ISSUE 2 2011


FAR EAST Damco seeks fresh challenges


Damco prides itself on getting into new markets


first, so it


comes as no surprise that the Danish-based forwarder is considering setting up new operations in Cambodia, Laos and even Myanmar as part of the next phase of its Asian expansion. Indonesia could also figure in its plans. “We’re currently reviewing our plans of where we want to be in three to four years time, so it’s quite logical that we should look at the markets that are developing the fastest,” says CEO Rolf Habben-Jansen. “We have the experience to go onto those sorts of places, which makes things easier.”


In fact, the Cambodian office will open later this year, and it follows the further expansion of Damco’s Vietnam network with a new office near Ho Chi Minh city earlier in 2011.


Cambodia, though small, is a market with potential,


Rolf


Habben-Jansen continues. “We already have 25 people there. We are now considering whether we should open a warehouse or a container freight station, though we need to find the right location.” However, many of the infrastructure problems associated with this once war- torn country are “definitely improving”. Textiles are the main story


in Cambodia. It is the industry of choice for many developing countries, whose exports enjoy substantially reduced import tariffs in western markets. Generally, Damco’s seafreight business from the Far East has made a slow recovery since the Chinese New Year and is now around 5-6% ahead of the 2008 level – and well ahead of the slump year of 2009. “It’s been a satisfactory start to 2011, though you can’t say anything definite until you’ve had the first entire quarter of the year.” Airfreight growth is a little softer.


Notwithstanding Damco’s drive for new markets, China is


still the major player in


this market. The forwarder operates ocean and air services from all over Asia into all the main European markets and as such is a major buyer of ocean freight. Rolf Habben-Jansen says that he is somewhat in- between those who see a major tightening of the seafreight container market and those who believe that there will be a glut of capacity.


Regional trade spurs Asian growth


Thomas Blank, regional director for sales and marketing at Geodis Wilson in Asia Pacific sees intra- Asian development as the next major step in its Far Eastern activities. It is already one of the few multinational freight forwarders to offer an intra- Asian trucking service between Singapore, Malaysia and Thailand and plans to expand this to include other areas such as China and even Cambodia over the next few years.


In Europe, we take comprehensive overnight or 1-2 day road services for granted. In Asia, they are a comparative rarity, both because road links have largely been lacking but also because of bureaucratic and slow customs procedures. Traffic tends to go by sea or air in many cases.


All that is changing rapidly


though. Road networks are improving and customs is becoming increasingly computerised, says Blank. “It may not be to European standards yet, but then Asia isn’t yet one large market as Europe is.” International trucking within Asia is still largely permit controlled and there are restrictions on activities like cabotage, but the level of protection varies from country to country and there are some signs of liberalisation. Geodis Wilson subcontracts around 75% of its Asian haulage and has found that a good quality local trucking industry is emerging, “though you do have to manage it well”, Blank points out. Economics is the spur. “What the Asian countries found in the last recession – and indeed the one before that – is that they would have taken a far bigger


Toll targets Asia


Toll is continuing to develop in both Asia/Europe and intra-Asian trades,


especially through the recent acquisition of Dubai-based sea air forwarder, SAT Albatros. Group products, marketing and sales director Paul Coutts explains: “We see this acquisition as adding significant value to our capabilities in this region, linking these key markets and offering our customers choice of service level and price.


Other recent acquisitions included WT Sea Air and Genesis in the UK and McLaughlin Freightlines in Australia. “Within Asia we continue to strengthen


our networks and


build our business. In our recent half year results, we reported significant contract retention and wins in Asia in the Global Logistics division, a key part of the business. We’re also progressing well with the redevelopment


airfreight, Toll has developed its air freight capacity and know-how so that it can offer greater variation in terms of speed and price to customers and has appointed a new senior management team to head up these operations. Coutts adds: “We are very optimistic about this opportunity and look forward to reporting further good results in the coming months and years as this strategy gains further traction.” With IATA forecasting strong growth in Asian air freight for the next three years, Toll has been investing in its regional and global services and network. The company has traditionally been weighted towards ocean


of the Loyang supply base in Singapore, which will be home to Toll Offshore Petroleum Services and others in this unique oil and gas sector.” In


hit than they did if it wasn’t for inter-Asian trade.”


That said, trade between the Far East and Europe is recovering well following the latest economic debacle in the West.


Geodis


Wilson’s own trade between Asia and Europe surged by over 80% on air and 50% on ocean freight though that was largely due to a concerted marketing campaign, focussing on blue chip as well as smaller companies. Nevertheless, overall market growth is still quite healthy, Blank says. It’s not all one-way either.


