Trade and
Transportation Network) is in place and
OBTIS (On-Board Trucker Information
System) is proceeding into the proof of
concept stage, more time is needed by
the industry to catch up with electronics
logistics. Compounding these
difficulties is the fact that Guangdong's
export trade may slow down as more
factories move further inland as a
result of recent regulatory controls
targeting labour-intensive and polluting
industries in Guangdong. As Hong
Kong's cargo is mainly sourced from
South China, reduction of Guangdong's
exports will most certainly adversely
impact Hong Kong. Our share of the
pie, which is not really growing, may
be further reduced.
As many factories in the Pearl River
Delta are expected to move westward,
whether for costs reasons or to avoid
regulatory controls by the Mainland
authorities, the need for the Hong
Kong-Zhuhai-Macau Bridge becomes
imminent. This Bridge brings Hong
Kong and the Western PRD within
a 30-minutes radius and is vital if
Hong Kong is to capture the cargo
from this source. The Chief Executive
has in his policy address included
this Bridge as one of the ten major
infrastructural projects committed by
the Government. We really need to
push ahead with this project.
Whilst enhancement of logistics
infrastructure is important, that alone
is not enough. Neither can we afford to
sit back and wait. The stiff competition
that Hong Kong already faces can only
intensify in the years ahead. For years
I have been calling on the Government
to assist the industry to breakthrough
into value-adding and other areas of
excellence. Some progress is made in
the development of electronic logistics,
though it may be a while before we are
able to reap the benefits. Progress is
however slow in the provision of land
which is almost a pre-requisite for the
development of value-added logistics.
Many logistics operators have already
moved to the Mainland simply
because they have not been able to
find suitable places for operation in
Hong Kong. The Logistics Park which
LOGISTICS
we have been talking about for many
years, and which the Government
said back in 2002 that it will build, is
still going through a feasibility study.
Worse still, it seems to have suddenly
disappeared from the radar of
Government's infrastructural projects,
as it is not even included in the current
Chief Executive's infrastructural
development program.
Many industry players have reflected
to me their concern about the lack of
logistics land for further development
of the industry. This insufficiency of
land is also hampering the growth
o f t r a n s s h i p m e n t c a rg o w h i c h i s
developing rapidly and which offers
a buffer to the decline or sluggish
growth of ocean freight. The logistics
industry does not have the luxury of
time. If Hong Kong seeks to retain
its competitive edge in the field
of logistics, it is high time that the
Government seriously focus on the
genuine needs of the industry and
perform its job as facilitator. I reiterate
my call to the Government for action to
be taken.
Shippers Today 
 LOGISTICS

Hong Kong's Export Outlook for 2008:

Maintaining Competitiveness through
accordingly. Across the Atlantic, the
EU will probably exert a tougher stance
Mr. Alan Wong on trade issues with the mainland,
Deputy Director, Hong Kong Trade bringing its position more in line with
Development Council
the US. While the initiation of anti-
dumping actions against mainland
Mr. Alan Wong was born in Northern China. His
products has subsided for some time,
family moved to Guangzhou soon afterwards and
new investigations are expected to
later the family settled in Hong Kong.
gain momentum, and rigorous use of
After attending high school in Hong Kong, Mr. Wong other trade defense measures cannot be
went to Canada for his tertiary education, he graduated ruled out. On both sides of the Atlantic,
from the University of Alberta with a degree of Bachelor of Science. recalls of mainland-origin products,
especially toys, pose another challenge
After working briefly in the private and public sectors, Mr. Wong started his long for Hong Kong exporters.
career with the Hong Kong Trade Development Council. He moved up the ranks
from Market Officer to his present position as Deputy Executive Director. He has Mainland as a cushion against
extensive experience working both in Hong Kong and overseas which included world moderation
postings to Los Angeles, Chicago, Dallas, New York, Panama, Paris, London, etc.
For Hong Kong exporters, a more
His present responsibilities include overseeing the Council's network of cheerful development is expected to
overseas representation and formulating the Council's promotional strategies. be the sustained growth of developing
economies. In particular, developing
Mr. Wong is married with two daughters. Asia, powered by the Chinese
mainland, will continue to be the
most vibrant region on the global
In 2008, the global economy, albeit will be largely tepid, despite helpful economic scene. To some extent,
remaining fairly decent, will witness currency movements. Oil prices are sustained intra-regional trade, primarily
the continued transition of advanced a wildcard. Stubbornly high crude driven by continued demand from the
economies to a slower lane of growth. prices may not only drag consumption, Chinese mainland, should be able to
In the US, growth is expected to but also stir up inflationary pressures, cushion some of the negative impact
decelerate markedly, because of further making it difficult to adopt a relaxed engendered by the slowing world
housing corrections and the sub- monetary stance if needed. economy in general and a dwindling
prime fallout. This US slowdown will U S d e m a n d i n p a r t i c u l a r. S o u n d
likely constrain growth in the EU and Hong Kong exports will be further economic fundamentals, including
Japan, although the expansion of both affected by potential protectionism in solid external positions, large exchange
economies should remain relatively traditional markets. Especially in the reserves and high domestic savings,
strong by their own standards, and a US, it is widely held that protectionism should indeed help the region weather
steady demand from the EU and, to a would intensify amid the presidential the global slowdown, whereas stronger
lesser extent from Japan, will provide elections in 2008. Calls for a tougher currencies should mitigate the negative
some buffer against the uninspiring stance against the mainland have consequences of high crude prices.
demand from the US. At any rate, already grown, and the US government
consumption in both Europe and Japan has taken a number of policy actions Evidently, Hong Kong is set to further

10 Shippers Today

Supply Chain Management
benefit from the sustained expansion in
intra-regional trade, especially sales to
the mainland, where economic growth
will remain at a double-digit rate in
2008, despite further policy curbs
in response to signs of overheating.
Notwithstanding successive interest
rate rises and a reduction in the tax
on deposit interest, retail sales were
up 15.9% in the first three quarters
of 2007, vis-à-vis 13.7% in 2006.
Consumption growth is expected to
stay strong next year, as the prevailing
positive wealth effect deriving from
rising wages and the stock market
should remain largely in place, while
the government also seeks to rely more
on consumer spending, rather than
investment and exports, as the driver of
economic growth.
On the external front, mainland
exports will moderate somewhat,
as foreign demand, not least US
demand, is forecast to slow. In all
likelihood, however, such impact
will not be substantial. According to
the World Bank, if US consumption
contracts by the equivalent of 1%
of GDP, China's economic growth
is estimated to be lowered only by
0.2-0.5 percentage point. Indeed,
China, the world's third largest exporter
in 2006, has overtaken the US as the
second largest since the beginning
of 2007, and is expected to surpass
Germany as the largest in the near
future. Hong Kong should therefore
further benefit from the mainland's
healthy appetite for materials and semi-
manufactures for export production.
In addition, the mainland's continued
industrial upgrade will generate huge
opportunities for Hong Kong as a
technology marketplace, especially for
machinery and equipment for advanced
production and green manufacturing.
Challenging production
environment
An unceasing demand from the
mainland will surely bring glad tidings.
But changes in processing trade
policies will pose a challenge for Hong
Kong exporters and manufacturers.
Now that promoting the transformation
and upgrade of the processing trade
and restricting the development of high
energy-consumption, heavily polluting
and resource-intensive industries are
the mainland's long-term development
objectives, it will continue to make
adjustments to processing trade polices.
Such policy changes, covering VAT
rebate adjustment, expansion of the
restricted/prohibited category and
access threshold for processing trade
enterprises, could have significant
impact on Hong Kong manufacturers,
perhaps in terms of mode of operations,
use of technologies, sources of raw
materials, manufacturing localities as
well as production costs.
However, rising labour costs present
the greatest challenge to Hong Kong
manufacturers. In the PRD, labour
costs that comprise wages, social
security contributions and other
welfare benefits have increased by
some 25% over the past two years,
while the new Labour Contract Law,
which will come into effect from
LOGISTICS
by Alan Wong, Deputy Director,
Hong Kong Trade Development Council
January 2008, may have additional cost
implications. Meanwhile, the RMB
exchange rate has been appreciating. It
is estimated that a 10% appreciation of
the RMB would translate into a 2-4.5%
rise in production costs. So if labour
costs account for 15-30% of the total
production costs, just the rise in wages
and RMB appreciation in the past two
years alone has already resulted in an
estimated increase of 6-12% in the
total production costs. To compound
problems, the recent product recalls,
dominated by toys, will also increase
safety compliance costs, whereas
soaring commodity prices will jack
up input costs, especially for precious
metals and stones, as well as plastic
raw materials due to high oil prices.
Likely performance of selected
Hong Kong exports
Given a stable demand due mainly
to the continued popularity of digital
products in overseas markets and
sustained demand for parts and
components from the mainland,
Hong Kong's electronics exports,
which account for over half of Hong
Kong's total overseas sales, will stay
as the growth leader. For clothing, a
continued shift in US and EU orders
from other production bases back to
Hong Kong and the mainland, amid
low levels of US quota utilisation
and the removal of EU textile quotas
next year, should partly offset the
moderation in foreign demand. For
toys, sales will be clouded by the
recent recalls, although the impact
should not be substantial, given Hong
Shippers Today 11
 LOGISTICS
Kong's ability in safety compliance. As
regards jewellery, sales in value terms
will be particularly inflated by lofty
raw material costs, while exports of
watches and clocks are expected to be
steady, with higher priced timepieces
likely to perform better.
Supply Chain Management: Tenet
for exporters and manufacturers
Hong Kong exporters and
manufacturers must take note of
the likely developments not only in
the global market environment, but
also the production environment on
the mainland. In view of changing
processing trade policies and rising
production costs, they should strive to
better manage their supply chains in
order to maintain their competitiveness.
First, to cope with the expanding
range of prohibited commodities
of the processing trade, enterprises
processing with supplied materials
should consider converting to foreign
invested enterprises. Second, to
avoid high labour costs in the PRD,
Hong Kong companies could shift
part of their manufacturing activities
beyond the PRD and further into other
provinces. They could even consider
maintaining a diversified production
base rather than just concentrating on
the mainland, not least setting up a
12 Shippers Today
presence in emerging production bases
like Vietnam and Cambodia.
M o r e i m p o r t a n t l y, t h e y s h o u l d
upgrade their product structure,
and shift from simple processing
and assembly to high value-added
activities and high technology sectors.
This move might involve a wide
spectrum of activities, probably
including developing own designs
and brands, introducing innovative
and high-tech products, adopting
new materials and technologies,
embarking on automated production,
implementing a green manufacturing
system, tightening financial
control, strengthening inventory
management, as well as enhancing
logistic arrangements. Prompted by
the urgency of transformation and
upgrade, alongside the substantial
adverse effect of rising production
costs, Hong Kong exporters and
manufacturers should no longer adopt
a wait-and-see attitude, and be ready
to step out of their comfort zone to
avoid being crowed out.
On the market front, as protectionism
i s l i k e l y t o i n t e n s i f y, w h i l e
consciousness on environmental
protection and product safety will
become more popular, what Hong
Kong exporters should do is to
keep a close eye on regulatory
developments and respond
accordingly, covering quotas and
anti-dumping/countervailing actions
on the one hand, and environmental
laws and related green manufacturing
requirements, plus product safety
measures and standards, on the other
hand. Given the limited growth
prospects of traditional markets,
Hong Kong exporters are further
advised to look for other fledgling
markets, spanning from Southeast
Asia, South Asia and the Middle
East to Central and Eastern Europe
and Latin America, particularly the
oil and commodity-rich countries,
and economies more insulated from
the global slowdown. But despite
abundant emerging opportunities,
obvious pitfalls await the unwary.
Hong Kong exporters should be
prepared for, among others, market
v o l a t i l i t y, r e d t a p e , i n a d e q u a t e
infrastructure, retail fragmentation
and affordability problems in the
emerging world.
Development of Hong Kong's
services exports
Consistent with the moderating growth
expected in merchandise exports, the
growth in services exports should
slow a tad in 2008. Although the trade
prospects for the Greater PRD region
next year should remain promising on
the whole, direct shipment or cargo
diversion will continue to take its
toll on Hong Kong's transportation
service receipts. The healthy state of
inbound tourism expected for next
year, which would help the passenger
of transportation service exports, may
not offer too much of an offset in light
of the sector's downtrend in growth
over the past four years. Although
cargo diversion would negatively
impact transportation receipts, Hong
Kong still derives very substantial
income from the export of trade-
related services, which are primarily
offshore trade transactions, that should
hold up well next year.
Cargo diversion notwithstanding, the
increased transhipment of PRD cargo
by barge to Kwai Chung has become
a brighter spot in the activities of
Hong Kong Port lately. For its part, the
Hong Kong government has recently
tendered out a waterfront plot of four
hectares off Container Terminal 7 for
improving barging operations. Apart
from measures to improve efficiency
and reduce the cost of cross-boundary
trucking, Guangdong and Hong
Kong are also discussing the need for
additional boundary crossing points to

enhance land connectivity between the
two places. Nevertheless, Hong Kong's
seacargo sector is facing intensifying
challenges from neighbouring ports
in Southern China, which are fast
catching up in terms of the number of
shipping lines, overseas destinations,
efficiency and capacity. The first two
berths of Dachan Bay will come into
operation by the end of this year, with
port expansion projects in Yantian and
Shekou steaming ahead.
In comparison with seafreight, Hong
Kong's airfreight sector should perform
somewhat better in 2008. Against the
background of the continued relocation
of electronics production capacity to
Asia, now an increasingly integrated
production region, airfreight prospects
next year should be helped by higher
electronics-related sales and sustained
intra-regional trade. On the other hand,
to reinforce Hong Kong's position as
an international and regional aviation
hub, progressive steps have been
taken to expand Hong Kong's air
transport network and capacity. Hong
Kong International Airport (HKIA)
is now working on an enhancement
project to increase the capacity of
the existing runways, while carrying
out a feasibility study of adding a
third runway. The Airport Authority
has also decided to consult cargo
facility operators regarding the need
for establishing Hong Kong's third
aircargo terminal.
The performance of Hong Kong's travel
and tourist sector looks promising
next year, thanks to the US dollar's
substantial cumulative depreciation
against major currencies, which raises
the purchasing power in Hong Kong of
tourists from many long-haul markets.
Hong Kong's themed promotion of
its being a host city of the Olympics
Games, expansion of the individual
travel scheme for mainland visitors to
cover currently 49 cities (including all
provincial capitals of Pan-PRD), plus
LOGISTICS
a strengthening RMB, should attract
more mainland tourists to the city.
Financial services, which constitute
about 10% of Hong Kong's total
services exports, have grown annually
at around 30% for the past couple of
years. While the mega-sized IPOs
seen in 2006 in Hong Kong were not
repeated this year, listings of mainland
enterprises of reasonably large size
will remain frequent next year. In
addition to a significant number of
IPOs related to mainland enterprises,
listing hopefuls from other places can
also be expected in 2008, with the
Hong Kong bourse starting to reap
the fruit of its active promotion of
Hong Kong's listing platform in many
emerging markets.
• Given a US-led global slowdown and rising overseas protectionism, Hong
Kong's total merchandise exports are projected to expand by 7% in 2008,
with electronics remaining the growth leader.
• Led by the Chinese mainland, the dynamic growth of developing Asia will
largely remain unscathed from the global slowdown. Intra-regional trade,
especially demand from the mainland, will provide the main stimulus to
Hong Kong exports.
• However, changes in processing trade policies on the mainland, along with
surging production and raw material costs, will pose big challenges for
Hong Kong exporters and manufacturers.
• In response, they should strive to better manage their supply chains to
maintain their competitiveness, not least shifting from simple processing
and assembly to high value-added activities and high technology sectors.
• They are also advised to monitor regulatory developments in overseas
markets, covering environmental laws and safety measures too, and
diversify into selected emerging markets, especially oil exporters and
countries with sustainable domestic demand.
• Services exports should moderate slightly in tandem with the slower
growth of merchandise exports, though the prospect of exporting trade-
related services and travel services should stay largely constructive.
• While the mega-sized IPOs seen in 2006 in Hong Kong are not repeated
this year, listing of mainland enterprises of reasonably large size will
remain frequent next year.
Shippers Today 13
 LOGISTICS

Helping Hong Kong exporters

grasp emerging opportunities
by Mr. Tom Tang, JP Chairman of The Hong Kong Exporters' Association

processes and our market position. We

Mr. Tom C. Y. TANG, JP must look at ways to to enhance our
competitiveness amid the changing
Chairman, The Hong Kong Exporters' Association
manufacturing environment in China
Elected Chairman of The Hong Kong Exporters' and the international market place.
Association in 2005, Mr. Tom Tang has been an
active member of the General Committee since If we want to compete globally and
1 9 9 6 . H e s e r v e d a s a Vi c e C h a i r m a n o f t h e maintain our viable production activities in
Association from 1999 to 2004. Mr. Tang is the the Mainland, then we must move onward
Managing Director of Meadville Holdings Ltd, a group that and upward the value chain. Manufacturers
manufactures printed circuit boards and copper clad laminates in Hong Kong can no longer focus on low-cost production
and China under the name of Oriental Printed Circuits Ltd, Mica-AVA (Far of low-value products. We have to re-orient
East) Industrial Ltd, Dongguan Shengyi Electronics Ltd, Dongguan Meadville ourselves in order to meet the changing
Circuits Ltd, Shanghai Meadville Electronics Ltd, Shanghai Meadville Science needs of our markets. While we can no
& Technology Co Ltd. Majority of the products are exported to USA, Europe, longer compete on cost advantage, we
Japan, Singapore, Malaysia, Philippines, Thailand, Vietnam and China. should instead add more value to our
goods and services; we should upgrade
Mr. Tang serves on the Electronics and Electrical Appliances Advisory Committee
our products, facilities and production
of Hong Kong Trade Development Council, Board of Directors of The Hong Kong
technologies; and, we should develop new
Standards and Testing Centre, Board Member of Hong Kong Safety Institute, Chairman
markets. After all, our competitive edge
of the Electronics and Telecommunications Training Board of Vocational Training
Council, Board of Directors of Hong Kong Applied Science & Technology Research is built on our innovativeness and cutting-
Institute Co. Ltd. and Honorary Chairman of Hong Kong Printed Circuit Association. edge design capability, as well as our high
quality products.

In 2007, we celebrated the 10th
anniversary of the establishment of the
SAR and our reunification with the
motherland. It was a memorable year in
many aspects. The value of total exports
of Hong Kong reached a record high at
HK$2,212 billion in the first 10 months
of 2007, registering an increase of 9.4%
compared to the same period in the
previous year, thanks to the hard work of
Hong Kong manufacturers and exporters.
Looking ahead to 2008, the global
picture looks promising although the
pace of economic expansion may be
slightly slower than in 2007 owing to the
envisaged sub-par growth in the United
States, one of Hong Kong's major markets.
Despite the uncertainties stemming
from the US economy, there are positive
developments in other parts of the world,
including the thriving mainland Chinese
economy, continued expansion in Europe
and Japan, and solid growth in most parts
of Asia and Eastern Europe.
Although the outlook is favourable, we
must be attentive to the looming challenges
arising from both our production and
market sides. In particular, Hong Kong
manufacturers are facing a major crisis with
the sudden changes in the processing trade
policy by China's Central Government,
such as banning the import of certain
key raw materials and implementation
of deposit for certain imported materials.
Meanwhile, the recent massive recall of
toys and other products that were made in
China have hit badly some of those in the
international export business.
These are the challenges that we must
squarely address to ensure Hong Kong
exporters' sustainable development.
It is about time for us manufacturers
and exporters to review our production
The overall export business of Hong
Kong is not dismal, if manufacturers react
proactively to the challenges. Although the
weakness of the US market, being dragged
down by its housing market downturn
and sub-prime mortgage problems, will
be the main downside factor in the period
ahead, there are positive developments
in other parts of the world. The robust
Mainland market is expected to be the
main driving force of Hong Kong exports,
and many other emerging markets in
Asia, the Middle East, Eastern Europe
as well as in Southern America remain
fairly strong. These markets will help
offset the softness of the US market.
The Hong Kong Exporters' Association
will continue to work hard to form the
best export business environment, not
just in Asia but the world, to help Hong
Kong exporters grasp significant and
emerging opportunities.

