Express Cargo

Overview

• In 2008, Hong Kong's air cargo throughput reached 3.6 million tonnes, down 3.1% compared to 2007. Air cargo took up 1.2% of Hong Kong's total cargo throughput in tonnage terms, and it accounted for 35.5% of the territory's total external trade, at US$266 billion in 2008.

• Against a grim economic backdrop, Hong Kong's air cargo throughput was 408,000 tonnes for the first two months in 2009, down 24.6% year-on-year (YoY).

• Based on the latest available figures, in terms of revenue, international courier services accounted for 13.4% of the air transport's total in 2007 in revenue terms (US$1,744 million), up 7.7% from 2006.

Industry Data

Business Receipts (US$ million)

Source: Report on Annual Survey of Storage, Communication, Financing, Insurance and Business Services, Census and Statistics Department


Range ofServices

Typical express services involve transport logistics of door-to-door deliveries with guaranteed time and traceable location. Thanks to Hong Kong's superior air connectivity, industry players are able to deliver the goods to major Asian cities within the same day, and to Europe and America within the next day.

Competition, together with information technology advancement, has encouraged the industry to integrate specialised and customised logistic solutions into its typical service model. Major industry players can now offer many value-added services including: packaging, insurance, dangerous and bulky goods handling, customs clearance, and shipment-tracing.



Service Providers

In line with many international cities, Hong Kong's express industry is dominated by a few multinational players, which have wide-ranging global air and ground networks. The smaller operators tend to focus on niche areas and leverage on their understanding of particular markets to develop business volumes.

In addition to the private service providers, the government-owned Hongkong Post is also a major player in the industry. Its Speedpost service has one of the largest delivery networks in the world, serving more than 210 destinations and over 1,900 cities on the mainland.

The very size of the big express operators and their commitment to hub strategies and filling up their planes, however, mean that smaller operators can provide a faster and more flexible service in certain areas. They often focus on a niche market and rely on a stable customer base which provides regular income flows. To reduce their overhead costs, they tend to subcontract wholesale operators such as on board couriers who have established routes and act as consolidators for other smaller operators.


Exports

The express industry facilitates international business flows. Its services thus tend to mirror trade routes. While North America and Europe remain the major markets, trading activity is also expanding within Asia. Because of geographical proximity and close economic ties, the Chinese mainland features prominently in Hong Kong's express cargo industry.

The size of the mainland market provides good business opportunities for Hong Kong's express sector. The larger operators have already established a presence in major mainland cities via joint-venture arrangements. The smaller companies tend to build their customer base through referrals from existing customers and visits to the cities to identify potential clients.

(US$ million)

Source: Report on Hong Kong Trade in Services Statistics, Census and Statistics Department
Note: Service exports by Hongkong Post is not included

Recent Development and Market Outlook

International trends

The continuing trend toward globalisation of sourcing, manufacturing, assembling, and distribution has boosted demand for transportation services, including express service. Asia, particularly the Chinese mainland, is playing an increasingly important role in manufacturing. As Asia's manufacturing capability improves, production of high-value goods continues to shift to this part of the world. These goods, such as telecom equipment and other electronic product and parts, are usually transported by air, as product life cycles shorten. This has created a favourable environment for the express industry in Asia.

Hong Kong's position as a hub

• Hong Kong has been the busiest airport for international cargo for a number of years. Hong Kong International Airport (HKIA) has around 85 airlines linking Hong Kong to some 150 destinations around the world, including 40 cities on the Chinese mainland, as well as frequent flights, offering a favourable operating environment for the express industry.

• Hong Kong also has a pool of international and highly experienced logistics companies that enables smooth logistic flows. Many of them are represented in the Hong Kong Association of Freight Forwarding and Logistics (HAFFA), with members including: DHL, UPS, Expeditors, Panalpina, Kerry Logistics, Schenker, etc.

• Time is critical to the competitiveness of the express industry. Besides extensive air connectivity, HKIA also has an excellent logistic infrastructure in place. HKIA has been awarded the Air Cargo Award of Excellence for two consecutive years by Air Cargo World (2007-2008), an authoritative industry publication.

• Efficient customs clearance is also an important element in the express industry. HKIA speeds up this process by providing integrated Electronic Data Interchange (EDI) with seven major air cargo operators and the Customs & Excise Department. In World Bank's Logistics Performance Index, Hong Kong ranked 7th among some 150 regions in terms of customs efficiency.

• In September 2008, DHL completed its expansion of Central Asian Hub facilities in Hong Kong, more than doubling its handling capacity to 75,000 pieces per hour (pph) from 35,000 pph previously.

Express industry in China

Since January 2006, China has allowed 100% foreign-owned express service providers to enter the country's express service market in observance of its WTO commitments.

China's express industry is dominated by less than 20 large express service companies. Nevertheless, competition is keen. Prominent players include international companies such as DHL, TNT, Fedex, and UPS, as well as domestic players like EMS, a subsidiary of China Post, Sinotrans, SF Express, ZJS Express, etc.

The industry has been enjoying dramatic growth over the past two decades. In 1990, the express industry handled a mere 3.4 million pieces of cargo, and the number of express cargo handled skyrocketed to 1.5 billion pieces in 2008.

As of 2007, 234,000 people were engaged in China's express service sector, which had 47,000 outlets across the country. In 2008, the express industry's revenues amounted to RMB40.8 billion (US$6 billion), up 19.2% from 2007.

The bulk of the Chinese express and air cargo market activities is concentrated in the coastal and southern provinces, as illustrated by the following table, showing pieces of cargo handled by the express industry in 2007:

Source: China Statistical Yearbook 2008

• The Chinese express market showed moderate growth amidst the financial crisis. In the first two months in 2009, revenue of the express industry increased by 5% YoY to US$902 million.

• In January and February 2009, international express service (including Hong Kong, Macau and Taiwan) took a 6.2% share of total number of pieces handled, but it accounted for 31.2% of total revenue of the industry. 71.2% of the total pieces belonged to the cross-city category, yielding 56.7% of the revenue, whereas same-city courier service's share of total number of pieces handled was 22.6%, giving rise to 7.3% of total industry revenue.

• DHL announced in late 2007 to locate its North Asia hub in Shanghai. The facility is expected to be operational in 2010. Its designed capacity is 20,000 parcels and 20,000 documents per hour.

• Fedex's Asia-Pacific Transshipment Centre in Guangzhou has begun operations in February 2009. After the facility its opening, delivery time for Fedex's international mail is expected to be cut from the current three days to one.

• In June 2008, UPS announced that it will move its intra-Asia air hub from the Philippines to Shenzhen. The facility, expected to be operational in 2010, will have a capacity of 18,000 pph, expanding from its 7,500-pph facility in the Philippines.