“There’s been a huge ramp-up in exports from Europe, both luxury


freight but has strengthened its air freight division during the last 12 months. IATA forecasts that the five fastest growing international air freight markets between 2009 and 2014 will be Hong Kong (12.3%), China (11.7%), Vietnam (11.4%) and Taiwan. Asia Pacific is expected to see the highest growth worldwide for international air freight at 9.8% during the same period, says IATA. Toll Global Forwarding chief executive officer, Hugh Cushing, adds: “Toll Global Forwarding has its headquarters in Hong Kong and our roots are in Asia Pacific. We see the forecast growth in the air freight sector in Asia as an exciting opportunity for Toll to expand its presence. Globally we have made several key acquisitions in the US, Europe and Middle East which will strengthen our air freight network.” China is still the major economic power in Asia and the centre


goods, more general consumer goods and capital goods and this has been reflected in our own carryings which are far more balanced than they were.” Geodis Wilson is continuing to open new offices in China. Not only is it following the westward shift in industrial development with new locations in Chongqing or Chengdu, but it is also opening additional outlets in the largest cities to bring itself closer to its customers. Shanghai and Beijing are huge cities now and getting from one side to the other has become a major undertaking. That said, congestion in these cities is no worse than comparatively-sized European metropolises. Chinese government policy is to keep on top of traffic demand with a massive road and rail building programme


for manufacturing and trade,


and there is “a lot of exciting opportunity there”.


But the developing countries in Asia are also showing a lot of potential, says Coutts. “We are well established in Indonesia, working in the resources and forwarding spaces there, and last year Toll opened the Cambodia railway through our joint venture partnership Toll Royal Railway. We are committed to our customers in these countries and the region generally, and look forward to growing our presence there as demand increases.”


The Cambodian government has outsourced its entire railway operations under a 30 year exclusive concession with Toll (Cambodia). With the help of the ADB and AusAID, infrastructure and reinstatement of the network is under way, together with the construction of new inter-modal freight terminal on outskirts of Phnom Penh.


Vietnam is emerging as one of the oil industry’s world hotspots, says Arbour Global Shipping Services director, Julian Chambers. The privately-owned forwarder, headquartered in Manchester, has been doing quite a few charters and part-charters to the port of Vung Tau, which lies on the coast about 80 miles south of Ho Chi Minh and has become the centre for Vietnam’s oil industry. Arbour is the European


general agent for Dubai-based Project Arabia Line, which operates a fleet of about half a dozen combi vessels. It also ships out-of-gauge cargoes on containerships and offers a weekly LCL container service to the two main Vietnamese cities of Ho Chi Minh and Hanoi, as well as on-board courier and airfreight.


The oil industry is a high priority for the Vietnamese government,


37


Added value is key to profits


Far East rather than move everything to the UK and then think about distribution. Why not pick and pack it there in the Far East?” Many companies have DCs in the UK, of course, but it can often be more cost- effective and efficient to bypass them.


As logistics gets on the agendas of an increasing number of boards, it is becoming easier


to get


Steve Walker, chairman of SBS Worldwide says that the Far East is “a key market” for the forwarder. However, with air and ocean margins forever under pressure – and likely to remain so with ever more shipping and airline


capacity


coming back on stream – the key to profitability in this trade lane is added-value.


Many of the supply chain practices already adopted in the large retailer and automotive segments could usefully be adopted in other industries – including publishing, one of SBS worldwide’s vertical market segments. “For example, we’ve encouraged to


printers hold stock in the


customers to accept this type of strategic thinking. “If you can give managements the right tool, they realise the savings that are to be had in the supply chain,” says Walker. A lot of the processes that are currently carried out expensively and not always very efficiently in the UK could just as easily take place at origin, given the sophistication of today’s supply chain software. This makes it perfectly feasible to check stock availability and manage consignments – even though they are 10,000 miles away. China is printing an increasing number of books for the UK market. India in time might start to capture an increasing amount of this business though, and SBS is setting up in that country too.


Oiling the wheels of commerce in Vietnam


which also owns most of the oil companies, so


shipments are


rarely held up by red tape and bureaucracy. There are also few problems in getting permits for onward road movements, adds Julian Chambers. “In fact, outside the cities, moving outsize loads by road is probably easier than it would be in the UK, and the authorities will bend over backwards to make sure that shipments get through. It also helps that our guys in Vietnam are very clued up on the regulations.”


As well as Vietnam, Arbour also handles similar work in China and, mostly via South Korea, Russia’s Sakhalin Island as well as in other parts of the world such as Afghanistan. “We’re also seeing a big increase in wind turbine traffic to China,” adds Mr Chambers.


He says that the company has expanded rapidly since being set up in August 2009 and is now looking for staff to set up an office in the Felixstowe area, whose function will include loading of pieces onto container ships in the Suffolk port. An office in Antwerp is also being actively pursued.


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