14 Shippers Today
 LOGISTICS

Servicing the export platform of Asia

by Peter Landsiedel, Chief Executvie Officer,
DHL Global Forwarding – Asia Pacific

into English as 'Middle Kingdom' or

'Central Kingdom'. The term roughly
Peter Landsiedel dates from c.1000 B.C., when the Chou
Chief Executive Officer, people believed their nation occupied
DHL Global Forwarding Asia-Pacific
the centre of the earth. Some analysts
claim that present-day China, because
Peter Landsiedel is Chief Executive Officer of DHL
of its mounting economic, political
Global Forwarding for Asia Pacific. Based at the
and technological prowess, is poised
regional headquarters in Singapore, he is responsible
to reclaim its place at the geopolitical
for the company's long-term strategic developments
centre of Asia.2
in 17 countries, with approximately 3,400 employees.
Mr Landsiedel was promoted to head the Asia Pacific region with effect from
This may or may not happen. However,
1 September 2003. Prior to that, he was Vice President for the North Pacific
as far as trade is concerned, China is
region, overseeing the operations in Hong Kong, China, Taiwan, Japan, Korea
becoming the 'middle kingdom' of
and the Philippines. A German national, Mr Landsiedel joined the former
trade flow in the Asia-Pacific by being
Danzas in 1999 as Managing Director of Hong Kong and Greater China,
an important destination for the exports
where he significantly doubled the company's revenue contribution within six
of its neighbours (adding to its existing
months and expanded Danzas' presence in Hong Kong. He was promoted to the
position as the 'factory' of the world,
position of Vice President for the North Pacific region in 2000.
with a USD 100 billion-plus trade
Before joining the former Danzas, Mr Landsiedel was the President & CEO of surplus).
Thyssen Haniel Logistics (United States) from 1993, and was the company's President
& CEO (Hong Kong) from 1997. For instance, 14.3 per cent of Japan's
exports go to China now compared to
Mr Landsiedel is a member of the Counsel for Logistics Management in the 6.3 per cent in 2000. China's share of
USA, and holds a diploma from University of Michigan Business School. South Korea's exports was 10.7 per
cent in 2000, but today, the figure is
24.6 per cent. 6.6 per cent of India's
exports end up in China, compared
China is the fastest growing trading Large scale international trading, global to 1.8 per cent in 2000. More than 7
nation and the world's third largest export/import processes, cross-border per cent of the exports of Indonesia,
trading economy, behind the European repositioning of raw materials/products Malaysia, Singapore, Thailand and
Union and the United States. At the and manufacturing would be impossible the Philippines flow to China. China's
end of 2006, its international trade without professional logistical support. share of combined ASEAN countries'
exceeded USD 1.758 trillion. The value Therefore, China's changing role in the exports has risen to 7.3 per cent from 3.8
of China's exports continues to augment export landscape of the Asia-Pacific, per cent in 2000.
at more than 25 per cent a year. particularly its emerging role as the
region's export platform, would require A number of developments explain
China is no longer merely a phenomenal logistics service providers to reassess this trend, including China's record
exporter of low-cost manufactured and rethink their strategies. economic expansion (GDP growth of
products to North America and Europe. around 10 per cent per year in recent
Research indicates that China is also Export Platform for Asia years), which has churned out many
performing the role of a sophisticated energy- and resource-hungry industries,
'export platform' for the Asia-Pacific In Mandarin, China is known as as well as an increasingly affluent
region.1 Zhongguo, which can be translated middle class with a growing penchant

16 Shippers Today

for luxury and consumer goods; China's
entry into the World Trade Organization
(WTO) in 2001, which inserted the
country into the multilateral trade
liberalization process; and the signing
of the Trade in Goods Agreement with
ASEAN in 2004 as part of the ASEAN-
China Free Trade Agreement, which
granted exporters in South East Asia
access to the 1 billion people in China.3
However, research indicates that
another important factor may be at play
here, which is China's changing role
in the global pattern of manufacturing.
The Economist Intelligence Unit
(EIU) found that China has emerged
as the "destination of choice" for final
assembly and processing of goods.
Parts and components produced
across the Asia-Pacific are shipped to
China for the last stages of production
before being exported to markets
in North America or Europe. 4 This
"triangular journey", with China acting
as a manufacturing or processing
middleman, is transforming the country
into Asia's 'export platform'.
Serving the Export Platform
What does this mean for the logistics
industry?
The supply chains in the Asia-Pacific
are fragmenting, resulting in different
parts of production being carried out
in different countries. Advances in
technology and communications have
also enabled companies to split up
their supply chains into even smaller
tasks and put those tasks in areas
where they are done best and more cost
effectively.5
In addition, supply chains seem to
be integrating north-south, along an
ASEAN-China axis, to accommodate
the new reality of China becoming
the export platform of Asia. Indeed,
intra-ASEAN trade has declined (the
share of ASEAN countries' exports
destined for other ASEAN countries
dwindled from 22.4 per cent to 20.9 per
cent) compared to individual ASEAN
LOGISTICS
countries' direct trade with China. Asia's export platform. In recent years,
China has witnessed substantial foreign
China's new role as an export platform investment from major global logistics
will have important consequences for players, including DHL.
the logistics industry. First, the industry
will need to cope with more volume In late 2006, DHL Global Forwarding
and increased traffic frequency, as established a new Logistics Center
China's imports and exports are likely at Shanghai's Waigaoqiao Bonded
to grow further. For instance, trade Logistics Zone (WBLZ), which
between China and ASEAN is expected is the largest bonded logistics
to exceed $200 billion in 2008, double zone in China. DHL also operates
the figure in 2004. Second, the industry similar infrastructure in Guangzhou
would need to cater for supply chains Huangpu, Yantian, Shenzhen Futian,
that are integrating north-south along Beijing, Nanjing, Songjiang, Jiutin
the ASEAN-China axis. New transport and Shenzhen Nanshan. Incorporating
networks and logistics nodes would advanced technology, these facilities
have to be established to quickly and perform the multi-functional role of
efficiently convey components from an international transfer, distribution,
neighbouring countries to China, and procurement centre to facilitate
transport them from the ports/airports t h e e ff i c i e n t a n d s m o o t h f l o w o f
to factories in the interior of China, goods. They have been specifically
and finally return the finished products built to facilitate China's growth and
back to the ports/airports for export to development as Asia's export platform.
the West.
Just recently, DHL Express announced
China's logistics infrastructure its intention to build a new USD 175
is playing catch-up. Fixed-asset million North Asia Hub in Shanghai to
investments in logistics-related sectors complement our other hubs in Hong
hit USD 126 billion (CNY 940 billion) Kong, Incheon, Bangkok, Singapore
in the first three quarters of 2007, up and Sydney. Our hubs in Shanghai and
18.8 per cent year on year.6 More Hong Kong will connect the Yangtze
railways, highways, roads, airports River and Pearl River industrial zones
and ports are being planned or being to the rest of world, helping to service
upgraded. An example is the new port China's future logistics needs as the
of Yangpu in China's southernmost export platform for Asia.
province of Hainan, which the
government hopes will become a In the past, the celebrated Silk Road
gateway for the expected rise in the connected the Middle Kingdom to
China-ASEAN trade.7 the West. In this millennium, when
China is once again at the middle of
Foreign logistics operators, with their trading activity in Asia, we at DHL
international networks and professional are confident that our services and
expertise, also have a crucial role to infrastructure are ready to meet the
play in supporting China's burgeoning challenge of facilitating the new trading
international trade and new function as landscape in the Asia-Pacific.
1
EIU, Trading Up: A New Export Landscape for ASEAN and Asia, Hong Kong: EIU, 2007.
2
Martin Bulard, "China: Middle Kingdom, World Centre", Le Monde diplomatique, August 2005.
3
The Agreement on Trade in Goods of the Framework Agreement on Comprehensive Economic Co-operation ASEAN and China
(Trade in Goods Agreement) was signed by the ASEAN and China Economic Ministers at the 10th ASEAN Summit in Vientiane,
Lao PDR on 29 November 2004 and came into force on 20 July 2005. Two protocols incorporating further tariff concessions
4
were subsequently signed in 2006.
EIU, Trading Up: A New Export Landscape for ASEAN and Asia, Hong Kong: EIU, 2007.
5
EIU, Trading Up: A New Export Landscape for ASEAN and Asia, Hong Kong: EIU, 2007.
6
Anna Bartram, "Logistics investment in China tops $126bn", China Economic Review, 21 November 2007.
7
Susan Geng, "Yangpu to be gateway for ASEAN trade", Cargonews Asia, 12 November 2007.
Shippers Today 17
 LOGISTICS

Agility emerges as global player as

growth in Asia continues
by Wolfgang Hollermann, CEO, Agility APR.

and sea cargo. In China, Guangzhou

Wolfgang Hollermann Runtong International Transportation
Agility CEO, Asia Pacific Region Company Limited (GRITCL) joined the
Agility family; the company is primarily
Wolfgang Hollermann is Agility’s head honcho for
focused on ocean freight forwarding
the Asia Pacific region. As CEO, he leads the group’
services in Guangdong. 
s initiatives in the Far East and the world’s fastest
growing economies. The last 15 years saw him lead
Currently, Agility has 30 offices in China
LEP/GeoLogistics in the same capacity until PWC
covering all major cities and industrial
Logistics acquired Geologistics in Sept 2006. His
areas throughout the country. Given
leadership role in making GeoLogistics a corporate name
the economic growth in China and the
in the global freight forwarding industry has ensured that he continues to drive
corresponding growth in outsourced
similar growth at Agility. Prior to his long innings at GeoLogistics, Hollermann
logistics services there are active teams
was Joint Chief Executive for Hermann Ludwig/Calberson Group, based in
of Merger and Acquisition staff working
Singapore, Germany and the US respectively. During his stay in Singapore, he
in China to identify companies that can
built up a network of offices in Asia, an experience that holds him in good stead in
be acquired in the future.
his current position. Hollermann was a part-time university lecturer on Logistics
during his stay in Singapore. He earned his commercial degree at the Bremen
In Australasia, the major acquisition in
College followed by additional German Diploma in logistics/freight forwarding
2007 was LEP International, including
and an executive trainee programme in International Transport Management in
AFS, which expanded Agility's footprint
Europe and the US. Hollermann is married with four children. He has a deep
in Australia, New Zealand and Papua
community involvement with Asian and African orphanage projects.
New Guinea, where the company is
market leader in Project Logistics. In
Singapore the company acquired Synergy
The trend towards consolidation in the specialists in chemicals, oil and gas, a specialist in providing the company
3PL sector shows no sign of abating project logistics and bulk transportation. with a presence in South East Asia's
and one of the 'new' brands on the The aim is to become a one-stop-shop, growing oil and gas sector. The other
global logistics scene, Agility, has where customers are offered a complete economic giant in Asia, namely India,
emerged through a series of mergers and range of services. has been developing very quickly and in
acquisitions. In the space of a year, the 2008, there will be a major investment
merged company which brought together The global outsourced logistics market is in the country. 
PWC Group and GeoLogistics as well set to grow to an estimated US$590 bn
as other strategic vertical market leaders by 2010 from US$440 bn in 2007 which The Vietnam joint-venture business
such as F&E Specialist Trans-Link, will mean more opportunities for logistics will see further growth as the country's
Project Specialist Trans-Oceanic and the companies to expand. Much of the industrial exports increase.
Chemical Logistics Specialist Agility growth will be organic but there will also
UK, has increased its footprint across the be a great deal of activity in mergers and The market will remain competitive and
world and into new markets. acquisitions as consolidation continues. large 3PLs with backing from major
financial institutions are raising the bar as
As pressure grows to increase efficiency The first year of the Agility brand has they look to Asia to acquire strategically
across the supply chain, global brand been very successful in Asia Pacific, and important companies. Economic growth
name manufacturers are now looking to the Global Integrated Logistics (GIL) continues across the region not only in
outsource their logistics requirements group has expanded its footprint through China but also in India and South East
with one or two global logistics strategic acquisitions in China, Singapore, Asia. At Agility, there is a great deal of
service providers. In order to remain Australia and New Zealand. These excitement because of new opportunities
competitive these global 3PLs are acquisitions also helped to strengthen the in the Asia Pacific region in 2008 and we
expanding their networks, buying sector network in the project forwarding sectors are optimistic of a good year ahead.

18 Shippers Today
 LOGISTICS

Logistics Industry Outlook 2008

Great boars of fire!
The logistics industry is also seeing a changing phenomenon. driven mainly by export activity out of
Major players such as China are demanding better logistics and Asia, particularly in China and India.
The Beijing 2008 Olympic Games will
supply chain services to serve them locally so as to meet growing
continue to be the key growth driver
demands for domestic and international consumptions
for China, creating strong demand for
logistics support and good flow between
China and the rest of the world.

Kenneth A. Torok With India's gross domestic profit

President, UPS Asia Pacific growing at over 9% per year and the
manufacturing sector enjoying double
As President of UPS Asia Pacific, Ken Torok is
digit growth rates, the Indian logistics
responsible for all UPS express and supply chain
industry is at an inflection point, and is
solutions operations in more than 40 countries and
expected to reach a market size of over
territories, including UPS owned operations, joint
US$125 billion in year 2010. Strong
ventures and agent relationships throughout the
foreign direct investment inflows in
region. Torok has led UPS's express operations in
Asia Pacific since 2003. His expanded responsibilities to several industry sectors will also lead
cover supply chain solutions mark a new phase of development for UPS in Asia to increased market opportunities for
Pacific. Prior to becoming President of UPS Asia Pacific, Torok was Managing 3PL providers in India.
Director of UPS South Florida. In this capacity, Torok played a key role in the
integration of UPS package delivery, logistics, warehousing, freight forwarding, The logistics industry is also seeing a
brokerage and airline operations. changing phenomenon. Major players
such as China are demanding better
Torok began his UPS career in the US in 1975 in the company's East Carolina logistics and supply chain services
district operations. He later became hub manager in Wisconsin and Managing to serve them locally so as to meet
Director of UPS Utah, and has also spent several years in Europe where he held growing demands for domestic and
various managerial posts and played a key role in the integration of UPS's ground international consumptions.
and air operations in Europe, Middle East and Africa. A native of Long Island,
New York, Torok graduated with a degree in business and economics from North In addition, some of our customers in
Carolina State University. He and his wife Sharon reside in Singapore. this part of the world, who previously
had their logistics operations managed
in Europe and the U.S., are now moving
2007—the Year of the Boar– was compared to the same period in 2006. their supply chain management needs
an exceptional year for UPS as we The main contributors included regional to Asia. This is a growing phenomenon
celebrated a centenary of being in the powerhouses China and India, with which the UPS Asia Business Monitor
business. It is doubly encouraging to export volume growth at more than 25% (UPS ABM) 2007 has captured as
continue to see strong growth by the for each market for the three quarters. well. The ABM, which is an annual
company especially in the international study commissioned by UPS to
sector, and in particular, the upbeat Moving forward, 2008 looks certain examine the driving force behind Asian
economies of the Asia Pacific region. to bring on another year of continued SMEs, found that more than 70% of
g r o w t h f o r t h e l o g i s t i c s s e c t o r. the region's SME leaders believe that
By the third quarter of 2007, it was clear According to MergeGlobal, the industry an effective supply chain helps their
that the year of the Fire Boar was indeed growth in terms of tonnage from 2007 to company to be more cost and time
bringing on much prosperity for the 2010 is projected at 36.7%. Demand for efficient. Evidently, Asia businesses
company. UPS in Asia was experiencing international shipment expects to surge are awakening to the benefits of a well-
more than 20% in export volume growth in 2008 and over the next several years, managed supply chain in order to help

20 Shippers Today
 LOGISTICS
them maintain their competitiveness
and protect their businesses, in the face
of volatile challenges beyond their
control, ranging from changing trade
policies, surging production and raw
material costs and the likelihood of a
down-spiraling US economy that may
further affect more parts of Asia.
Asia
Although the US slowdown will likely
constrain growth in the EU and Japan,
led by the Chinese mainland, the
dynamic growth of developing Asia
will largely remain unscathed from the
global slowdown. Intra-regional trade
should continue to be an area of growth
for the industry in 2008.
Asian markets are vitally important to
UPS and the company sees true, long-
term growth potential in the region.
According to MergeGlobal, the industry
CAGR for intra-Asia trade in terms of
tonnage from 2004 to 2009 is 7.6%.
UPS will continue to grow our business
through the strategic expansion of our
network, infrastructure and portfolio of
services in order to help our customers
navigate global commerce. We expect
intra-Asia trade to continue to flourish
as manufacturers capitalize on the
comparative cost advantages offered
by different economies in Asia, greater
integration between Asian economies and
more intra-Asia Free Trade Agreements.
More businesses will turn to reliable
supply chain services providers with
a strong network in Asia to help them
with supply chain management in
order to become more competitive.
UPS's strategic focus is on developing
business in Asia, in particular the large
and growing economies of China, India
and Japan.
Milestones
In fact, to meet market demands and as
testaments of our commitment to Asia,
22 Shippers Today
UPS recently made investments that
will change the logistics landscape of
China, India and Japan.
In August 2007, UPS started construction
of the UPS International Air Hub in
Shanghai, China. The new hub is being
built on a parcel totaling 1 million square
feet and slated to complete towards the
end of this year. Rapid expansion is
planned to a sorting capacity of 17,000
pieces per hour.
Following this in September, UPS was
granted the authority to operate six daily
flights between the U.S. and Nagoya,
Japan, in addition to its daily service to
Tokyo and Osaka. UPS will be able to
connect these flights to its new air hub in
Shanghai, China. Japan has the world's
second largest gross domestic product
and the opening of air lanes between
Nagoya and Shanghai will improve our
services to customers throughout Asia,
especially China and Japan
Starting January 2008, UPS Jetair
Express has formed a strategic alliance
with leading local logistics player AFL.
The partnership significantly expands
accessibility to UPS services in India
and exponentially increases UPS access
points for customers with international
express delivery requirements to more
than 200 locations.
Renewal Vs Transformation
Overall, UPS remains very confident
about Asia in the year of the Earth Rat,
which signifies a time of renewal, or as
UPS sees it, a time of transformation.
Tr a n s f o r m a t i o n h a s b e e n a k e y
component of UPS's long term success,
as we grew from a small messenger
business on a bicycle in 1907 to be a
leader in global logistics today.
With 100 years of industry experience,
UPS has extensive intellectual capital
and has put in place innovative supply
chain capabilities and technology in its
operations around the world. Moving
ahead, the company will use its
knowledge and expanding capabilities
to connect suppliers and customers
one-to-one.
The vision of One-to-One, as put
forward by our former Chairman and
CEO Mike Eskew, refers to offering
more options for our customers to
meet their supply chain needs; more
bundling solutions that target market
segments like healthcare, high tech and
retail; presenting one point of customer
contact supported by a specialized
team; and having the right technology
for customers to easily request services
like notifications, shipment status, etc.
8 New UPS Products for 2008
To e q u i p o u r c u s t o m e r s w i t h t h e
right tools to take on their supply
chain challenges in the new year, we
have strengthened Asia's portfolio of
products and services with eight new
products. Three are unique freight
products as they are rooted in both
the integrator and freight-forwarding
business models. Four are consumer
technology products including the
industry first UPS Paperless Invoice
and UPS Returns, which come as a
direct result of the annual US$1billion
U P S i n v e s t s i n t e c h n o l o g y. T h e
eighth product, UPS Clinical Trials
is targeted at the pharmaceutical and
biotechnology companies where they
need biological products to be shipped
internationally.
The greening of the supply chain will
drive continuing attention to fuel,
packaging, waste minimization and
flexible mode shifts that balance speed
to market of air transit with lower
carbon options from ocean and ground.
Companies will seek paperless options
for Customs documentation and
visibility tools to enhance planning;
network optimization with routing/
scheduling/dispatch.

Senator International Hong Kong
opens Shenzhen office
Senator International Logistics Limited
Hong Kong has put it’s footprint in
South China with the opening of the
Shenzhen Representative Office late
last year. During the official Opening
Ceremony, Senator International
Chairman, Uwe Kirschbaum, gave
his blessings and best wishes for
a successful business. Seen at left
are (from left), Jochen Krug, Uwe
Kirschbaum and Rainer Helm during
the office inauguration in November.
The Shenzhen office is under the
m a n a g e m e n t o f L i s a Wa n g a n d
Simon Zhang. It provides customer
service and sales support for
business to and from the Guangdong
Province. Services offered include:
· Airfreight direct via Shenzhen or via
Hong Kong
· Oceanfreight via the Shenzhen ports
and Hong Kong
LOGISTICS
· Logistics and Value Added Services
like Pick & Pack, Quality Control,
Sorting, Assembly and more.
To contact Senator International Logistics
Limited-Shenzhen Representative
Office, call +86-755-2219 1889 or fax
+86-755-2219 1887, at Room 1904,
Shenhua Commercial Building, Nanhu
Road, Luohu District, Shenzhen 518001,
P.R. China. Contact person is Simon
Z h a n g , O p e r a t i o n M a n a g e r, t e l .
+86-755-2219 1889 or email simon.
zhang@szx.senator-international.
com, or Lisa Wang, General Manager
South China, tel. +86-755-2219 1883
or email lisa.wang@szx.senator-
international.com.
Shippers Today 23
 LOGISTICS
European benchmark study:
The Netherlands scores best on
qualitative location factors
A recent benchmark study, comparing
the relative attractiveness of 21
European cities, shows that the
Netherlands offers excellent locations
for European supply chain activities,
reported NDL/HIDC which represents
the logistics sector in the Netherlands.
T h e m a i n d r i v e rs for the leading
position of the Netherlands are the
labor conditions and the regulatory
and customs environment, along with
competitive costs for transport, and
the availability of intermodal transport
solutions.
The benchmark study 'High quality,
competitive costs' was conducted by
Holland International Distribution
Council (HIDC) and Buck Consultants
International (BCI), and compares
different cities as location for central
European distribution centers(EDCs)
or regional distribution centers (RDCs),
by analyzing various business case
scenarios in the high tech, spare parts,
lifestyle and med tech industries. This
benchmark study covers a broader
scope than other studies by taking into
account total supply chain costs from
source to market, as well as qualitative
factors, such as physical accessibility,
quality of labor, availability of transport
solutions and regulatory climate and
customs regime.
24 Shippers Today
SUPPLY CHAIN
MANAGEMENT
Labour and Customs
From a qualitative perspective, the
N e t h e r l a n d s s c o r e s e x c e l l e n t l y,
in particular in terms of labour
flexibility, as seen in hiring and firing
regulations. The Netherlands' high
rating for Customs regulations is also
to its advantage. The Dutch Customs
authority is known for its efficient
working procedures and pro-business
attitude. This is also supported by
the recent outcome of the Logistics
Performance Index published by
The World Bank, in which the Dutch
customs regime even scores best in the
world.
Transportation
In order to present an accurate
indication of how the various locations
relate to total supply chain costs, the
costs for both inbound transport (from
source to DC) and outbound transport
(from DC to customer) were taken into
account in the study. Even though the
Netherlands does not have a reputation
for being a low-cost country, the study
showed that the transport tariffs to
and from the Netherlands are lower
than in the other European countries
surveyed. The strong position of the
Dutch sea- and airports, the abundance
of European transport services from
the Netherlands and the central location
within the European market, contribute
to these competitive transport costs.
European supply chain structures
As a result of market developments and
cost factors, companies opt increasingly
to supply the European market through
hybrid supply chain structures. This
means applying different supply chain
solutions for different customers,
regions or product types. Locations
chosen for European supply chain
operations should therefore be related
to their purpose. The competitive
position of the Netherlands is favorable
for companies that supply the European
market via an EDC structure as well as
for those that use an RDC structure.
A digital copy of the report 'High
quality, competitive costs' can be
downloaded from www.hidc.nl.
NDL/HIDC represents the logistics
sector in the Netherlands and helps
international companies make a
smooth entry into the European market
or restructure their supply chain
through the region's leading gateway,
the Netherlands. All NDL/HIDC's
services are free of charge and without
obligation.
For more information about the
benchmark study, please contact the
local representative of NDL/HIDC:
NDL/HIDC Asia, Ms. Karin Rancuret,
Regional Director Asia, tel, +852
2297 3544 (Hong Kong office), e:
k.rancuret@hidc-asia.com.
 AIR

2008 fraught with challenges

for air cargo industry by Ron Mathison
Director & General Manager
Cargo Cathay Pacific Airways

and a reduction in air cargo purchases

Ron Mathison, Director & General Manager Cargo by shippers anxious to prove their own
for Cathay Pacific Airways Ltd, is responsible for green credentials. The environmental
all aspects of the airline's cargo business worldwide, challenge is not just about how we cope
including operations, marketing and sales. He is a with additional cost as a result of taxes or
member of Cathay Pacific's Management Committee emissions trading but also the negative
and an Executive Officer of the airline. He is also impact it will have on consumption and
a director of Air Hong Kong, and a director of the choice of mode of transport.
Global Logistics Systems Asia Pacific and Global
Logistics Systems Worldwide (Traxon). Mathison We can expect to see acceleration in the
joined Cathay Pacific in 1984 and has held a number of different retirement of older freighters as pressures
managerial assignments overseas as well as in marketing and sales and revenue mount on the bottom line and this will put
management. Most recently, he was Director & General Manager of Cathay increased strain on flight crew training
Pacific Loyalty Programmes Ltd, a wholly owned subsidiary of Cathay Pacific resources which are already stretched thin.
Airways Ltd charged with managing the airline's Loyalty Programmes, The Rapid airline growth in recent years and
Marco Polo Club and Asia Miles, as well as developing the airline's Loyalty aggressive expansion plans have resulted
Marketing and Customer Relationship Management strategy. He has been in in a worldwide shortage of qualified flight
Loyalty Marketing since January 1994 when he set up Cathay Pacific's Loyalty crew, and crew costs are on the rise as a
Marketing Department and was in charge of the development and launch of the result of the pilot shortages.
Asia Miles Travel Reward Programme in February 1999. He also led Cathay
Pacific's Datawarehousing and Business Intelligence Programme (Customer Another constraint on growth is the lack
Information Systems) and was in charge of Customer Information Systems of sufficient airspace, slots and airport
from 1996 to 2004. Mathison holds a Literae Humaniores and Master's degree infrastructure - not just in Asia but in
from Oxford University. He is married with three children. many of the major air cargo consumption
markets. Air cargo tends to favour late
night departures because of consolidation
The outlook for the air cargo industry but consumed in the United States and and therefore often runs up against local
in 2008 is probably best described Europe. So far the trade friction has not noise restrictions on runway movements,
as extremely challenging. 2007 was had much impact on air cargo but there which is another constraint.
certainly a difficult year, with yields is a concern that directional imbalances
falling as a result of overcapacity and will continue to get worse as capacity Then there is the subprime credit
costs rising due to record-high jet fuel is added to serve the headhaul demand. crisis to contend with and the drastic
prices. We also saw a significant modal This will put more pressure on margins depreciation of the US dollar. The loss
shift from air to ocean take place and it going forward. in currency value and the tightening
is likely that this trend will continue if of credit is likely to have a negative
fuel prices remain at their current levels. The air cargo industry will also have to effect on consumption in the US and
come to terms with increasing security may even trigger a serious economic
Recently, there has been an increase in requirements and environmental downturn. The air cargo business has
trade friction as a result of widening activism, which will place a greater cost always been cyclical and trade flows
directional trade imbalances and this burden on the whole supply chain. We are likely to be negatively affected by
trend is unlikely to change given that can expect rising pressure on consumers a loss in consumer confidence and any
most products are manufactured in Asia to purchase locally grown fresh produce drop in underlying economic activity.

26 Shippers Today

Hong Kong itself is facing increasing
competition from new airports in the
Pearl River Delta (PRD) region and
rapid growth in competing hubs such as
Shanghai, Seoul and Dubai. It cannot
be denied that its position as the world’
s largest air cargo hub and the leading
gateway to the PRD is under threat. So
far Hong Kong International Airport
has held its own but we can expect that
growth in air cargo throughput in Hong
Kong will be a lot lower than at these
other airports in 2008.
However, it is not all doom and gloom
and we remain confident about the
long-term prospects for air cargo
growth. Hong Kong still has a lot of
advantages as a hub for air cargo and
we remain committed to investing
in our cargo facilities here as well as
in our freighter fleet. There is much
that can be done to take unnecessary
cost and time out of cross boundary
truck movements and there are other
opportunities to make HKIA more
competitive as a transshipment hub and
regional distribution centre.
One opportunity that is worth
highlighting is e-freight, where Hong
Kong is ideally positioned to take the
lead given its Freeport status, efficient
customs regime and supporting IT
infrastructure. The move to e-freight is
not just about taking paper away; it is
about improving the visibility of goods
throughout the whole supply chain
and speeding up the processing of
shipments. Together with Cargo 2000,
AIR
it provides an opportunity to make the
air cargo industry more competitive as
a mode of transport.
Hong Kong is also well positioned to
capitalise on trade growth between
India and Mainland China and,
notwithstanding the economic worries
mentioned above, we should expect
to see continued rapid growth in these
economies. We must brace ourselves
for the challenges that lie ahead
but trust in our ability to cope with
adversity and aim to come out of it
with renewed strength and vigour. That
has always been the way in this city.
Shippers Today 27
 AIR
TNT’s ‘Focus on Networks’
strategy
TNT inaugurated its Asia Road
Network into China in the fourth
quarter of 2007 becoming a
pioneer in Asia as an integrated
road network integrator linking six
countries across 4,000 kilometres.
The road network, which
connects Singapore to Nanning,
the capital city of Guangxi
Zhuang Autonomous Region,
and Guangzhou, the capital of
An illustration of TNT’s Asia Road Network
28 Shippers Today
Guangdong Province, will become
fully operational early 2008 after
completion of the last trials. The
Asia Road Network connects
to TNT's international express
network in China and linking it to
TNT's Chinese domestic network
will be a next step. This move will
eventually allow TNT's customers
to benefit from seamless road
connections in the region.
The integrated road network
reflects the extensive road network
operations TNT has established
i n E u r o p e . " P r e d o m i n a n t l y,
TNT Hong Kong deals with the
European market—60% of our
consignments out of Hong Kong
are bound for Europe. When the
shipment reaches the TNT hub
in Europe, in either Amsterdam
or Frankfurt, the shipment is
then transferred to the TNT air
hub or the road hub where it gets
distributed by truck on the road
network," explained Ambrose
L i n n , m a n a g i n g d i r e c t o r, T N T
Hong Kong.
The road network distribution
channel in Europe comes under
TNT's deferred shipment for
economy freight. "With the
product, global express logistics, it
takes 4 to 5 days' transit time door
to door, while economy freight
takes 2 or 3 days longer, or about 7
days in all."
Linn explains that TNT is purely
an ‘express link logistics' company.
"We are not in the integrated 3PL
service. Express link logistics is
a core part of the logistics cycle,
whereby air cargo is flown by the
global express channel, which is
clearly much faster than airfreight
and seafreight channels.
"In the global express channel,
about 95% of the customers
we are dealing with are high-
 AIR

end technology customers, the quality control, external package

likes of Apple, Acer, IBM–these
commodities are time critical, time
sensitive, which require them to be
conveyed by global express."
TNT assists these customers who
have to be mindful of production
lead time, and the sales order lead
time. "Just two years ago, the
customers used to give their clients
about two months' production
lead time. But now the production
lead time has been substantially
shortened to less than 2 to 3 weeks.
That's why we are the only viable
alternative for the production
plants of OEM technology
products. They have to ship the
parts all the way to end users in
Europe by global express channel
which is a door-to-door delivery
service," explains Linn.
" U s u a l l y, i f y o u s h i p d o o r t o
door, ex-factory, via Hong Kong
to Europe, by seafreight it would
take 14 to 18 days. By airfreight
channel, it would take 8 days by
normal airfreight, door to door.
If you ship by global express, 4
days is our service guarantee, a
commitment to our customers that
use TNT's global express door to
door delivery services. We ship
our customers' products under a
solution called IDE –Integrated
Direct Express," described Linn.
" Ta k e a n O E M i P O D f r o m a
factory in Dongguan. It is moved
across the border by truck into
Hong Kong, and the trip takes
about 6 to 7 hours. It is actually
shorter but Customs clearance cuts
heavily into the delivery time.
When the pallet arrives at the TNT
Hong Kong airport hub, value
added services are done, such as
tag, inspection for damages,
RFID, and so on, at a bonded
restricted area. The cargo transit
turnaround time in Hong Kong is
less than 2 to 3 hours after which
the shipment is uplifted to the
aircraft at around 9 to 10 p.m.
bound for Europe or the US."
When the shipment reaches
Europe, it is taken either to the
road hub or the air hub. "When the
shipment arrives at the European
road hub, the cargo is depalletised
and then injected into the European
road network. The truckage on
road comes under the deferred
phase and we call it economy
freight because the price is much
cheaper than airfreight. On the
other hand, the shipments that
go to our European air hub will
be injected into the European air
network to be delivered by TNT
aircraft to European destinations.
Upon arrival at the designated
airport, the shipment is loaded onto
vans for delivery to the end users.
This is the express service—using
the European air hub."
Linn notes that domestic activities
in Europe are on the growth path
but it seems that in the US, while
domestic air has been increasing,
road activities have been
diminishing. There is the issue of
overburdened infrastructure in both
Europe and the US that makes it
hard to push expansion until these
are less stressed. Meanwhile, Asia
has the economic momentum that
is driving faster growth.
Introduced at the end of 2005,
TNT's Asia Road Network connects
Malaysia, Singapore, and Thailand
through the north-eastern border of
Asia has the economic momentum that
is driving faster growth-Ambrose Linn,
managing director, TNT Hong Kong
Vietnam. Boasting 24x7 real-time
Global Positioning Satellite (GPS)
tracking of TNT's container trucks,
TNT has seen double-digit growth
in overall volumes since the launch
i n 2 0 0 5 . T h e g r o w t h i s l a rg e l y
driven by customers moving high-
value goods such as electronic,
automotive and computing
components. The road service
is two to three times faster than
sea freight and offers customers,
significant savings of up to 30%
compared to air freight.
Headquartered in the Netherlands,
TNT offers efficient network
infrastructures in Europe and
Asia and is expanding operations
worldwide to maximise its
network performance. TNT serves
more than 200 countries and
in 2006, reported €10.1 billion
in revenues and an operating
income of €1,276 million. TNT N
V is publicly listed on the stock
exchanges of Amsterdam and
New York.

30 Shippers Today
 AIR
IATA financial forecast predicts
2008 downturn
T h e I n t e r n a t i o n a l A i r Tr a n s p o r t
Association (IATA) released from
Geneva last December, a new industry
financial forecast estimating a global
industry profit of US$5.6 billion
in 2007 falling to US$5 billion in
2008. IATA represents some 240
airlines comprising 94% of scheduled
international air traffic.
The outlook is unchanged for 2007 at
US$5.6 billion. Higher oil prices (full-
year average forecast of US$73 per
barrel) were offset by strong traffic
growth (5.9% for passenger traffic) and
even stronger revenue growth of 8.4%.
"For the first time since 2000, we
are profitable. That is good news,
representing a lot of hard work by
airlines. Since 2001, non-fuel unit costs
dropped 16%, labour productivity is
up 64% and sales and marketing unit
costs decreased 25%. But with a 1.1%
margin, the bottom line is still peanuts,"
said Giovanni Bisignani, IATA's
Director General and CEO.
IATA sharply revised downward its
outlook for 2008 to US$5.0 billion
from the previously forecast US$7.8
billion. The spike in fuel prices is
expected to add US$14 billion to
the industry fuel bill, driving it up to
US$149 billion (based on an average
price of US$78 per barrel). The
broadening impact of the credit crunch
is expected to slow revenue growth
32 Shippers Today
to 4.7% and traffic growth to 4.0%.
Simultaneously, capacity expansion is
expected to accelerate in 2008 with an
increase in aircraft deliveries to 1,281
(up from 1,041 in 2007).
"The challenges get tougher in 2008.
A favourable economic environment
and effective efficiency measures
helped mitigate the impact of high fuel
prices and underpinned profitability
improvements. With the credit crunch,
that is changing. The peak of the
business cycle is over and we are still
US$190 billion in debt. So we could
be heading for a downturn with little
cash in the bank to cushion the fall,"
said Bisignani.
• W h i l e l e a d i n g i n a b s o l u t e
profitability in both 2007 and 2008,
North American carriers will see
the largest fall in profitability from
US$2.7 billion in 2007 to US$2.2
billion in 2008. With 35% of the
fleet over 25 years old, the impact
of high fuel prices is greater than in
other regions. Moreover, the region
is at the centre of the credit crunch.
• European and Asian carriers will
see minor drops in profitability of
US$100 million each to US$2.0
billion and US$600 million
respectively. Robust traffic growth
to and within Asia is expected to
partially insulate carriers from the
impact of the crunch.
• Middle East will remain s t a b l e
at US$200 million supported by
ambitious route expansion.
• Latin America is the only region to
see profitability improve by US$100
million to breakeven in 2008. This
is largely the result of industry re-
structuring.
• A f r i c a w i l l b e t h e o n l y r e g i o n
reporting a loss—stable at losses of
US$100 million last year and this.
"The common theme globally is
t h e n e e d f o r e f f i c i e n c y. I ATA ' s
Simplifying the Business programme
is delivering critical efficiencies from
e-ticketing to e-freight. In 2008 IATA
will launch three major initiatives that
will cut costs and improve service,"
said Bisignani.
"We will further revolutionise the
travel experience with expanded self-
service options to give passengers
more control over their journeys.
The new strategy is built around the
success of the Common-Use Self-
Service Kiosk, already operating at
83 airports around the world. Better
baggage management will help
mitigate the US$3 billion in annual
costs from the 1.8% of bags that are
mishandled. And the IATA Safety
Audit for Ground Operations will help
reduce the US$4 billion annual cost of
ground damage," said Bisignani.
 e - LOGISTICS
Digital Trade and Transportation Network (DTTN)
The crucial stage:
Achieving critical mass
The product and service suites were
rolled out in October 2006 and the
partnerships are now in place for
Hong Kong's own Digital Trade and
Transportation Network. DTTN for
short, the platform is owned and operated
by DTTNCo, an associated company of
Tradelink Electronic Commerce Limited
(Tradelink) and partly owned by the
Hong Kong Government.  benefit for DTTN if all these networks
DTTNCo operates an electronic platform
that provides interconnection among the
trade, logistics and finance industries
to facilitate the exchange of electronic
documents and information.
DTTN is on its way to achieving its
ultimate aim that would showcase
its viability to the rest of the world -
achieving critical mass. The network's
functions and products have been
developed to cater not just to one part
of the trading community, or to the
logistics community, or the shipping and
transport community - but for all these
sectors to interact in one smooth flow of
commercial transactions.
"DTTN is a first for Hong Kong and
a first for the world. The concept has
already caught on in other places - the
general concept that they call a 'national
single window' which is a phrase coined
by the UN. We've already achieved
this with the combination of Tradelink
and DTTN," said Justin Yue, Chairman
of DTTNCo, meaning a connection
between the trading community and the
logistics and trading platform.
"This year, we will keep driving our
recruitment of users. We need to sell
34 Shippers Today
the concept of DTTN to a lot more
people. Internationally, one of the
tasks that we're facing is to create a
connection between DTTN and other
similar platforms elsewhere. The
national single window concept is a
very strong trend that is emerging,
particularly in Asia and you can
see how it would be of tremendous
were to spring up and were all
interconnected. In fact, DTTN users
would be interconnected not just for
transactions with logistics suppliers
in Hong Kong but also with their
overseas counterparts - their buyers,
their sellers elsewhere. This is how we
can make use of DTTN to complete
the supply chain automation effort."
While multinational conglomerates
that make up the companies in Hong
Kong's trading and logistics industries
do electronic trading and SMEs do
understand and see the need of going
digital if they were to conduct business
with them, there are still some who
hold back. "There is still a bit of inertia
in the industry about going electronic,"
comments Yue. "Some can understand
the concept and see the need for
migration from paper to e-documents,
but for some it is a bit of a hassle simply
because even if a certain company A
is connected, another trading partner,
company B, may not be. Hence, this
is why I said at some point we need to
reach critical mass so that when new
users come online, they can use DTTN
not only to link up with their buyers, but
with the suppliers as well as with the
logistic providers (shipping lines, freight
forwarders, airlines)."
by Gina Giron-Urquiola
Critical mass
"First of all, one has to keep in mind that
SMEs don't trade with SMEs. SMEs
look to receive orders from the bigger
companies, the likes of Li & Fung in
Hong Kong, Wal - Mart in the US,
Metro, and so forth.
"Therefore, we have developed an
approach to DTTN that you could
describe as the hub - and - spokes
method. We sign up a large user - this
could be a major freight forwarding
company or a large buying company -
and when they come online, their many
partners or customers, including SMEs,
would automatically be users of the
DTTN platform," explains Yue.
"So what we've done in terms of
recruiting customers so far, since
DTTNCo's launch in October 2006, is
that we have enlisted more than 3,000
customers, including lots of bigger users
and lots of SMEs. And our approach
ensures that larger users would bring
in a cluster of SMEs. In the case of
a big trading company, for instance,
the SMEs could be small suppliers,
or accessory suppliers. In the case of
freight forwarders, then these would be
the shippers using the forwarder. Again,
the shipper could be several SMEs or
a large one, the likes of DHL which
you would consider a big shipper with
many 'users', the users in this case being
their customers like the larger electronic
companies in Hong Kong. And on the
other end of the spectrum, DHL has
small users such as an SME sending a
small parcel. So they all come in as one
hub - and - spoke or cluster, under DHL.
 e - LOGISTICS
So this is how we are proceeding in
terms of recruitment," Yue points out.
"In terms of providing connection, we
have two solutions. For the SMEs, we
offer a very simple solution, what we
call Excel form. For example, the SME
needs to set up a PO or Purchase Order.
They get free software from us which
is used on their own PC utilising the
Microsoft Office suite, and creating a PO
with Excel. As simple as that.
"Now, that's ok for the SMEs, but each
time you do a PO, you have to do data
entry. So for the larger users, we offer
a more efficient solution whereby you
can integrate DTTN into your back -
end system. Initially, you have to tell
DTTN the documents you propose
to use through DTTN. The package
itself has already been designed to
use a particular standard, such as EDI
or XML. They have to tell us the
documents they wish to generate, such
as PO, advance shipment notice, packing
list, commercial invoice. We look at the
format you are already using and do a
one - time mapping of your documents -
we format it to the DTTN format. When
we've completed the one - time format,
then your back - end computer system
can be configured to create the DTTN
documents automatically. It has proven
to be a very efficient method on how to
connect to the larger users."
"For our basic solutions, we have
lined up six different partners under
the project to "Promote the Use of e -
Business in the SME Community". The
six software vendors have been selected
by the panel of judges representing
the HKSME Association, HKITF and
DTTNCo to develop seven front -
end software applications covering 10
business processes and over 70 business
documents being used along the supply
chain. These solutions include:
• Insurance application developed by
Infinite Financial Solutions Limited;
• ERP (Enterprise Resource Planning)
36 Shippers Today
applications developed by United
Technologies (International) Limited,
Thinking Technology Limited
and MYOB Hong Kong Limited /
Purpose Driven Solution Limited, and
• FMS (Freight Management Systems)
developed by United Technologies
(International) Limited, Dynamic
Tech Consultants Limited, and eBean
Century.
Riding on the DTTN platform, customers
can make use of these free software
solutions for e - business use and this can
help facilitate the business workflow for
the SME community.
"To these partners, we provide the
basic Excel documents on top of which
they can add any useful, value adding
solution or applications that they might
need. This enables us to approach
potential customers with a wider range
of options that they can use within
their own offices, and choose their
options. And these are free because in
fact the development aspect has been
from a grant of a Government funding
programme," explained Yue.
"In terms of partners, Tradelink is the
largest partner of DTTN, of course.
Anyone joining DTTN is enabled to link
up with the more than 54,000 Tradelink
customers, and if you are already doing
business with anyone of them, then the
better for you. The over 54,000 Tradelink
customers by and large comprise the
majority of the Hong Kong trading
community.
"The other connections provided on the
DTTN e-platform, in addition to trading,
are freight forwarding, insurance,
banking, and terminal operators. With
the terminal operators, we are linked
through OnePort. In banking we have
connection to the Bank of East Asia
and more are in the works, including
HSBC and Hang Seng Bank. We are
still arranging the insurance links, which
would include marine and air cargo
insurance."
Costs
As per an agreement with Government
when the concept of DTTN was first
being formed, DTTNCo cannot charge
over $2.50 per transaction. "In general, the
fees we charge, such as the transaction fee,
are something we agreed with the Hong
Kong government, which is not more
than $2.50 per transaction. A 'completed
transaction' comprises one transaction
sent and a return confirmation." The fee
could go down to $2 depending on the
volume, as with a large freight forwarding
company, for instance.
"SMEs are really small shippers, doing
a limited amount of shipping with a
turnover of perhaps a couple of million
per year. And they are maybe not
transacting directly with buyers in either
Europe or the US but are working through
some of the large trading companies in
Hong Kong. Some of them may have
a small office in Hong Kong but with a
lot of suppliers in China, or even their
own manufacturing operations," says
Yue. Which leads him on a tangent, that
of moving across the border into China,
where many of these customers are.
"We already have quite a few customers
with operations in Guangzhou, Shanghai,
Beijing, Tianjin. We are now looking
at efficient and cost effective ways of
serving our customers outside of Hong
Kong, particularly in China. We have
to look for local partners to provide
different levels of service, such as to
handle the initial registration, and in
some cases, to do the activation of the
service. If it's a SME, we can send the
software in the form of a CD but they
will need customer support. Hence, the
need for a presence there. Furthermore,
we need to have a payment solution for
customers outside Hong Kong."
Break - even
"When we first started, we did a very
detailed cost benefit analyses for one of
the larger freight forwarders in Hong

Kong. At that time, the freight forwarding
company had a team of a hundred people
to process orders by telephone or by fax.
They reckoned that if they were to switch
over to using DTTN - - processing all
the orders through the DTTN system by
their computer system - - they would
need 90 less people from the team and
monthly savings would amount to some
HK$300,000," commented Yue.
"Of course, for SMEs the savings will
Thinking outside the box
Youship.com revolutionises
container shipping
Maersk Line launched on January 15
the online shipping service for small
businesses, Youship.com through the
website www.youship.com. Intended
for small direct shippers and freight
forwarders in the Greater China area,
one can ship up to five containers only
via the service. The website provides
high transparency, with real - time rate
checking and availability of space, even
without prior registration. The system
works with great similarity as online
booking of airline seats - the sooner the
shipment period, the more expensive the
cost.
"The cost quoted on Youship.com is all
inclusive, a port - to - port, all - water
cost. There are no surprise charges once
you've booked your container and paid
for the booking with Visa or Mastercard,"
said Lars Jensen, director Youship.com.
"You are also given the choice of paying
in advance for destination fees, or just
leave that up to the consignee on the
other end."
The new online service operates on 17
different trade lanes out of Hong Kong
(Modern Terminals Ltd). Once you
have selected the date and port for the
container's shipment, you are given
not be that big but it does increase their
efficiency and makes them more accessible
to bigger partners than other SMEs with
no electronic network capabilities."
Yue explained that the government is a
shareholder in DTTN, with an ultimate
shareholding of 21%. "Eventually,
DTTN would have to be financially
self-sufficient but right now, we've not
reached the break-even point. But that
will come.
a schedule of when to deliver your
container to Modern Terminals at the
Hong Kong port.
"With this new service, youship.com
has taken the traditional shipping
process and turned it on its head in
order to meet the needs of customers
who prefer to buy online. We're giving
the smaller customer more control–
the customer will experience Youship.
com as a revolutionary new service,"
explains Jensen. "We believe the market
has been waiting for this type of service.
Youship.com offers space guarantee with
immediate confirmation and an all - in,
up - front, attractive price to customers
directly on the website."
Along with 17 different trade lanes out
of Hong Kong (including AE7, AE10,
AU2 and IA2), Rotterdam and Antwerp,
a new lane from Rotterdam to Yantian,
Shenzhen, will soon be put into service.
The new service eliminates the need for
time - consuming manual workflows,
phone calls back and forth, and
subsequent additions of local and floating
surcharges. Clear information on pricing
and availability is accessible online and
in real time. Customers simply choose
e - LOGISTICS
"This year, we will keep driving our
recruitment of users. We need to sell the
concept of DTTN to a lot more people.
Internationally, one of the tasks that we're
facing is to create a connection between
DTTN and other similar platforms
elsewhere."
DTTN is connected to shipping lines
through the portals of INTTRA, GT Nexus,
and soon to Cargo Smart. With airlines,
DTTN users can connect via Traxon.
Settling orders online
by credit card
Different rates quotation
on Youship.com
their shipping date and cargo volume,
from 20ft, 40ft or 40ftHC containers, and
can follow the prices on each of the trade
lanes. The online booking works on a
first - come, first - served basis, and lower
rates are available for early bookers.
Orders can be completed in less than
10 minutes and there is a window of 60
minutes to complete an order and pay for
it, since supply is constantly changing.
For registered customers, it is simpler
- - just point and click in order to book
the shipping date and cargo volume.
Once the order is placed and paid, they
automatically get an E/Doc confirming
the order. The E/Doc is their space
guarantee – even when booking 8 weeks
in advance. Youship.com's policy is never
to overbook; however, should a rolling
occur a full refund is of course given,
along with space on the next vessel.
Maersk Line (www.maerskline.com) is
a global liner shipping company with
more than 500 container vessels and over
1,900,000 containers.
Shippers Today 37
 e - LOGISTICS
EPC/RFID implementation in Foshan
GS1 Hong Kong, together with
the Economy and Trade Bureau of
Chancheng District Foshan, China, and
Wal - Mart are joining forces to create
a programmeme to drive adoption of
EPC/RFID (Electronic Product Code
TM/Radio Frequency Identification)
technology. The programmeme is aimed
at enhancing efficiencies of import -
export activities between the Pearl River
Delta (PRD) and the global market using
EPC/RFID technologies, ultimately
creating an RFID industry chain.
The Federation of Hong Kong Industries
(FHKI) reports that approximately
60,000 Hong Kong manufacturing
facilities are operating in the PRD. One
of the manufacturing bases is Foshan in
the western PRD, with a concentration
of household and electronic appliance
manufacturing. The partnership will
equip Foshan with world - class EPC/
RFID infrastructure, knowledge and
skills, and accelerate the adoption of
EPC/RFID technology by Hong Kong
enterprises in Foshan.
" We a r e d e l i g h t e d Wa l - M a r t i s
supporting the RFID adoption
Free ENCs from Chinese authorities
Maritime authorities from
Guangdong, Hong Kong and Macao
have jointly made the latest versions
of electronic charts for the area
available for free, for a usage period
of one - year, for jet boats shuttling
between the three jurisdictions,
DigitalShip (www.thedigitalship.
com) reported on Jan 4.
China Communication News reports
that the Guangdong Provincial
Maritime Bureau, the Marine
Department of the Hong Kong
Special Administrative Region
(HKSAR), and the Maritime
38 Shippers Today
programme," said Hu An Quan,
director general, Economy and
Trade Bureau of Chancheng District,
Foshan. "Wal - Mart's extensive RFID
experience is extremely important
to help increase competitiveness
of the local Foshan manufacturing
industry in the global trade." Hu said
the partnership will help accelerate
RFID adoption and further promote
Foshan as an important RFID
base for Guangdong. "RFID is an
important technology that will help
local industries enhance supply chain
efficiencies. The technology will raise
Foshan's profile in the international
market. Over the next five years, the
estimated demand for RFID tags in
Foshan will reach to more than 600
mn, about 11,000 readers and RFID
antennas."
The Foshan Government will create
the necessary funding scheme, import
and export trade policies and incentives
to encourage RFID adoption. The
programme will foster RFID technology
development in Foshan and support the
development of the PRD as a world -
class manufacturing hub.
Administration of the Macao Special
Administrative Region (MSAR)
have produced the 14 electronic
navigational charts (ENCs) for free
use by the more than 100 jet boats
carrying passengers in the sea area
near the Pearl Rivermouth.
The charts will be subject to a
c h a rg e a f t e r t h e f i r s t y e a r ' s f r e e
usage, though the authorities have
declined to mention exactly what
the subsequent charges will be.
Hong Sixiong, an official from
Guangdong, said that the new
"The Pearl River Delta is important
t o Wa l - M a r t ' s g l o b a l s o u r c i n g
s t r a t e g y, " s a i d S i m o n L a n g f o r d ,
d i r e c t o r o f Wa l - M a r t ' s R F I D
Strategy and Transportation systems.
"The adoption programme in Foshan
represents a major step toward the
e x p a n s i o n o f Wa l - M a r t ' s R F I D
initiative in Asia in terms of business
processes improvement."
Currently, 600 of Wal - Mart's largest
suppliers in the US are tagging
cases and pallets of some of the
products they ship to RFID - enabled
distribution centres and stores.
Langford said Wal - Mart is seeing
significant improvements in inventory
data accuracy, reduced out - of - stock
and increased sales.
Wa l - M a r t w i l l s h a r e i t s R F I D
implementation experience with
its suppliers in Foshan and provide
support to their trading partners. This
cooperation will help providers utilize
EPC data to solve business challenges,
help with marketing and promotion
programmes, and the effective launch of
new products.
charts will now provide seamless
coverage of the sea area of the Pearl
River mouth and will correct a few
errors of separate electronic charts
previously prepared by the three
authorities
IMO regulations to come into
force this year will require all
high - speed craft manufac t u r e d
after July 1, 2008, to be equipped
with ECDIS, with all high - speed
vessels subsequently expected to
carry ECDIS after July 1, 2010.
DigitalShip (www.thedigitalship.
com)
 e - LOGISTICS
Container lines launch
informational website
The US National Industrial and
Transportation League newsletter,
NITL Notice reported in its January
11 issue that 24 container shipping
companies launched the Container
Shipping Information Service (CSIS),
an initiative the carriers said is
intended to provide information to
the public, businesses and the media
on their relatively unknown industry.
The container group said it also plans
to openly address some common
areas of general concern and talk
about its role in addressing them
– in particular, the environment,
Transport Intelligence (Ti), a research
company, launched the China Supply
Chain Intelligence (CSCi) portal on
January 8, a web - based logistics
knowledge portal that contains market
intelligence and company profiles.
C S C i , a c c e s s i b l e a t w w w.
chinascintell.com, is an online
resource providing access to
p r o f i l e s o f t h e l e a d i n g a i r, s e a ,
road, freight forwarding operators
as well as extensive research on
the country, economy and logistics
markets (including market sizes and
forecasts). The portal provides all the
information needed for a fundamental
40 Shippers Today
globalization and security.
The group's first step has been
t h e c r e a t i o n o f h t t p : / / w w w.
shipsandboxes.com, a web site
that it is designed to appeal to a
broad audience, featuring useful
information such a Did You Know
section and a Jargon Buster. The site
also will cover topical issues. A list of
the 24 CSIS members is available on
the web site.
The CSIS said it was formed in
2007 to give the global container
shipping industry a voice with which
Transport Intelligence launches
online China knowledge portal
understanding of the country's
transport and logistics industry, the
companies which are present in the
market, and its prospects for growth.
Information is constantly updated
by Ti's teams of researchers based in
Shanghai and Kunming. CSCi includes
profiles of around 100 Chinese based
companies across all the transport and
logistics markets. In addition it includes
information on over 100 foreign
companies with operations in China.
Additionally, CSCi contains market
sizings and forecasts of major
logistics segments (including express)
and includes analysis of trends and
developments in the market. To find
out more about how CSCi contact
to communicate with the world.
"Normally people do not give the
world of container shipping a second
thought. Yet, without it, modern life
would not exist in the way we know
it," a statement on the web site reads.
"In this context, the aim of CSIS is
to encourage an understanding and
appreciation in the wider world about
the container shipping industry, and
to show the benefits that it brings to
our everyday lives."
Mike Nordmann on +44 (0)1666
511880 or email at mnordmann@
transportintelligence.com.
Tr a n s p o r t I n t e l l i g e n c e L t d i s a
company registered in England.
Headquartered in the UK and
e s t a b l i s h e d i n 2 0 0 2 , Tr a n s p o r t
Intelligence are providers of research
and analysis dedicated to the global
logistics and express industry. Ti has
developed a range of market web -
based intelligence portals, reports
and tailored consultancy services.
Ti products and services include
daily and weekly news and analysis
through Logistics Briefing. Access
to Ti's research output is through the
Global Supply Chain Intelligence
website www.gscintell.com.
 OCEANS

Prospects for the year ahead –

pressures forcing up costs of transport
by Dr Andrew Traill, Managing Partner,
The Shippers' Voice UK

charges might realistically be challenged.

Dr Andrew Traill has worked in the freight transport
arena for some twenty years, including 12 years at the
Freight Transport Association (FTA) in the UK. In
2007, he established his own consultancy SV2 and,
with partners, launched www.shippersvoice.com, a
networking website aimed at building an international
community of shippers. The Shippers' Voice continually
gives updated information about legislation/regulations/
proposals affecting trade as well as offering individuals
the chance to voice opinions, ask questions and generally
interact with other shippers around the world. This year it will begin to publish
quarterly Digests, offering in-depth analysis and insight as well as detailed demand
forecasts on various trade lanes (provided by partner MDS Transmodal). The
Shippers' Voice also promotes the work of Shippers Councils around the world.
Nevertheless, such practices will
be far easier to expose now there is
The Shippers' Voice website (www.
shippersvoice.com) offering a facility for
shippers to communicate (anonymously
if they prefer) with others in the industry
and in the supply chain. Shipping lines on
the European trades in particular will be
under very close scrutiny by both industry
observers and competition authorities to
ensure a competitive market exists – best
shown, surely, by downward pressure on
rates and charges, rather than upward!

However, assuming transport capacity

Four issues look set to dominate the
international freight industry in 2008:
congestion, competition, the environment
and, last but not least, security.
Economic conditions (which are at best
uncertain according to most pundits) will
determine the scale of congestion and
where it will strike hardest. Asia-Europe
trade doesn't appear to be showing any
significant long-term signs of a down-
turn in volume despite tax changes and
wage cost inflation increasing in China.
Many ports have struggled through 2007
to keep the goods flowing and capacity
will surely be an issue, particularly in
the European container hub ports where
MDS Transmodal port statistics show
an average 15% growth in volume
throughput for 2007.
The rapid introduction of ever larger
container ships (latest data shows a 16%
increase in shipping capacity through
the Suez Canal for 2007, for example)
will only serve to worsen the congestion
at strategic transhipment points and
put further strain on the hinterland
infrastructure connections. While it is
not simple, and certainly not cheap, to
rapidly increase or improve road and
rail links or storage areas, it is possible
to make much better use of the existing
infrastructure. Shippers' Groups will
continue to push the freight industry,
manufacturers and retailers towards
collaborative initiatives where improved
communication – in both the personal
and the IT sense – can help make
smarter use of the existing infrastructure.
Competition will theoretically increase
with the end of the conference system
on the European liner shipping trades,
but the impact is going to be far from
clear and perhaps not truly felt until
2009. With most Asian shippers selling
FOB and not in control of the freight
negotiations, will carriers individually
take advantage over Asian exporters by
increasing or introducing charges for
activities prior to loading, knowing that
the exporter is unlikely to be able to pass
this on to the buyer that has negotiated
the sea freight contract? This is a fear
among many Asian exporters and without
a single conference secretariat to make
representations to, they wonder how such
(ships, aircraft, road freight vehicles,
and trains) does not out-strip demand,
in general, there is likely to be an
upward trend in rates, as costs from
congestion will be joined by pressure
from environmental and security (anti-
terrorist) requirements. Again, however,
The Shippers' Voice believes collaborative
approaches between shippers, carriers,
agents and logistics service providers,
port/terminal operators in air and
sea, road and rail will hold the key to
reversing the trend. Security measures
and environmental awareness should
increase transparency of operations and
highlight inefficient practices. Remove
these inefficiencies and the supply chain
becomes leaner, more robust, and, as
a consequence, unnecessary costs are
driven out. This is the way forward.
Shippers' Councils around the world should
aid collaborative initiatives that lower costs.
The Shippers' Voice provides a facility to
help increase awareness of these initiatives,
connecting importers and exporters and
the freight service providers who want to
confront the issues and beat the inflationary
consequences of doing nothing.

42 Shippers Today
 OCEANS

Shipping in the age of the

$100 barrel
by Charles Wellins, VP Sales,
Greater China Area, Maersk Line

perspective: industry profits in the first

Charles Gary Wellins joined A P Møller/Maersk Inc half of 2007 reached US$40/FEU. By
directly out of Pennsylvania State University (BSc in comparison bunker prices have increased
Marketing Management) in 1985 as a Marketing Analyst by US$180/FEU through 2007 alone!
in Manhattan, New York. He was recruited into the
Maersk Inc training programme and transferred to The volatility in fuel prices are,
Long Beach, CA where he was positioned as a Sales obviously, a major headache for carriers
Executive, covering the Pacific and Atlantic trades as and perhaps the largest challenge to
well as refrigerated commodities. In 1988, Wellins the industry at this particular point
was transferred to Maersk Hong Kong Limited as in time. It is a situation that requires
International Account Manager and in 1990 was promoted to General cooperation and understanding between
Manager of Mercantile Hong Kong and China (now known as Maersk Logistics). carriers and shippers if the volatility and
He did a brief tour with Sea-Land Hong Kong in 1994-96 as South China Regional unpredictability of fuel markets are not to
Manager and then Director of Sea-Land China Logistics. He rejoined Maersk HK wreck havoc amongst carriers, possibly
Ltd as General Manager of North and South America Services in 1996. After more prompting carriers to withdraw from
than 11 years in Asia, he returned to the US in August 2000 to become Regional some trades distorting finely tuned supply
Director of the Pacific Northwest where his responsibilities included the Seattle, and demand balances and reducing the
Washington, Portland Oregon, and Kenai, Alaska sales force. In July 2003, Wellins choices available to shippers.
was promoted back to Maersk Hong Kong as VP Sales covering the Greater China
Area (China, Taiwan, Hong Kong, Macau and Mongolia). Circumstances demand that action is taken
to mitigate the effects of soaring bunker
Other posts: costs. One response by carriers has been
to reduce fuel costs by slow steaming and
1997-98—Chairman, Transportation Committee, Hong Kong AMCHAM; Jul reducing the number of port calls. This
03-06—Alternate Director, Hysan Development Co Ltd; Jul 03-06—Alternate has had some effect, unfortunately also on
Director, Lee Gardens Intl Holdings Ltd; Jan 04-06—Director, Commercial carrier networks, but far from sufficient to
Management Ltd; Jan 04-08—Member, Hong Kong Logistics Development offset a dramatically altered cost picture.
Council; Jan 06-08—Board of Governors, AMCHAM. Something must be done.

Other industries, from airlines to

2007 has been a turbulent year for the
global economy. The subprime mortgage
crisis has created turmoil in financial
markets, oil prices have inexorably
pushed towards new highs while the value
of the dollar with equal determination has
pursued new lows. At least two of these
three situations have had – and continue
to have – a direct impact on the ability
of carriers to make ends meet. Freight
is settled in dollars while landside costs
are, most often, settled in currencies
appreciating against the dollar. Of more
significance though, the cost picture of
carriers has been radically transformed as
oil prices have approached and surpassed
the US$100 mark per barrel. Indeed,
the price of bunkers has grown from
less than US$150/ton in 2004 to almost
US$375/ton in 2007. The proportion
accounted for by bunkers of total vessel
cost now exceeds 35%. To put this into
cab drivers in Guangzhou, have
implemented fuel surcharges to share
the risks and added costs with their
clients. Likewise, a rational model is
required for the liner shipping industry.
In Maersk Line, we believe the solution
is the introduction of a 'floating' bunker
adjustment factor (BAF) following
the ups and downs of fuel prices. A
floating BAF will go far to take out the
volatility of freight rates and towards
creating transparency towards shippers.

44 Shippers Today

Instead of carriers having to add a
separate premium to the freight to cover
risks on the significant bunker price
fluctuations, a floating BAF following
bunker price fluctuations will ensure
that the services offered to shippers to a
higher degree reflect the actual cost of
transportation at any given time.
We have noted that in some trades it has
proven easier to explain and argue for a
floating BAF and therefore the degree of
application varies (from trade to trade).
Many shippers realize that the concept is
right and that they need to work together
with carriers towards mitigating the risks
of wildly fluctuating bunker prices. The
floating BAF is important to the overall
stability and health of the industry – and
to everyone's benefit. We will be looking
forward to discuss the floating BAF with
our business partners in Asia and are
confident that we in 2008 together will
be able to find a solution minimizing the
perils of unpredictable fuel markets.
In conclusion, a few words on how
we anticipate the market to develop in
2008: Generally, we predict a healthy
demand growth with large regional
Industry profits in 1H 2007
reached US$40/FEU….by
comparison bunker prices
have increased by US$180/
FEU through 2007 alone!
differences. The slowdown in the
US economy is counter-balanced by
European growth resulting in continued
high demand in the Asia-Europe trade.
 
Currently our expectations are in
OCEANS
line with the predictions of most
analysts forecasting growth in
16-20% range (total trade average).
Capacity increases are coming into the
trade, however, we expect this to be
moderate as carriers due to fuel price
increases reduce their service speed and
incorporate more buffer time to account
for port congestion.
 
Overall, we estimate the market
w ill globally add approxim a t e l y
13% capacity compared to 2007.
This will result in a supply demand
scenario which will continue to be
fairly balanced, however, there is no
doubt that the growing costs and trade
imbalances in general will put financial
pressure on our industry.
We are looking forward to an exciting-
-and challenging—new yea r an d
wish you all a happy, healthy and
prosperous 2008!
Shippers Today 45
 OCEANS
Container shipping
For several years now I have published a
"year-ahead container shipping forecast"
for Shippers Today. The accuracy from
a rear-view mirror perspective has likely
been no more than 50% and some would
say even less. Forecasting is also often a
game of manipulating perceptions. Open
ended statements and vague predictions
can be read back to mean something closer
to what happened with 20/20 hindsight.
But numbers don't lie, right? Unless, of
course, they get re-stated. Yet, ultimately, the
more the data series, the better the process
of triangulation becomes. And the more
the disclosure, the faster resolutions and
conclusions can be reached. Forecasting
is more a process and an exercise in
continual dialogue with the market than
anything close to science.
2007 was another year of surprises.
Volumes from Asia to the US were far
weaker than expected. Expectations were
7-10% (We were 7-8% in 4Q06), but the
actual growth rate is coming in closer
to zero based on Oct/Nov '07 data, after
decelerating through our 4% growth levels
by mid-07. The irony was that the market
talked 7% when growth was closer to 4%
in mid-07, and more recently has talked
mid-single digit when it was zero.
Asia to Europe surprised to the upside
in 2007, and is likely to come in at
46 Shippers Today
outlook 2008E
by Charles de Trenck, Head of Regional Transport
+19%, after expectations in 4Q06
of 15% growth in 2007. But the
other surprise in 4Q07 could be the
deceleration toward a 15% run rate
from the 21% in 1H07.
The combined run rate out of Asia (US
and Europe combined) in 4Q07 likely
was well below 10%, which is starting
to take us back to 2001. The risk is that
this low-end growth is repeated not
only in 1Q08 but throughout 2008. It is
still too early to tell.
Asia-US Trades
Up to 2007, the Transpacific has
remained the most important market
in the world. And it has not been doing
too well. Behind a marketing push
by container lines to hold the line on
pricing, carrier executives have talked
openly of slashed capacity and flat and
even negative volume growth.
The major success story in 2007 was
getting customers to pay for higher
intermodal pass-through charges. Also
Maersk's generous capacity cuts also
helped the market for a change (ie, a
reversal from the negative impact seen
from Maersk-P&ON changes in the
Asia-Europe trade in 2005). Maersk in
late 2006 and early 2007 took out about
20% capacity in this trade.
Growth has decelerated throughout
2007 and we are now looking at about
zero growth for 2007E based on poor
4Q07 data
Citigroup Investment Research
charles.detrenck@citigroup.com
The major disappointment was that
volumes to the US West Coast have
fallen significantly short of 2007
forecasts which originally called for
10% growth (market view end-06), and
later 7-8% (our view end-06 and market
view early-06) – and more recently
we had been looking for 2-5% growth.
Based on recent data, growth could
be around zero for 2007. For 2008E
we are beginning with an estimate of
2% growth based on a mild recovery
toward end-2008E. But volume shifts
remain volatile.
The other big change occurring is that
2007 is setting up to be the first time in
a decade that export growth has grown
more substantially than import growth.
This is still early days for this trend.
But now that the US dollar has held its
weaker levels, its export competitiveness
at least in some products has worked its
way through to significant export jumps.
Products leading the rebound include
cotton, soybeans, grains and metal scrap.
Utilization remains so low on the export
trade overall that a return to profitability
on US outbound to Asia may need two
more years of good growth.
But then again this depends on strategy.
One Asia carrier with a strong presence
in refrigerated containers makes
about 10-15% of its profit from this
division, and export of fresh fruits and
vegetables from the US to Asia is one
value added driver of growth.
Another, perhaps less noticed rebound
 OCEANS

Figure 1. Transpacific Asia to US '000 TEU Monthly Profiles, 2004-2008E trend of deterioration within overall
efforts at damage control, and yet
should also see a worsening of the
downturn. Weak demand and low
rates follow on from the continued
unraveling of the US property bubble.

The 3Q07 all-in rate on the Transpacific

Eastbound, as tracked by CI and
released in late November 2007, came
in at -0.5% or US$1,707/TEU. This
rate includes the higher fuel costs
and reflects some significant degree
of pain which the container lines
will do their best to redress in 2008.
Source: PIERS; Citi Investment Research
Despite the recent news that CSCL has
joined the TSA and that the TSA now
Comparing overall Transpacific volumes to US West Coast port volumes offers a
represents about 80% of capacity in
sanity check on actual growth rates, given debates on the accuracy of some series
the Transpacific Eastbound, we believe
in some months (ie, the debate on PIERS data this year)
2008 will be another difficult year.

Figure 2. Asia to US TEU Volumes and US West Coast TEU Volumes, YoY Percent Change
As of November 2007, carriers were
scrambling to go back to customers
for emergency fuel surcharges (ie, to
recover part of what was not covered in
annual contracts). The effect for Nov-
Dec 2007 was expected to add about
$20/TEU to nominal rates, though
carriers were generally believed to be
operating close to or in the red in 4Q07
in the Transpacific.

Source: Ports; PIERS; Citi Investment Research
US export recovery just beginning (but will take time to have an impact on profits)
has been higher volume growth in US to
Europe, where a weaker dollar has begun
to drive export growth. Containerisation
International and others have discussed
these developments recently.
Transpacific to US rates
Based on an understanding (rather than
forecasting) of demand, also based on
capacity growth as well as shifts in
costs, US$ Rev/TEU tracking is the
other part of the puzzle.
In the Transpacific 2H07 rates remain
several percentage points below 2H06
(for instance, as seen by a weekly
series published by the JOC based on
submissions from Drewry), despite
fuel and other costs being higher. This
means that effective rates ex-surcharges
are hurting. At the same time, the rates
are not as weak as they might have
been expected given the deceleration
in trade, partly due to damage control
early in 2007, and partly due to the
emergency nature of record high
bunker costs.
We think 2008 will follow a similar
A s i a - Eu rop e t r ade s (a nd
contributions to the balancing act)
The Asia-Europe trade, combining the
North Europe and the Mediterranean,
should in 2008 be the largest trade in the
world by box volume, if, as expected,
2008 trade Asia to Europe grows more
rapidly than to the US. Because the run
rate of growth had been at 20% levels
for most of 2007, congestion was feared
in many North Europe ports.
In August and September, overall growth
slowed to about 16-17% and slowed even
further in October, before rebounding to
19% in November. We had been expecting
base case growth to hold 15% levels into
2008, which we have considered to be the
average case for the trade several times in
2006-07. But data is now pointing to the

Shippers Today 47
 OCEANS
Figure 3. Container Growth Out of Asia, 2006-2007 (Nov-Dec est)
Source: PIERS; FEFC; Citi Investment Research
run rate slowing to a shade lower, perhaps
a 3-14% level. To be sure Asia-Europe
growth in 2008E will remain above that of
the Asia-US growth.
Interestingly and ironically the real driver
of trade growth has been very strong East,
or new Europe, and demand for China
made goods in East Europe. Growth into
the Med has been even stronger than into
North Europe, partly because of growth
into the Black Sea area.
As mentioned, over the last few months
growth has slowed a shade, and this could
be because of some softening of demand
in old Europe. New Europe, particularly
Russia, should remain relatively strong,
though whether it maintains 60% growth
levels may be another issue.
The key question, at a time when most
new capacity is expected to make its
way into the Europe trade, is 'what
Asia-Europe trade growth rate do East
– West trades need for the market to
remain relatively stable'?
Common wisdom has it East-West trade
will remain relatively stable if Asia –
Europe holds +20% levels, but show
greater signs of weakness if US inbound
trades remains weak and Asia-Europe
volumes show growth declining toward
15%. If Asia-Europe dips below 15%,
this could be the real time to worry.
48 Shippers Today
Asia Outbound g row th qu ick
calculation
A quick and dirty check is if Asia-
Europe (outbound) shifts to a run-rate
of +15% from +20% while the Asia –
US runs at +0-4%, this generates about
+8-9% combined, keeping in mind
that the Transatlantic has been slower
than the two Asia Outbound trades
for a long time. This of course is not a
scientifically adjusted number. But then
again neither are the official numbers.
Average growth around 9% for Asia
Outbound would represent a decline
of perhaps 2-4% from recent run rates
and perhaps as much as 5-6% from
peak demand growth levels (delivered
in a more balanced fashion) during the
2003-04 rebound, when annual container
demand growth was a high as 15% on
what we could call the 'core East-West'
lead legs (Asia-Europe, Transpacific
and Transatlantic). In recent months our
estimates for 2007-08 global growth have
drifted lower by about one percentage
point, with our 2008E global growth
now standing around 8.1%. Market
expectations continue to hold around
10% levels, though many have not fully
adjusted for lower 4Q07 run rates.
Fuel, demand and prices
High fuel costs, with bunker in January
2008 at the $500/ton level, affect
demand through reduced buying
power given tighter spending abilities
of consumers, while also affecting the
nominal pricing of $/TEU rates (higher),
particularly in the stronger Asia-Europe
trade in 2007. In the Transpacific,
container lines have reported difficulties
passing on higher fuel costs. Many
contracts in the Transpacific in fact have
a flat or fixed or semi-fixed fuel costs
written into the contract.
In 2007 in the Transpacific, the container
lines have had more success recovering
higher freight costs from rail than they
have had catching the moving target
of continuously rising bunker. In Asia-
Europe lines were better able to recover
higher fuel costs through rate hikes, at
least for oil through the mid-70s (but
not clear at the $90-100 oil level as yet).
Oil at $90-100 in 2008 is something that
shipping lines are generally un-prepared
for. For the moment we are working off
of an average of about $415/tn for 380cst
bunker, based on fuel costs declining
from their peaks but averaging more than
the $346/tn average for Rotterdam 380cst
in 2007 (this has raised our Rev/TEU
base case assumptions a little as well to
-3% levels in 2008E).
Hedging is often considered a key
strategy to minimize the impact of higher
fuel costs, which in nominal terms range
up to about 20-22% of costs currently,
and up from 7% 4-5 years ago. In many
cases this has added $100/TEU or more
to the nominal US$ rev/TEU tracked by
Containerisation international.
Hedging for many companies can
cover about half of fuel costs, on the
view that the other half can be covered
by surcharges. This is the theory.
The practice is that not all carriers
hedge half their costs and in an
environment of rising prices, and the
setting of surcharges lags the increase
in costs as incurred. Thus in a rising oil
environment, tail chasing remains an
 OCEANS

activity that cannot be avoided.
Of the carriers that seek to hedge about
half their costs, this may be more true
at some and not other parts of a cycle.
In 2004, 2005 and even 2006 it was
much easier to hedge during earlier
parts of oil's upward trajectory.
One can argue that any one period could
and should be treated like any other period.
But the reality is financial managers –
as share investors might too – look at
different parts of a chart differently. The
higher the price, the higher the risk. And
the risk of entering into an oil derivative
designed to make money on the way up
when the price of the underlying is already
high is higher than when it was lower.
Hedge too much at a high point, followed
by a leg down, and one can generate a
loss, when an uncovered position would
earn you money.
Another feature of oil hedging contracts
is that they use collars and caps, designed
to hedge oil within a certain trading
range. When oil trades out of a band, the
oil hedge loses its effectiveness.
The point is hedging appears riskier,
and/or less effective, in 2007-08 than
it did earlier in the cycle. And because
hedging in 2007 has been riskier, the
average container line has generally been
more negatively impacted by higher fuel
costs in 2007-08 than in 2005-06, though
experiences vary greatly as well.
Slowing vessels and the impact on
capacity
Container lines began talking of slowing
container vessels in the Asia-Europe trade
in 2005. In 2007-08 it appears this has
been implemented with some success,
with several loops having increased
from eight to nine vessels. The impact
is higher vessel capital outlays of one
extra vessel per loop in return for lower
fuel costs for the nine vessels in the loop
as a result of lower fuel consumption at
slower speeds. We also believe this was
combined with some strategic vessel
withdrawals by Maersk and longer slack
season capacity reductions by the major
alliances. Between these two effects,
the approximate 5-6% excess of ships
delivered over demand growth was
effectively absorbed in 2007 (at least
based on market perception).
We performed a study on vessel speeds
of a carrier and found significant speed
variances over the entire year, but also
a distinct slowing in recent months,
which coincided with the rise in oil
prices to $90+/bbl levels in 2H07.
Based on industry discussion, and in our
view, some Asia-Europe services have
increased vessels from eight to nine per
loop, but this has not been standardized
(and could be subject to shifts based on
fuel prices), and many debates exist.
Some comments in industry have also
been made that some vessels missed
terminal berthing windows, which
contributed to congestion.
Yet, although many are operating nine
vessels in a loop, most continue to order
batches of 8x13,000 TEU ships rather
than 9x13,000TEUs. This tends to
show how driven the industry still is by
owner/CEO decisions without the same
consideration to operational practicality.
In many ways, we also now may be
seeing that the so called standard
Korean 8,400TEU design isn't as
efficient as first thought and quite a
few people may now be getting their
fingers burned by seeing the so called
jump to 8,400TEU as a mistake, as
may some of the 12,500-13,000 TEU

Figure 5. Long Term Container Demand and Supply Versus Rates, GDP, Bunker, Vessel Charters, 2000 – 2010E
2000 2001 2002 2003 2004 2005 2006 2007E 2008E 2009E 2010E

Container Rates $/TEU (unweighted) 1,236 1,135 1,032 1,181 1,244 1,302 1,280 1,284 1,241 1,195 1,218
Container rates growth (%) 1.9 -8.2 -9.0 14.5 5.3 4.6 -1.7 0.3 -3.3 -3.8 2.0
Asia Outbound Rates $/TEU 1,817 1,544 1,340 1,661 1,821 1,822 1,610 1,699 1,610 1,519 1,567
Asia O'bound rates growth (%) 2.1 -15.0 -13.2 24.0 9.7 0.0 -11.6 5.6 -5.3 -5.6 3.1
Container 3500TEU vessel charter % chg 17.0 -24.0 -27.3 79.8 38.8 7.9 -31.1 22.0 -10.0 -10.0 5.0
Rev/TEU $ ref only (CIR core basket) 1,146 1,031 960 1,135 1,237 1,303 1,225 - - - -
Cost/TEU $ ref only (CIR core basket) 1,077 1,006 934 987 1,025 1,085 1,157 - - - -
Bunker Rotterdam $/tn 380 CST 138.4 117.4 133.7 152.9 155.3 234.0 293.0 346.0 415.0 370.0 330.0
Bunker Rotterdam % chg 48% -15% 14% 14% 2% 51% 25% 18% 20% -11% -11%
Container demand/TEUslot moves (%) (1) 12.7 -0.2 11.2 16.9 13.6 12.1 10.8 9.5 8.1 8.9 9.3
World GDP growth (CIR Nov 07) (%) 4.7 1.5 1.8 2.9 3.8 3.4 3.9 3.7 3.4 3.7 -
Container to GDP multiplier (X) 2.7 -0.1 6.2 5.8 3.6 3.6 2.7 2.8 2.4 2.4 -
Container scrapping in % TEU fleet est 0.3 0.6 1.1 0.4 0.1 0.0 0.2 0.2 0.4 0.6 0.3
TEU Standing FCC Fleet '000 TEU adj 4,847 5,432 6,004 6,538 7,178 8,117 9,458 10,929 12,503 14,227 15,984
Fully cellular cap growth ex-scrap (%) (2) 9.7 12.1 10.5 8.9 9.8 13.1 16.5 15.6 14.4 13.8 12.3
Simple capacity less demand (excess in ppts) (1) – (2) -3.0 12.3 -0.7 -8.0 -3.9 1.0 5.8 6.1 6.3 4.9 3.0
Total Trade TEU/Standing TEU Slots (X) = slot turnover 14.5 12.9 13.0 13.9 14.4 14.3 13.6 12.9 12.2 11.6 11.3

Source: CI; Drewry; Clarkson; Citi Investment Research

CIR Core basket = Evergreen, Yangming, APL, OOCL, Hanjin & CSCL (2000+)

Shippers Today 49
 OCEANS
Figure 7. Fleet on Order by Carrier, May '07 Vs Nov '07
Source: CI; Citi Investment Research
Figure 8. Container US$/TEU Rates Updated for 3Q07, 1994 – 2010E
Source: CI; Citi Investment Research
unit decisions as well.
The optimal efficiency for standard
designs are 10,000 and 15,000, not 8,400
and 13,000 in the opinion of some
operators1. So far the real 'dogs' are the
first generation super post-panamax
vessels, in the eyes of many.
Looking to 2008
Average trade growth is slowing from
an Asia Outbound perspective.
Global TEU trade volumes could
in 2008E see growth around 8.1%,
down from about 9.5% in 2007E,
based on some deceleration in Asia-
Europe outbound trades and continued
softness in Asia to US trades.
In general terms, we have seen the run
rate of growth out of Asia to the US
50 Shippers Today
and Europe combined shift from a 15%
growth level to about a 10% level (or less).
And though the Asia Inbound trade,
particularly the US return leg to Asia
given the weakened dollar, is set to
continue rebounding, this phenomenon
at first will be part of a long process of
re-balancing trade flows and will not
contribute to the type of pressure on
capacity that leads to higher rates.
The one year ahead forecast can usually
be done with a little bit more certainty
than a stab in the dark by the time we
reach the 4Q of the target one year
forward. And as we get into the 1Q (and
out of the Chinese New year) of the
forecast year, our understanding develops
further. Typically forecasting more than
one year forward remains a dark art in
terms of demand, although physical
capacity at a macro level remains a
known quantity some three years out.
We see capacity growth in 2008 about
two percentage points off the 2006
peak – but recall there is still some
accumulated over-supply sloshing
around only partly used (just ask
Maersk). If fuel costs came down
dramatically (ie, vessels could speed up
a little), the BDI normalized (ie, some
partly cellular ships shifted back to some
containers), or Maersk and/or alliances
decided to bring back marginalized
tonnage, these could all prove additions
to the fleet on top of the 14% capacity
delivery run rate in 2008-09.
Therefore, absent further clues to 2008
based on November 2007 information,
and until we get into the first 2-3 months
of 2008, Asia to US TEU volume
growth is looking to run about 2%, with
some downside risk at present.
Early guidance from some large retailers
to container lines appears to be around
zero growth – and potentially slightly
negative – for the retailers, which
appear to be exposed to high oil and
the deflating housing bubble. For the
moment we would stick to a just below
consensus expectation of about 14%
growth for Asia to Europe for 2008.
We will have more to say for other
smaller trades eventually, but no other
significant trade is expected to perform
better than the Asia to Europe trade.
Intra-Asia is expected to hold on to
some of the gains made in 3Q07, when
fuel costs were able to generally be
passed on. But capacity flowing in
from the cascading effects of mid-sized
ships being further deployed into Intra-
Asia will remain a concern.
Vessel supply outlook update
During 2007 the container ship
orderbook accelerated again back
above 60% of the fully cellular fleet
(or about 50% of the enlarged fleet,
though most partly cellular ships have
 OCEANS

been used for bulk transport in 2007).
This will become a greater concern at
the back end of 2008 when deliveries
will start to accelerate again. For the
moment, concern should shift to the
structure of demand deceleration.
APL has been back at the orderbook
during 2007 and this shows up as APL
catching back up to just below the average
of the fleet on order as a percent of
orderbook. Otherwise, the usual suspects
(CMA, COSCO, Zim, etc) remain the
orderbook leaders in terms of their fleets
on order. Yang Ming has accelerated a
lot over the last few months, although
some is also data which may have been
entered a little late. Nonetheless, Yang
Ming surprises by having an aggressive
orderbook out to 2012. Other late
bloomers include COSCO and Zim.
2009 and beyond (low trust factor
for forecasts)
opportunities to bottom, leaving room to find negative correlations between
for rebounds by 2010. But forecasting nominal excess supply and rates.
the bottom and therefore the rebound
pattern remains subjective at this stage. One final trend we note for 2008-09 is
an expected decline in vessel financing,
We track correlations for many of our particularly for 10,000+TEU vessel
data series for the period 1990 – 2010E. types for 2011 delivery, with certain
Many of the relationships are not very European owners likely to be more
strong, however we continue to find affected. More specifically, owners
a positive relationship between US$/ who have relied on structured German
TEU rates and cargo demand, rates and financing should see a drying up of
vessel charter costs. We also continue funding for new vessel projects.
Figure 9. Correlations Reference, 1990 – 2010E
Rates & cargo grth 0.61
Rates & world GDP 0.30
Asia outbound rates & cargo grth (from ’95) 0.40
Asia rates & Avg rates (from ’95) 0.70
3500 TEU charter and Asia rates (from ’95) 0.73
3500 TEU charter and Avg rates 0.87
Rates & capacity growth -0.33
Asia Rates & cap excess (from ’95) -0.67
Rates & cap excess -0.63
Source: Citi Investment Research

The current pattern of deceleration into

2008 may be focused on 3Q07 forming
a top for acceleration in the Asia-
Europe trade, while the US experiences
one more leg down in trade growth
from a deceleration that in retrospect
should have begun in 4Q06 (with a
brief respite in 1Q07).

We would expect this deceleration

pattern to follow through into end 2008,
but potentially form some sort of bottom
in 2009. The process of inflation, oil
price and other commodities slowing
their advance and potentially coming off
their highs, taken against GDP and the
strength of the consumer in 2009, will
be a significant part of the influence on
the bottoming process.

Looking at run rates in Transpacific

Asia to US as well as US port and US
rail data series, but ultimately also
based on how bad the US housing and
consumer downturn of 2007-08 truly
is, points to 2008 simply following on
from 2007. But going into 2009, the
base, on the demand side, should find

Shippers Today 51
 OCEANS
Transpacific carriers'
outlook for 2008
Shipping lines comprising the
Transpacific Stabilization Agreement
( T S A ) ( w w w. t s a c a r r i e r s . o r g )
announced in 4Q 2007 their 2008-09
revenue/cost recovery program,
saying that the program addresses
rising operating costs expected this
year. Other factors cited include
freight rates that continue to lag
operating costs; limited cost recovery
in 2007-08 that has added to current
rate pressures; record fuel prices
making floating bunker charges a
top priority; uncertainty over the
outcome of labor negotiations on
the US West Coast that will put
pressure on US East Coast services;
and transportation infrastructure that
remains a concern going forward.
TSA said the voluntary guideline
revenue/cost recovery program for
the 2008-09 contract season, which
is subject to all applicable filing
and consultation requirements,
addresses rising operating costs in
the coming year, including record
marine fuel prices in 2007-08. In
combination with further steps to
be taken in 2009-10 contracts, it
also will establish over time a level
of profitability required to meet
anticipated asset and service expansion
in the Asia-US freight market.
" We' ve alr eady seen significant
carrier redeployments that reflect the
deteriorating economics in the high-
cost transpacific market, relative to
other trades," said TSA chairman and
American President Lines Ltd CEO,
Ron Widdows. "Given cost increases
expected through the end of 2007
and into 2008, and the potential for
service disruptions, there's an obvious
52 Shippers Today
and compelling need for a viable rate
structure that encourages adequate
carrier reinvestment."
Elements of the plan proposed by
TSA include:
* Freight rate increases of US$400
per 40ft container (FEU) for US West
Coast port-to-port and door cargo,
and US$600 per FEU for all other
traffic, including intermodal and US
East Coast all-water shipments.
* Restoration of a floating bunker
fuel surcharge–broken out from base
rates and adjusted on a regular basis to
reflect bunker fuel price fluctuations
–in all contracts that have had bunker
surcharges mitigated, capped or folded
into base rates.
* A US$400 per FEU peak season
surcharge will be applied to all
shipments on TSA member line
vessels during the period of June
1 through October 1, 2008, subject
to adjustments relating to the
timing, duration and strength of
the 2008 peak.
TSA said their member lines also
intend to modify the timing of
service contracts, extending 2008-09
contracts by an additional two
months, to expire on June 30, 2009.
This will give shippers the benefit
of two additional months at 2008
contract rates, and will also mean that
future 12-month contracts will have
July 1st start dates.
Finally, carriers said they plan to
include provisions in upcoming
contracts that will enable them to
recover increased West Coast trucking
costs which may arise from legislative
and/or regulatory changes, such
as implementation of the transport
worker identification card (TWIC) and
the proposed Los Angeles-Long Beach
harbor truck plan.
According to JS Lee, senior
executive VP of Hanjin Shipping
Co Ltd and a member of TSA's
executive committee, transpacific
container lines still anticipate a 7%
to 8% increase in basic operating
costs apart from fuel– inland
rail and truck charges, container
handling at destination US ports, and
repositioning of empty containers
back to Asia after cargo has been
delivered at US interior points.
He added that carriers also must
address increased costs that were
not recovered in current contracts.
Beyond that, he said, restoring
carrier revenues to sustainable levels
of profitability cannot be done in a
single year, and the market should
be prepared for a continuation of this
initiative in 2009-10 contracts.
A TSA survey of member line
operating costs relative to freight
rates shows current rate levels well
below break-even costs for nearly
all carriers on most route segments.
At the same time, bunker fuel
prices rose by 34% during the first
nine months of 2007 alone, from
an average US$295 per tonne in
January to an average $395 per ton
during September. An internal TSA
survey reveals that this $100 per
ton difference in price–taking into
account typical vessel capacity, actual
lift based on effective capacity and

utilization, fuel loading prices, fuel
consumption per day, sailing time
and a pro rated share of fuel cost
for repositioned empty containers-
-translated into a $132 million
increase in aggregate fuel costs paid
by TSA lines in September over
January to move the same volume of
freight. In October fuel prices reached
record levels and an average for the
month of $436 per ton, suggesting
an aggregate fuel bill of about $150
million higher than in January 2007.
Increases in the TSA bunker
surcharge, from $455 per FEU
in January to $680 per FEU in
October, only partially addressed
these rising costs, due to the lag
time in calculation and to the pace
and extent of fuel price increases,
the TSA said. And in a number of
contracts, caps and other restrictions
even further prevented meaningful
cost recovery as fuel prices spiked
throughout 2007.
"Lines will, of necessity, be pressing
the issue of a full, floating bunker
charge very seriously in upcoming
contract negotiations," Widdows
explained. "We understand that this
is a major item in the overall rate
structure and that shippers are looking
for pricing stability over the 12-month
contract term. But the market must
understand that fuel prices are far too
volatile, and ocean carriers are far too
exposed to fuel cost fluctuations over
a 7,000 to 10,000-mile, 12 to 18-day
one-way sailing, to lock in a single
price for a year." Noting that airlines,
railroads and truckers all collect full,
floating fuel surcharges, he added
that container lines are particularly
vulnerable to fuel cost impacts, and
failure to recover those costs amounts
to a hidden subsidy imposed on them.
"At current price levels, fuel is no
longer just another cost component,"
Widdows stressed. "We're at a point
where service levels at minimum and,
for some carriers, financial viability
are threatened if we are not able to
share these costs more equitably
with the customer base. It's not a
sustainable situation."
Service levels and operating
flexibility will be particularly
important in the coming contract year.
Independent industry analysts forecast
7-9% cargo demand growth in 2008
– the same or slightly higher than
predicted for 2007. TSA anticipates
new transpacific vessel capacity to
increase by 5.2% growth among
TSA members, and 6.3% across the
entire trade, and potentially less in
the event that there is not sufficient
improvement in the economics.
Allocations of new capacity are
being driven by the high-growth
Asia-Europe and intra-Asia trade
lanes, with smaller ships cascaded
out of those trades accounting for
much of the new capacity scheduled
for the transpacific.
"Despite positive economic signs
such as recent US employment
figures and 3.9% GDP growth in third
quarter 2007," said TSA executive
TSA is a research and discussion forum of 14 major container shipping lines serving
the trade from Asia to ports and inland points in the US.
OCEANS
administrator Brian Conrad, "cargo
demand in 2008-09 may well
moderate further amid uncertainty
in the housing and credit markets. It
is also clear, however, that carriers
will be seeking out markets and
deploying vessels and equipment
where the economic conditions
are most favorable, so we see an
continuing healthy supply/demand
balance in the transpacific even at
somewhat lower levels of growth,
should that scenario develop."
Widdows added that shippers are
already looking to their carriers
to help them avoid potential
delays in 2008 as longshore labor
negotiations intensify on the US West
Coast toward a July 1st contract.
Asian terminals are additionally
experiencing congestion, said
Widdows, and delays as demand
outpaces expansion throughout the
region, even though there has been
some reduction in the pace of growth
in volumes to the US. "There will be
many variables affecting service and
schedules next year, making service
choice and contingency planning all
the more important," he predicted.
Shippers Today 53
 OCEANS
Asian lines to launch
China-Pakistan express container service
Orient Overseas Container Line
( O O C L ) a n d Ya n g M i n g L i n e
plan to launch a new container
NYK and HMM collaborate on new service
NYK and Hyundai Merchant
Marine (HMM) have come to an
agreement to operate jointly in
the container trade between Asia,
South Africa, and the east cost of
South America.
The new service, named the "New
Horizon Express" (NHX), will
commence operations from the
second half of April. It will replace
NYK's current New Good Hope
Express Service (NGX), which
NYK has operated together with
Maersk Line and Hamburg Süd.
NYK and HMM are aiming for
better integrity of schedules and
fast transit times to main markets
in Asia, South Africa, and the east
coast of South America.
54 Shippers Today
shipping service providing direct
links between China, Pakistan and
India, from January 17, 2008.  continent," it added.
Hong Kong-headquartered OOCL
said the new operation, called
China Pakistan Express (CPX),
would upgrade its routes from
an existing transhipment service
via Singapore to a direct service
from China to Pakistan and
Mundra (India), providing faster
transit times. "The new CPX
service will also offer additional
f r e q u e n c y, e n h a n c i n g O O C L ' s
Masato Katayama, chairman for NYK
Line do Brasil Ltda, announced, "This
new configuration should greatly
help NYK improve its customer
service in the Asia to South Africa to
South America trade, and moreover,
allow NYK to build on its tradition of
service to these areas."
S e u n g I n Ya n g , V P o f H M M ' s
Container Business Department in
Seoul continued, "We are delighted
to announce this brand new premium
service, which will allow HMM to
enthusiastically participate in the
fast-growing South American market
as we work to meet our customers'
diverse needs."
The New Horizon Express will be a
weekly fixed-day service operating a
comprehensive network between
China and the Indian sub-
The port rotation will include
Shanghai – Ningbo – Shekou –
Singapore – Karachi – Mundra –
Penang – Port Kelang - Singapore
– Hong Kong - Shanghai, for a
35-day round trip. Five vessels,
each with an effective capacity of
1,200 TEUs, will be deployed on
the service, which will be jointly
operated with Taiwan-based Yang
Ming Line.
total of 10 vessels, eight from NYK
and two from HMM, with a weekly
capacity of about 2,500 TEUs.
The port rotation will begin at
Shanghai and continue as follows:
Shanghai - Ningbo - Hong Kong -
Singapore - Durban - Santos - Buenos
Aires - Itajai - Paranagua - Santos -
Itaguai (Sepetiba) - Singapore - Hong
Kong - Shanghai
Other main ports in Asia will be
covered by feeder connections.
NYK and HMM will use their
global networks to enhance their
locally focused capability of serving
the needs of customers in fast-
growing markets.
 PORTS

A tale of two regions

South China and Yangtze River Delta terminal
supply and demand by Jonathan Beard, managing director,
GHK (Hong Kong) Ltd

the ratio of transhipped to direct

Dr Jonathan Beard is managing director of GHK
(Hong Kong) Ltd that is part of the global GHK
Group, a leading logistics and economic development
consultancy. Financial advisors, potential investors,
operators and governments regularly seek his opinion on
logistics policy and development. Dr Beard was lead
author for the Hong Kong Port Master Plan 2020, Hong
Kong Port Cargo Forecasts 05-06 and the Shanghai
Port Master Plan 2003. He has recently finished
reviewing a major port investment on the West Coast of North America
serving the Asia-Pacific trades and also provided support to the successful bidder
for the Karachi New Deepwater Port. In addition to his work on sea ports, Jonathan
has also worked extensively in the aviation sector and has been retained over a
number of years by Airport Authority Hong Kong to advise the Board and senior
management on competitiveness strategies and master-planning. He is currently
President of the Hong Kong Institute of Management Consultants, and holds a BA,
MA and PhD from Cambridge University.
(land or inland waterway) containers;
throughput variation during the year
("peaking"); the effects of working
close to capacity on customer service
and satisfaction; etc.
With due regard to these caveats, Figure
1 shows, for South China, the balance
between the supply of container
terminal facilities (presented as total
capacity) and demand - the "cargo
base". The trend over time for capacity
shown in Figure 1 assumes that capacity
increases at a uniform rate between the
benchmark years identified in various
development plans. In truth, this may
not be the case as additional capacity
may arrive in lumps.

The "cargo base" means the

A key challenge for policy makers
is to ensure adequate capacity and
competition in port services, without
generating dramatic over-supply:
"white elephants" are neither good
for the economy nor the environment.
Meanwhile, for operators and
investors, there is clearly a desire to
ensure maximum utilisation of facilities
and avoid a financially destructive price
war for cargo–typically a by-product of
significant surplus capacity. Shippers
and shipping lines on the other-hand
may welcome such a scenario.
Probably nowhere on earth has the
development of container terminals
been so rapid as China. The supply
side response and the ability to quickly
introduce additional capacity, both
in terms of new-build but also via
productivity enhancements at existing
terminals have been phenomenal.
These issues are starkly highlighted
in the development of port facilities
servicing two of China's key economic
regions–South China (Guangdong
Province plus Hong Kong) and the
Yangtze River Delta (YRD). However, as
this article suggests, the two regions may
be heading for contrasting futures in
terms of the projected balance between
supply and demand for terminals.
Before presenting the analysis,
a word of warning. Forecasting
future terminal capacity is far from
straightforward. Even assuming
that development programmes and
Five-Year Plans are adhered to, the
capacity of any given facility at any
point in time may vary according to
a variety of factors. These include:
operational productivity; the ratio
of 20ft to 40ft containers; the
average number of container moves
(containers unloaded and loaded)
per vessel call; the vessel size mix;
international cargo (inbound,
outbound and empties) generated
by the South China economy. It
should be noted that in addition to
South China international cargo,
ports may also handle transhipment
cargo. Moreover, some of the capacity
within South China, notably Nansha
and Guangzhou is primarily occupied
with feeder traffic – this throughput
would not be included within the
South China international cargo base
projections. Nonetheless, the key
point is that South China appears
to have moved from a position of
highly constrained CT supply – i.e.
when Hong Kong was the only major
container port - to one of surplus
capacity, which is likely to continue
until the end of the next decade.
Some of the additional capacity may be
soaked up via handling transhipment
(and feeder) traffic, however the

56 Shippers Today

impacts for port competition are clear
– significant excess capacity chasing
cargo, which will likely put downward
pressure on tariffs. Furthermore,
it seems fair to assume that South
China ports will also be keen to
handle transhipment cargo and hence
compete with Hong Kong in this
market – there will likely be strong
lobbying to ease current Mainland
restrictions on transhipment.
A key question is whether any checks
and balances come into play. Will the
projects that are primarily driven by
local government support (and related
subsidies), rather than commercial
logic, be reined in as the proponents
(and related commercial operators
and investors) start to be concerned
about lack of throughput volume and
falling profitability?
Will those operators with major
investments in Hong Kong and
Shenzhen – China Merchants, MTL
and Hutchison Port Holdings – be
able to exert any control over the
balance of supply and demand and the
downward pressure on revenues or will
the excess capacity induce a price war
(on the basis that "any cargo is better
than no cargo")? On the other hand,
the lower prices and increased choice
of port services are clearly of benefit to
shippers and shipping lines. Beyond
the negative environmental impacts,
should policy makers therefore be
worried about significant surplus
capacity if the investment risk has been
largely allocated to the private sector?
Figure 2 presents a similar analysis for
the YRD. The capacity analysis covers
Shanghai and Ningbo, plus the smaller
ports of Lianyungang and Taicang.
The absence of any significant capacity
over-hang, especially post 2012 is clear.
Given this context, it seems likely that
the additional 14 berths that could be
developed at Yangshan will be brought
on stream before 2020 – i.e. 50 berths
by 2020.
The tightness of capacity should ensure
that there is no significant chase to the
bottom for cargo – operators should be
able to protect their tariffs without seeing
a substantial migration of cargo to other
ports. The competition is primarily
between Shanghai and Ningbo for the
YRD cargo base (Lianyungang and
Taicang are unlikely to be major players).
Competition from Bohai Rim and South
China ports will be minor. There is only
limited overlap between hinterlands
and hence little of the YRD cargo base is
contested by ports from other regions.
For international transhipment there
PORTS
may be some competition if Mainland
restrictions are lifted. This is in addition
to the international competition from
Busan, Hong Kong, Kaohsiung, etc.
However the projected supply-demand
balance indicates that the YRD ports
will have the luxury of deciding whether
they want to top up with this footloose,
lower revenue cargo or not. Moreover,
their substantial base-loads of origin/
destination (O/D) cargo will ensure
high liner connectivity and add to the
competitiveness of both Ningbo and
Shanghai for O/D and transhipment
cargo, before they even need to start
thinking of cutting charges.
Given the high demand for port
services, relatively tight supply, limited
competition for Shanghai, and extremely
high capital expenditure for Yangshan
(notably the road link to the terminal
platform), the headline handling
charges for Shanghai are surprisingly
low, especially when compared with
the rates in South China and elsewhere.
This remains the case, even with the
tariff increases announced at the end
of 2007. A key influence and point of
departure from Hong Kong and South
China, is the prominent role taken by
government (through the Shanghai
International Port Group) in keeping
prices down. Rapid volume growth at
the new Yangshan, keeping transport
costs down for YRD manufacturers and
a desire to top the throughput league
tables appear to be higher political
priorities than cost recovery for the
substantial, public sector investment at
Yangshan….certainly for the time being.
Shippers Today 57
 PORTS

CSAV NORASIA christens

Da Chan Bay
C S AV N O R A S I A ( w w w . CSAV NORASIA in Hong Kong celebrated the holidays in December with
csavnorasia.com/) container its customers, clients and friends, with a black tie party on board a private
ship, Pucon, paid her maiden yacht that went down the Hong Kong harbour for the evening while guests
c a l l a t D a C h a n B a y Te r m i n a l enjoyed Chilean wine and salsa dancing on-board.
One, the new terminal facility in
Shenzhen, China, on January 13.
The Compañía Sud Americana de
Va p o r e s ( C S AV ) v e s s e l i s b e i n g
deployed for the weekly Asia-
North Europe (ANE) service of
CSAV NORASIA. It also marks the
first string calling Da Chan Bay
Te r m i n a l O n e s i n c e i t o ff i c i a l l y
opened in December 2007.

C S AV N O R A S I A i s p a r t o f t h e
C S AV G r o u p , w h i c h i s b a s e d i n
Valparaiso, Chile, and is the largest
shipping company in Latin America.

The ANE service deploys eight

vessels with an average carrying
capacity of 6,000 TEU. Its 56-day
rotation covers Le Havre, Hamburg,
Rotterdam, Antwerp, Port Kelang, Seen here watching the fireworks off the waters of Disneyland are, from left to right:
Da Chan Bay Terminal One, and K C Wong, Fracht; Byron Lee, China Global; Guillermo Ginesta, CEO of CSAV
NORASIA; Gina Giron-Urquiola, Shippers Today; Hernan Martinez, Line Manager,
Qingdao in its eastbound service and
CSAV NORASIA; and Jens Pottschul, Hellmann.
other ports in westbound service.

I n 4 Q 2 0 0 7 , C S AV N O R A S I A
announced the switching of the
I s t a n b u l c a l l t o t h e We s t b o u n d
voyage on its Asia Black Sea
Service (ABS). The first vessel
on this route was the Loa voy
748 which started the rotation at
Xingang on November 26 and
reached Istanbul on December 21.

D a C h a n B a y Te r m i n a l O n e i s
located at Da Chan Bay Terminal,
Xi Xiang Road South, Bao An
District, Shenzhen, PRC 518102. CSAV NORASIA top management, from left to right: Pablo Gonzalez, Mauricio
Te l . ( 8 6 ) 7 5 5 2 7 9 1 0 0 6 8 ; E m a i l Ramirez, Hans Moller, Guillermo Ginesta, Mario Da-Bove, Hernan Martinez, Cristian
commercial@DaChanBayOne.com. Ulloa and Dheeraj Bhatia.

58 Shippers Today
 SECURITY
10+2 US security programme
raises trade concerns
The European Shippers' Council (ESC) has voiced
concern about the US advance trade data initiative
known as the 10+2 security programme. The proposal,
according to the US National Industrial Transportation
League (NITL), would require both importers and
carriers to submit additional information on cargo to
Customs and Border Protection (CBP) before the cargo
is brought into the US.
"ESC considers that the proposal is another bureaucratic
burden for European companies" trading with the US,
said ESC Secretary General Nicolette van der Jagt. The
ESC said it will ask the European Commission to call
on the US to not apply this rule to the European Union,
and instead, apply the mutual recognition concept in
relation to new programmes such as the Authorized
Economic Operator programme. That programme will
become operational as of July 2009.
"We welcome the fact that the European Commission
has already expressed concern that the 10+2 rule does
not respect the SAFE Framework established by the
World Customs Organization (WCO) since it goes far
beyond" what is recommended by the WCO. "Apart
from this we are not sure whether European exporters
are willing to exchange commercially very sensitive
information with their trading partners," van der Jagt
added.
The long anticipated notice of proposed rulemaking
(NPRM)—the Advance Trade Data Initiative otherwise
known as "10+2" was formally published on January
2 in the Federal Register. The proposal would require
both importers and carriers to submit additional
information on cargo to Customs and Border Protection
(CBP) before the cargo is brought into the US. The
NPRM is focused on imports entering the US by water.
The due date for comments is March 3, 2008. Under the
proposed program importers will have to file 10 data
sets with CBP at least 24 hours prior to foreign lading
of the cargo onto a vessel bound for the United States.
Carriers will have to file an additional two data sets. All
carriers (except for ships exclusively carrying cargo in
bulk) would be required to submit a vessel stow plan not
later than 48 hours after departure from the last foreign
port. For voyages of less than 48 hours, the stow plan
60 Shippers Today
would be submitted prior to arrival in the first US port.
For importers, the proposal sets forth 10 elements that
are required for shipments consisting of goods intended
to be entered into the US as well as goods bound and/or
delivered to a foreign trade zone (FTZ).
These 10 data elements must be transmitted by the
importer and consist of the following:
• manufacturer (or supplier) name and address;
• seller name and address;
• buyer name and address;
• ship to name and address;
• container stuffing location;
• consolidator (stuffer) name and address;
• importer of record number/ FTZ applicant
identification number;
• consignee number(s);
• country of origin; and,
• commodity harmonized tariff schedule of the US
(HTSUS) number (provided up to the 6 digit level).
For freight remaining on board (FROB), five elements
must be provided and include:
• booking party name and address;
• foreign port of unloading;
• place of delivery;
• ship to name and address; and,
• commodity HTSUS number.
The purpose of the new rule is to better evaluate the
potential risk of smuggling weapons of mass destruction
through the use of oceangoing cargo containers before
goods are loaded on vessels destined to the US. While
the NITL is currently analyzing the latest proposal, last
year it told CBP that while it believes the program's
objective is correct, the 10+2 initiative needs to take
into account the hundreds of thousands of shippers
that utilize different types of supply chain strategies.
It pointed out that this could make full compliance
difficult. To view a copy of the NPRM, visit www.nitl.
org/E7-25555.pdf.

C-TPAT expanded to
US Customs and Border Protection (CBP) has
announced that it is expanding participation in the
v o l u n t a r y p r o g r a m k n o w n a s t h e C u s t o m s Tr a d e
Partnership Against Terrorism (C-TPAT) to air carriers
and third party logistics providers (3PLs) by early
2008 ( NITL Notice , November 30, 2007).
Earlier this month CBP released its minimum security
criteria for air carriers. It is continuing to study
how similar criteria can be expanded to 3PLs. One
difficulty faced by the CBP with respect to 3PLs is
how their supply chains can be fully vetted so as to
ensure the chain’s integrity.
At a recent meeting of the League’s Select Committee
on Security and Ocean Transportation Committee,
members discussed the relative merits of participation
in C-TPAT. At these meetings, members also shared
their perspectives on the program, including the
merits and benefits of CTPAT participation versus the
relative costs.
In January, NITL Notice published the results of
a survey of members of the National Industrial and
Transportation League on their views on the relative
merits of participation in the voluntary security
program, C-TPAT.
The ten-question survey was prompted over concerns
expressed over the relative value of the programme
particularly in view of subsequent initiatives which
call for the eventual scanning of all cargoes’ and
advance manifest and trade data submissions such a
"10+2" (Notice, January 4).
Overall most respondents expressed positive
e x p e r i e n c e s w i t h C - T PAT. M o s t i n d i c a t e d t h a t
they have been in the program for more than three
years, have had good experiences in working with
Customs and would recommend to other companies
that they participate in C-TPAT.
SECURITY
air carriers
The survey had 68 responses with nearly 80 percent
stating that they are certified at "Tier 2" or "Tier 3"
levels. When asked why they chose to participate in
CTPAT, by a 2-1 margin—respondents believed they
would be conferred tangible benefits such a fewer
inspections, less delays and reduced costs. For a
complete breakdown of the survey results, visit www.
nitl.org/C-TPATSurveyResults.pdf.
Meanwhile, Notice also reported in November that
the House Appropriations Committee is considering
a provision to a funding bill that would accelerate the
current timetable requiring that 50% of air cargo on
passenger aircraft be inspected within 18 months and
100% of all cargo in passenger planes within 3 years.
The current timeline for inspecting such cargoes was
included in the Implementing the 9/11 Commission
Recommendations Act of 2007 and signed into law
earlier this year. The House Appropriations provision
would shorten the 50% mandate from 18 to 10 months.
The League is working with a broad-based industry
coalition to counter this provision and isconsidering
a joint letter to the Committee in opposing the
accelerated timetable. Among the arguments to be
made is that it was only a short few months ago that
Congress passed, and the President signed into law,
t h e c u r r e n t r e q u i r e m e n t s o n a i r c a rg o s c r e e n i n g .
Further, that Congress should allow the Transportation
Security Administration (TSA) to implement current
requirements before establishing new mandates.
Additionally the group will point out that "doubling"
the amount of cargo inspected within 10 months is an
arbitrary formula that will divert, not focus, necessary
resources and slow implementation of the 9/11 bill.
Finally the group will point out that it fully supports
TSA current mandates for screening air cargo as set
forth in the 9/11 bill.
Shippers Today 61
 CHINA TRADE
The heartbeat of change
Wuhan, in central China, is forging ahead with dramatic
transport infrastructure developments, writes Sam Chambers
from Hubei province
Sam Chambers is the Hong Kong correspondent for
Supply Chain Asia as well as founder of City Connect
(www.cityconnect.com.cn), a series of inland, municipal
supply chain events including one for Wuhan on
September 22-23. Chambers is a freelance travel and
transport writer, the Asia editor for Seatrade, and Asia
columnist for Cargo Facts. In 2006, he founded City
Connect, the world's first dedicated inland, municipal
supply chain conferencing company which debuts in
Chongqing in April, before heading to Wuhan in September and Chengdu
in November. Chambers is publishing a book on China's ethnic minorities, due out
next year, which explains the headgear in the photo above.
Stick a pin into the centre of a transport seen its plant in Wuhan (one of two in the
artery map of China and invariably country, the other being in Guangzhou)
you'll hit one that links to Wuhan. continue to churn out more and more
This perfectly located city sits on the vehicles. The plant can now produce
crossroads of China, smack in the 70,000 Civic sedans and 50,000 CR-
centre of the east-west Yangtze river Vs a year. China's Dongfeng Motor has
and at the middle of the north-south rail commenced construction of a new facility
link through China. in Wuhan to produce its own brand
vehicles. It already has a joint venture
Variously described as the 'Detroit of with Honda in the city, which will start
China' for its myriad car factories, or constructing hybrid, environmentally-
the brewing centre of the mainland for friendly cars starting this year.
Anheiser Busch's huge beer operations
that supplies more than 40% of China's Meanwhile, Dongfeng Honda
beer consumption, Wuhan has the Automobile doubled its sales to
potential to become a leading logistics 125,000 units in 2007 from 63,000
hub for the region. units in 2006. The company currently
produces the Civic sedan and the CR-V
However, transportation costs are still an sport-utility vehicle. PSA Peugeot
issue. Independent research carried out by Citroen, which has also enjoyed a
City Connect (www.cityconnect.com.cn) highly successful partnership with
shows that it costs 10% more to produce Dongfeng in Wuhan, is on a mission
a car in Wuhan than it does in Shanghai, to double its market share in China by
despite the considerably cheaper wages in 2015. Peugeot, Europe's number two
Wuhan. Japanese car maker, Honda, has automaker by volume, is doubling
62 Shippers Today
by Sam Chambers,
Managing Director, CityConnect.com
capacity at its central China plant in
Wuhan to 300,000 vehicles a year by
2008, and building a second facility to
add capacity of 150,000 units per year.
Wuhan now has more skyscrapers
than London. Last year it became one
of 13 mainland cities whose GDP
exceeds RMB300 bn. Reflecting the
province's rise is the fact that the
United States has just opened its fifth
China consulate there.
With a gigantic US$1bn investment
by Taiwan's Foxconn, Wuhan is set
to become the world's largest digital
camera production base. Some 200,000
people will be employed by Foxconn in
Wuhan–that's the same as the whole
population of Arlington, Virginia or
Northampton in the UK. The first
digital camera and PC were produced
in October 2007, and once fully up
and running the facility will knock out
US$12.5bn worth of products a year.
Foxconn is also building a massive
LED factory in the Hebei capital.
Meanwhile, IBM, which boasts more
than 1,000 customers in Wuhan, is
reportedly looking to invest in the city.
Wuhan is often selected by central
government as a petri dish for change
aka in Beijing speak as an 'experimental
zone of comprehensive reform'.
Whether it's in fostering links with the
poorer rural surroundings, developing
green industries, pioneering aviation
liberlaisation, or even gambling—
Wuhan—in the heart of China, is also
the heartbeat of change.
And so it was on December 21 that
the local government held a press
conference announcing comprehensive
transportation investments in Wuhan
for it to become a hub and make best

use of the State Council's grant on its
'experimental' status.
News from the press conference showed
the main body of Wuhan Railway
Station will be completed before the
Spring Festival; Tianxingzhou Road/
Railway Yangtze Bridge, with a total
investment of RMB16.7 bn, will be
completed and put into operation in
2008. Wuhan Railway Station, with a
total investment of RMB14 bn, will be
completed in 2009 and make Wuhan
the fourth largest railway hub in China.
In the summer last year, Canada's
Bombardier Transportation won a
contract for rail signaling equipment
worth US$91 million. The new
system will manage high-speed trains
traveling at speeds of up to 300 km
per hr, along nearly 1,000 km of rail
line between Wuhan and Guangzhou.
The new system is scheduled to enter
commercial operation in January 2010
and there is speculation that Japan's
bullet trains will be used on this route.
Meanwhile, work has started on the
city's first subway. A total of seven lines
are planned—from a logistics point of
view, should help ease road congestion.
Telecommunications network gear-
maker, Nokia Siemens Networks, said
last autumn it had won an expansion
order for network equipment for a
proposed Hefei-Wuhan railway line
in China. Nokia Siemens said the
railway line would be 360 km long and
operational by early 2009.
Eight expressways that connect Wuhan
with nearby cities will be completed in
2008, making the neighbouring eight
cities within an hour's access from
Wuhan and making Wuhan—as the
China Daily put it, more 'outstanding'
as a transportation hub.
Construction work is speeding up
on the first tunnel to pass under the
Yangtze River. Workers in Wuhan have
now completed three-quarters of the
section of the tunnel that lies beneath
the country's longest river. Advanced
technology is being used in the massive
project being carried out some 60
meters under the river. The 3.6 km
long tunnel is set for completion by the
end of 2008 and will make it easier for
vehicles to cross the Yangtze River.
A t t h e e n d o f D e c e m b e r, Wu h a n
Yangluo Yangtze River Bridge, the fifth
Yangtze River Bridge in the city, started
operation. The bridge has also become
the 8th largest suspension bridge in the
world at 1,280 metres in length.
The second terminal building of Tianhe
Airport will be completed and put into
trial operation before the Spring Festival,
increasing the capacity of this airport to
13 mn passengers annually. The third
terminal building and the runway are
expected to start construction soon and
will increase the capacity of the airport
to 35 mn passengers annually.
When it comes to aviation, Wuhan really
is the envy of just about everywhere else
in China. While Beijing has become
quite restrictive on granting rights
for new airlines, Wuhan's aviation
liberalisation experiment has allowed
plenty of new firms to get the blessing
of Central authorities, making the city
a vibrant air hub. A large air cargo
logistics park is now being built.
A potentially huge and significant
moment in the easing of China's aviation
structure took place in July last year in
Wuhan. China's General Administration
of Civil Aviation (CAAC) granted
private carrier East Star Airlines the
rights to operate international flights.
The significance? In a bid to shield the
big three, state-run airlines, Beijing has,
until last July, insisted that no airline can
gain international flight rights until it has
been operating for at least three years.
East Star, based in Wuhan, only started
operations in May 2006. The airline
now calls at Hong Kong and Macau.
It has also applied to operate flights to
CHINA TRADE
Singapore and Thailand. The airline
started flying in May 2006 with three
Airbus 319s. It plans to add six Airbus
A320s and 11 short-range Airbus aircraft
by end-2008.
In other airline news, under a code
share agreement with Air China, rapidly
expanding Austrian Airlines has started
daily calls at Wuhan. The CAAC said
mid-December that it has also approved
the application of setting up a new air
freight company called Uni-top. The
new company will be based at the
airport, with a focus on domestic and
overseas cargo transportation. Uni-top
Logistic Company and Autel Intelligent
Technology Co Ltd will invest RMB135
mn and RMB15 mn respectively in Uni-
top. It plans to rent two Boeing 747-300
aircrafts and one 747-400 to undertake
the services, as reported by sources.
Wuhan Port Group, an enti t y t h e
mighty Shanghai International Port
Group invested in nearly three years
ago, operates six terminals handling all
cargo. Officials in Wuhan expect the
city to handle 450,000 TEU in 2007
(up 100,000 from 2006), and to crack
1 mn TEU by 2010. The municipal
government, on listening to shippers'
demands, are targeting a project for
24/7 Customs clearance.
Meanwhile, CIG Yangtze Ports will
invest RMB150 mn in building a dock
for heavy and large-sized goods in the
Yangluo Port in Wuhan. The project will
start construction at the beginning of
2008 and is expected to finish in mid-09.
On the box front, 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. After
the Phase II expansion is completed in
2010, Wuhan International Terminal's
capacity will increase to 1.2 mn TEU.
It will be the largest box port in western
and central China, and will account for
80% of Wuhan's total throughput.
Shippers Today 63
 CHINA TRADE

Relocating Processing Trade from PRD

Assessing alternative destinations on the Mainland
• Research Department, Hong Kong Trade Development Council

The changing investment environment in the

PR D is pushing Hong Kong manufact urers
who want to expand, to move production in
areas outside the PRD cache. The Ministry of
Commerce (MOFCOM) assists by identifying
nine central region cities ideal for relocating
processing trade from the coastal cities.

To encourage the relocation of Pan-PRD

processing trade activities from
China’s coastal region to the
central and western regions,
MOFCOM has selected nine
cities as the first batch of key
alternative destinations. They are
Chenzhou in Hunan, Wuhan in
Hubei, Xinxiang and Jiaozuo in
Henan, Hefei and Wuhu in Anhui,
Taiyuan in Shanxi, and Nanchang
and Ganzhou in Jiangxi.
Most of the Hong Kong
processing trade operators with
plans to relocate would only do
so by expanding their production
lines, shifting part of their
production activities to areas
outside the Pearl River Delta
(PRD) region while maintaining
close ties with their existing
production base in the PRD
to leverage on the advantage
of complementarity. As such,
preferred alternative destinations
for relocation are primarily
places in the vicinity of the
PRD. Apart from Ganzhou and
Chenzhou which are designated
by MOFCOM, Beihai and Yulin
in Guangxi (which lies adjacent
to Guangdong and is part of the
region) are
also good
choices as
processing trade under the restricted
category is still allowed there.
Labour supply and cost are among
the key considerations of Hong
Kong companies planning to
relocate. In Ganzhou in Jiangxi,
an estimated 2 million out of its
8.6 million people are working
and living outside the city. To
help enterprises recruit workers,
Ganzhou has proactively stepped
up promotions to attract the return
of its natives who are working
and living in other provinces.
Apart from Ganzhou, other cities
with large populations, large
numbers of outbound workers,
or large surplus labour include
Chenzhou in Hunan, Nanchang in
Jiangxi, and Yulin in Guangxi.  Qingdao. As for raw materials
The minimum wage levels
of Nanchang and Ganzhou in
Jiangxi, Chenzhou in Hunan,
and Yulin and Beihai in Guangxi
are slightly higher than those of
Jiaozuo and Xinxiang in Henan
but lower than those of Anhui,
Hubei and Shanxi. Generally
speaking, the minimum wage
level is around RMB 400-500
a month in cities in the central
and western regions, which is
significantly lower than that in
PRD cities. 
In terms of export routing,
Ganzhou in Jiangxi, Chenzhou
in Hunan, and Yulin and
Beihai in Guangxi rely more
on the PRD and Hong Kong
as the distances between these
cities and the two regions are
shorter. Hefei and Wuhu in
Anhui primarily use Shanghai,
and Jiaozuo and Xinxiang in
Henan, and Taiyuan in Shanxi
mostly export via Tianjin and
for the production of industrial
goods, the PRD is the key
source for Nanchang and
Ganzhou in Jiangxi, while the
other cities are less reliant on
t h e P R D .  - H o n g K o n g T r a d e
D e v e l o p m e n t C o u n c i l R e s e a rc h
Department

64 Shippers Today
 TRADE
New Labor Contract Law of the PRC
The Labor Contract Law of the
People's Republic of China will come
into force on January 1, 2008. This is
a most important work in the field of
legislation over the last 10 years, with
a major breakthrough in the existing
labor law, as well as in many aspects
of local policies. Since October 2007,
as the date of implementation of the
labor contract law neared, cases have
occurred from time to time that surprise
dismissal of the old corporate staff,
forcing staff to take a "voluntary"
resignation and re-sign a labor contract,
so that the employees had to accept
"zeroing" of the length of service in
the service unit. Even a small number
of employers are found to have
illegal implementation of economic
eliminating by one-time dismissing a
large number of workers with a labor
contract signed. This has triggered a
high degree of community concern.
Article 14 of the Labor Contract
Law
In China's enterprises, the short-term of
the contract is found quite common. In
2005, the National People's Congress
Standing Committee had a national
labor inspection, which revealed that in
small and medium-sized enterprises and
non-public-owned enterprises, those
66 Shippers Today
that had the labor contract signed with
the laborers were less than 20 percent
and individual economic organizations
saw an even lower rate; the survey also
revealed that more than 60 percent of
employment units usually signed short-
term labor contract with the workers,
mostly once a year, and some even
more versions in a year. As a result,
this has affected the stability of labor
relations. The new Labor Contract Law
hereinabove is to solve the problem of
short-term contracts by expanding the
scope of labor contracts without a fixed
period where applicable.
Non-fixed term labor contract is that
an employing unit and the workers
shall agree to terminate such contract
without determining the time for
expiration thereof. Many people believe
that such a labor contract is an "iron
rice bowl", "life tenure" and that there
was no fixed deadline for dissolving a
labor contract once signed. Therefore,
many workers always try everything
possible to sign a non-fixed term labor
contract with employers. On the other
hand, employers consider the non-fixed
term labor contract to be a "life-long
burden", and trying to evade the legal
obligation therein.
In fact, no specific termination time
means that a labor contract does not
have a fixed expiry time; the length of
the duration of the labor contract not
to be determined dose not mean that
such expiration time doesn't exist. As
long as there are no legal provisions
or conditions of the terms agreed by
both parties, the parties shall continue
to fulfill the obligations under the
labor contract. A non-fixed term labor
contract is not a permanent one, and
does not mean that workers therewith
may be arbitrary in actions and shall
comply with the labor regulations of
such unit and the relevant provisions
of the Labor Law. Once the situation(s)
provided by the law have occurred,
such non-fixed term labor contract
may also be lifted. There are three
situations that may cause dissolving a
labor contract without a fixed term: (1)
where the Employer and the Worker
therewith have an agreement; (b) where
the Worker has an illegal behavior
or in illness or with an injury, thus
not competent in work; (3) economic
retrenchment. These situations are in
consistency with the regulations for
lifting a fixed-term labor contract.
Article 14 to the Labor Contract Law
provides that a labor contract without
a fixed term shall be concluded
accordingly in respect of any worker

with over 10 years of continuous
employment in a work unit, employing
units in the initial implementation
of the labor contract system, or re-
establishment of state-owned enterprise
that is to restructure a labor contract,
and such worker in the employing
unit has a continuous work period for
ten years, and less than a decade from
the mandatory retirement age, or for
a second time to sign a fixed period
of labor contract, when such worker
is consent to the renewal of a labor
contract, in addition to the proposal
proposed by such worker to sign a
fixed-term contract.
Where employing units having had an
employment with workers on the date
of the expiration of one year and did
not enter into a written employment
contract with such workers shall be
deemed as such employers and workers
have made a non-fixed term labor
contract. Employers, who have violated
this law and failed to make a labor
contract without a fixed term with such
workers, shall pay such workers twice
the monthly wage since the date of
a labor contract without a fixed term
shall be signed.
Impact of Labor Contract Law on
Enterprise
The final version of the labor contract
law has the provisions of Article 14
as that, workers in meeting " having
been with an employing unit for over
10 years of continuous work" or "for
a second fixed-term labor contract"
conditions can be made with the
employing units a "non-fixed term
labor contract." This provision has
caused many entrepreneurs' concern
that the employment enterprises will
face greater difficulty in autonomy
on firing, i.e. high cost; enterprises
cannot determine how much this risk
might be. Before the implementation
of the new labor contract law, there
will probably be major adjustments in
human resources management policies
in many enterprises.
October 22, 2007, Wal-Mart global
p r o c u r e m e n t h u b i s s u e d a l a y o ff
notice, the global total of more than
200 employees would be given an
"unprincipled dismissal", of which
Chinese staff were about half of the
number.
In the City of Dongguan, Guangdong,
China, a sports hardware factory
forced more than 1,000 workers "to be
recruited only after demission", that is,
one hand is to sign a letter for voluntary
demission whilst the other hand to sign
a new contract.
Also in Huizhou, another city
in Guangdong Province, a daily
necessities manufacturer requested a
number of 2,500-contracted employees
to sign a new contract, which would
be effective on the date of January 1,
2008. At the same time employees
were asked to sign a labor contract to
terminate the original "agreement".
H u a w e i Te c h n o l o g i e s C o . , L t d .
Shenzhen introduced the "Regulations
on Compensation for Lifting or
Termination of Labor Relations,"
which encouraged more than 7,000 old
employees with over eight years, before
the New Year's Eve in 2008, shall
take the initiative for the resignation
procedures, then 1-3 years of labor
contracts would be resigned with them
after the competition for a post with
the company. All their jobs, wages
and benefits would remain unchanged,
except the labor contract and seniority
would be once again signed for a
TRADE
change. In exchange, Huawei offers
a higher standard for economic
compensation than the new Labor
Contract Law stipulates, for a total of
up to RMB 1,000 million. Under the
rule of "First resignation, then compete
for a post", all staff in the voluntary
departure would be granted by Huawei
the corresponding compensations. The
compensation package is as per "N
+1". N is for work age in the Huawei,
e.g. a Huawei employee has a monthly
salary of RMB 5,000 yuan, and 60,000
would be the bonus for a year; if such
employee Huawei has work ed for
eight years, then he would be given
the final amount of compensation of
RMB 10,000 yuan (wages + year-end
bonuses equally shared), multiplied by
the "8 +1", totaling 90,000 yuan.
The Huawei event immediately became
a hot topic in social circles, producing
a tremendous demonstration effect.
It is generally considered that the
purpose of Huawei is trying to write
off the seniority of the old employees,
and have their length of service
recalculated, avoid staff working
continuously for 10 years and signing a
fixed-term labor contract. To ultimately
circumvent the Article 14 to the new
"Labor Contract Law", in advance, it
attempts to convert the possible "long-
term contracted" staff to "short-term
contracted" staff. Huawei responded,
however, that this adjustment is a
normal practice of human resources.
The old staff getting onto the new
posts would be more dynamic for the
enterprise. Meanwhile, it denied the
intention to have the previous work
ages of the old employees converted
into "zero."
Some senior judges and lawyers
considered that, because the relevant
judicial interpretations have not yet
Shippers Today 67
 TRADE
introduced, whether the practice of
Huawei spending money to encourage
nearly 10,000 employees to resign
and have a competition for a new
post could really circumvent the
labor contract with no fixed term is
still unknown. Such practice in an
enterprise might face an adventure.
Buyouts cannot be used as the simple
way to solve a series of problems such
as the health care period, annual leave
and the length of service. Under the
current practice of Huawei, the so-
called "demission" of the Huawei
staff is not a real leave off their post.
Instead, all the staff would continue
to work. In legal terms, demission is
marked as: the handling of handover to
recover the card, and payment of wages
stopped, and social security stopped,
file transferred, handling registration
of the unemployed, rather than relying
on staff to submit a single report on
the resignation. So, although Huawei
provides recalculation of seniority
with that employees have to agree,
the statute is greater than agreement,
the "left" staff's working age can not
be re-calculated, and but deemed as
a consecutive term. According to the
"Labor Contract Law," Article 14
provides that in the same unit for 10
years or more, employees shall have
the right to sign a non-fixed term labor
contract the employer.
As for Huawei to pay compensation, it
may be seen as the future of economic
compensation paid to the workers as
the early part thereof. Because the
length of service of staff could not be
really written off, Huawei's practice is
to have the economic part paid to the
workers as an advance payment. For
example, a Huawei staff has been in
eight years, the staff has received the
first eight years of payments this time;
After re-signing a labor contract, and
68 Shippers Today
then assumed that paying economic
compensation occurs in 3 years, the
eight-year work age shall then be
removed, with only later three years of
compensation received.
It is understood that regarding to
the "labor contract law," the draft
of the implementation details has
been worked out, and now is seeking
o p i n i o n s f r o m d i ff e r e n t p a r t i e s .
Meanwhile, the judicial interpretation
of the Law will also recently be
introduced by the Supreme People's
Court, and is expected to define
the situation mentioned above.
I f t h e n e w l a w, b e f o r e a n d a f t e r
its implementation, meets a large
number of avoidance measures,
judicial interpretation might be cover
the concept of "the contract signed
within one year after being dismissed
may be treated as a continuous labor
contract." In the foreign practices, a
contract re-signed within one month
to three months, shall be deemed as a
continuous labor contract.
Law Working Committee of the
National People's Congress Standing
Committee: Interpretation of the
Authority
Prior to the implementation of the labor
contract law, some enterprises intend to
dismiss employees, or force employees
to take a resignation, resulting in the
workers in the service unit to get a
"zero" for the continuous length of the
service.
Law Working Committee has said
that these practices have aroused
widespread social concerns and strong
reactions. Employers adopt these
practices for different purposes: some
had a misreading or misunderstanding
of the labor contract law; some
intended to circumvent the relevant
provisions of the labor contract law;
and in some enterprises, this has been
done by a small number of people to
seek their own interests. Such practices
are actually contrary to the provisions
of the labor contract law, and have not
only caused harmonious impact on
stable labor relations, but also damaged
the legitimate rights and interests of
workers, and nor conducive to the
development of enterprises.
In accordance with the provisions
of the labor contract law, employing
units have established a labor relation
with laborers from the date of
employment of the workers. After the
implementation of the labor contract
law, as long as workers continue
to work in this unit, labor relations
is deemed as continuous; even a
"resignation" and/or a "voluntary
agreement" have formed to change
the labor contract, nor can it change
the fact of such "labor relation". And
also, Employers cannot circumvent the
statutory obligations.
Labor Contract Law on the provisions
of the labor contract with no fixed time
limit is targeted mainly at labor and
employment in the short-term labor
contracts and the prominent problem
in a one-year labor contract, and even
the more common situation where
signing contracts for several times in
a year. The purpose is to encourage
and guide the Employers and workers
to sign a longer duration of a labor
contract, in attempt to construct stable
labor relations and enhance laborers'
identification with the employing
units, improving labor enthusiasm and
promoting a long-term development.
Prior to that the Labor Contract Law
comes into effect, employing units, in
 TRADE

lifting or terminating labor contracts,

shall be strictly in accordance with the
implementation of the provisions of
the Labor Law. If there is an economic
layoff, it shall be in accordance with
the Labor Law Article 27 on the
economic layoffs; If employing units
have a unilateral dissolution of the
labor contract, in accordance with the
Labor Law Article 30 and Article 21 of
the Trade Unions Act, employers shall
in advance notify the trade unions for
seeking their views thereon. Workers
that consider employing units illegal
in lifting or terminating labor contracts
may require the labor department to
have it dealt with according to law, or
an application can be filed for labor
arbitration or litigation.

Labor Contract Law Article 97

provides that any labor contracts
that have been lawfully entered into
and existing before the effective
date of the labor contract law shall
continue to perform. Pursuant to
this principle, the labor contract law
made three transitional provisions:
First, in respect of the number of
consecutively signing labor contracts
with a fixed period of time shall be
counted as per the date of the renewal
of fixed-term labor contracts after
the implementation of this Law;
second, with the establishment of de
facto labor relations, a written labor
contract that has not yet been made
shall be concluded within one month
as of the date of the implementation of
this Law; third, in respect of lifting or
terminating labor contracts, the method
for economic compensation shall be
implemented in accordance with the
relevant existing provisions prior to
the implementation of this Law; As of
the date of the implementation of this
Law, the provisions of this Law shall
govern.

Shippers Today 69
 Hutchison Port Holdings (HPH) has named ECT President, Jan Henrik von Sydow became
Westerhoud, as division director for North Europe, it was reported late Executive Director on 1 Jan 2008
in 2007 by World Cargo News online. This cluster includes all HPH's of Kerry Logistics, based at the
operations in Belgium, France, the Netherlands and Germany plus all of head office in Hong Kong, Sydow
Scandinavia and the Baltic, including Russia. The appointment, it was is responsible for all international
reported, marks a split in HPH's European control, as Richard Pearson freight forwarding business.
headed all HPH operations in Europe as CEO of what was until recently Henrik von Sydow joined Kerry
called Hutchison West Ports, based in the Port of Felixstowe. Previously Logistics from Baltrans Logistics
the European head office, the Felixstowe office will now cover the as the Director of Corporate
UK and all of the Mediterranean, including the East Med. Likely to be Strategy in 2007. Gary Wilcock
renamed Hutchison Central Europe, it is headed by Clarence Cheng, has been appointed Managing
formerly the unit's CFO under Pearson. Westerhoud commented that Director of Europe for K er r y
Hutchison's decision to split Europe into two major divisions gives ECT Logistics. In his new function,
a boost. It will bring ECT closer to the global centre of operations in Wilcock is responsible for the
Hong Kong. From being a subsidiary reporting to Felixstowe, ECT now Group's business operations in the
oversees more than half of Europe. Westerhoud joined HPH in mid-2004 UK, Spain, Central Europe and
as president of in Rotterdam. Europe's biggest container terminal Western Europe. Wilcock joined
operator, ECT handled 5.5M TEU in 2006 and has just handled the Kerry Logistics from Trident
container that represented the Port of Rotterdam's 10 millionth TEU in International as the Managing
2007. World Cargo News online Director of UK in 2002.

Establishing a cargo outstation requires not just a lot of cargo, Formerly a

but a good deal of expertise, experience and ingenuity–which
is precisely the criteria Emirates SkyCargo looked to fill
when appointing cargo managers of its newly opened routes,
said Peter Sedgley, Emirates' Senior VP Cargo Commercial
Operations. Emirates SkyCargo now serves 99 destinations
in 62 countries. Venice Cargo Manager, Giovanna Cardinali,
joined Emirates SkyCargo from Venice's Marco Polo Airport
where she held a variety of positions, including Cargo Sales
and Marketing Manager, for seven years. Lisa Downey,
formerly with Emirates SkyCargo Manchester station, was
appointed Newcastle Cargo Supervisor when the new route
opened. She brings with her 17 years' experience in the UK
air cargo industry. New Brazil Cargo Manager, Dener De
Souza, based in Sao Paulo, joined Emirates SkyCargo after
previously holding senior cargo roles at American Airlines,
KLM and Varig Airlines spanning back to 1985. Air cargo
specialist, Mahendra Pokhriyal, was appointed Cargo Manager
at Ahmedabad when Emirates SkyCargo commenced flights to
the Indian city.
He has spent
18 years in
t h e a i r c a rg o
industry, and
was previously
at Jet Airways
as Area Sales
Dener De Souza Robert Siegel Manager Cargo.
GSA for the
cargo divisions
of Air Canada
and Canadian
Airlines
based in
Toronto, Ken
M c D o n a l d Lisa Downey Duncan Watson
joined Emirates SkyCargo as Cargo Manager in Toronto.
The Emirates SkyCargo business in Houston will be led by
industry specialist Roberto Penate who has been appointed
Cargo Manager. Cyprus & Malta has a new Cargo Manager,
Anthie Antoniou, based in Larnaca, who joined Emirates
SkyCargo from Amathus Navigation, the GSA for several
international airlines including Emirates. At the Emirates
SkyCargo's Dubai hq, Duncan Watson and Robert
Siegel have been appointed Regional Managers Cargo
Commercial Operations Middle East & Africa and Europe
& the Americas respectively. Watson was previously with
DHL for 15 years where his most recent position was
Head of Commercial Middle East based at the company's
regional headquarters in Bahrain. Siegel has been with
Emirates SkyCargo since 1991. Prior to his recent
appointment in Dubai, he was Cargo Operations Manager
in Frankfurt, Germany. Emirates SkyCargo launched five
new freighter-only destinations in 2007-Djibouti, Hahn,
Toledo, Zaragoza and Prague.

70 Shippers Today
 The European Liner Affairs Association Lufthansa Cargo AG has announced
(www.elaa.net) has elected as its new the appointment of Flight Captain Kay
Chairman, Ulrich Kranich, a member of Kratky as the new General Manager
Hapag Lloyd's executive board, with effect of Jade Cargo International, with
from 1 January 2008. He succeeds the effect from 1 Jan 2008. The Board of
Mediterranean Shipping Company's Gian Directors had already appointed him
Luigi Aponte. Headquartered in Brussels, the caretaker General Manager of the
ELAA was set up in May 2003 to represent German-Chinese cargo carrier, based
Ulrich Kranich
the liner shipping companies of the world in in Shenzhen, in September 2007.
the European Commission’s review process of Regulation 4056/86. Kratky was previously in charge of
The ELAA acts as a contact point for the EC throughout its on-going Transport Management and Flight
consultation and review process. Chris Bourne, formerly MD of O p e r a t i o n s a t L u f t h a n s a C a rg o .
MOL (Europe) Ltd, was named Executive Director of ELAA from Claus Richter moves from Lufthansa
1 Sept 2007. The association counts among its members A P Møller/ Passage Airline to take over as VP
Maersk, Atlantic Container Line AB (Grimaldi), China Shipping Transport Management and Flight
(Group) Co, CMA-CGM Group, COSCO, CSAV (Compañia Sud- Operations of Lufthansa Cargo. He
Americana de Vapores S A), Evergreen Marine Corp (Taiwan) Ltd, was formerly Manager Operational
Hamburg Südamerikansiche Dampfschiffahrtsgesellschaft KG, Support and Deputy Manager of Flight
Hapag Lloyd, Hanjin Shipping Co Ltd, Hyundai Merchant Marine Operations of Lufthansa Passage
Co, Ltd, Kawasaki Kisen Kaisha, Ltd, Malaysia International Airline. Meanwhile, Hjoerdis Stahl,
Shipping Corporation (MISC), Mediterranean Shipping Co S A head of Lufthansa Cargo handling
(MSC), Mitsui OSK Lines, APL Co Pte Ltd, NYK Line (Nippon organisation in Frankfurt, is leaving
Yusen Kaisha Line), Orient Overseas Container Line Ltd, United the company at her own request and
Arab Shipping Co (SAG), Yang Ming Marine Transport Corp, and is presently on leave. A decision on a
Zim Israel Navigation Co Ltd. successor will be taken shortly.

Shippers Today 71
 EVENTS

William Fung, Group Managing Director of Li & Fung Limited, will give the Keynote Address at the Opening of the
2008 edition of Prime Source Forum (www.primesourceforum.com) scheduled for 1st & 2nd April at the Hong Kong
Convention & Exhibition Centre. Dr Fung joins the many distinguished speakers taking part in the Forum including
Rufus Yerxa, Deputy Director General of the World Trade Organisation (WTO), who will update the expected 400
participants on the latest trade situation from the perspective of the WTO.

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72 Shippers Today