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Express Cargo Industry in Hong Kong

Overview

  • Hong Kong is the world’s busiest airport in terms of handling international cargo. In 2012, Hong Kong's air cargo throughput reached 4.0 million tonnes, up 2.2% from 2011. Hong Kong’s total exports by air reached HK$1,154 billion, accounting for 33.6% of Hong Kong’s total exports.
  • Based on the latest available figures for 2011, revenue generated from international courier services increased 12.7% from 2010, accounting for 15.7% of the total receipts of the air transport industry (US$2,690 million).

Industry Data

Business Receipts

2007

2008

2009

2010

2011

International Courier Services
(US$ million)

1,744

1,908

1,760

2,387

2,690

YoY % growth

+7.7%

+9.4%

-7.8%

+35.6%

+12.7%

Source: Report on Annual Survey of Storage, Communication, Financing, Insurance and Business Services, Key statistics on Business Performance and Operating Characteristics of the Transportation, Storage and Courier Sector, Census and Statistics Department

Range of Services

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 their business.

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 country destinations and over 1,900 cities on the mainland. In May 2013, Hongkong Post was awarded the “2013 Best SME’s Partner Award” by the Hong Kong General Chamber of Small and Medium Business.

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.

 

2009

2010

2011

Courier Services and Postal Exports (US$ million)

297

295

322

YoY % growth

-9.1%

-0.7%

+9.2%

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

Recent Development and Market Outlook

International trends

The trend of globalisation of sourcing, manufacturing, assembling, and distribution has boosted demand for transportation services, including express service. While the Chinese mainland remains Asia’s main manufacturing powerhouse, other production bases in Southeast Asia are playing an increasingly important role in manufacturing. As Asia’s overall 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 more than 100 airlines with about 1,000 flights daily, linking Hong Kong to about 180 destinations around the world, including 48 cities on the Chinese mainland, including many chartered cargo planes, offering a favourable operating environment for the express industry.
  • Hong Kong 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 and Schenker.
  • Time is critical to the competitiveness of the express industry. Besides extensive air connectivity, HKIA also has an excellent logistics infrastructure in place. HKIA has been awarded the Air Cargo Award of Excellence for six consecutive years by Air Cargo World (2006-2011), 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 the World Bank’s 2012 Logistics Performance Index, Hong Kong ranked 2nd among 155 regions in terms of customs efficiency.
  • Hong Kong’s express industry is intimately tied with the success of the city’s air transport infrastructure. In March 2012, the Hong Kong government conditionally approved, for planning purposes, the HKIA proposal to build a third runway. Meanwhile, multiple expansion and improvement projects are underway to maintain and improve its air transport services.
  • The statutory environmental impact assessment and associated design details and financing arrangements will likely be ready by the end of 2014, with the Hong Kong government then to make the final decision on whether to proceed with the implementation of the three-runway system.
  • In June 2013, DHL Express’s Hong Kong office won five awards in the 2012/2013 Customer Relationship Excellence Awards (CRE Awards), which recognise the company’s service quality and customer relationship excellence across Asia. The participating companies in the CRE Awards are judged by their effectiveness and quality in accordance with the Customer Service Quality Standard (CSQS). 
  • In January 2012, FedEx expanded its HKIA facility to enable greater cargo handling capability by 37% to 4,695 m2. Together with the addition of new equipment and staff, the facility is able to process three freighter loads of cargo under 45 minutes. 
  • TNT Express opened a new regional hub in Hong Kong in March 2012. This new facility of 7,380 m2, with a dedicated customs clearance facility and advanced sorting systems, will be able to handle 600 tons of cargo per day.

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, YTO 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 5.69 billion pieces in 2012, surging by 54.8% from 3.67 billion pieces in 2011. In 2012, the express industry’s revenues amounted to RMB105.5 billion, up 39.2% from 2011.

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 which shows the pieces of cargo handled by the express industry in 2011:

Regions

million pieces

% share

Regions

million pieces

% share

1

Guangdong

756.9

20.6%

17

Shaanxi

39.4

1.1%

2

Zhejiang

496.6

13.5%

18

Jiangxi

37.2

1.0%

3

Shanghai

409.1

11.1%

19

Guangxi

35.0

1.0%

4

Jiangsu

385.1

10.5%

20

Heilongjiang

30.7

0.8%

5

Beijing

336.6

9.2%

21

Yunnan

30.4

0.9%

6

Shandong

184.4

5.0%

22

Jilin

26.5

0.7%

7

Fujian

157.6

4.3%

23

Shanxi

21.0

0.6%

8

Sichuan

102.2

2.8%

24

Inner Mongolia

19.9

0.5%

9

Hebei

86.6

2.4%

25

Xinjiang

19.2

0.5%

10

Henan

83.8

2.3%

26

Guizhou

15.3

0.4%

11

Hubei

82.8

2.3%

27

Gansu

11.4

0.3%

12

Anhui

66.3

1.8%

28

Hainan

9.5

0.3%

13

Hunan

63.4

1.7%

29

Ningxia

6.8

0.2%

14

Liaoning

62.1

1.7%

30

Tibet

2.8

0.1%

15

Tianjin

51.3

1.4%

31

Qinghai

2.4

0.1%

16

Chongqing

40.7

1.1%

 

Total

3673.1

100.0%

Source: China Statistical Yearbook 2012

  • The Chinese express market continued to show strong growth in the first half year of 2013, with revenues increasing by 34.5% YoY to RMB 63.0 billion. The number of express cargo handled increased by 60.6% YoY to 3.8 billion pieces.
  • In the first half of 2013, international express service (including Hong Kong, Macau and Taiwan) took a 3.0% share of total number of pieces handled, yet it accounted for 20.4% of total revenue of the industry. In addition, 71.5% of the total pieces belonged to the cross-city category, yielding 56.5% of the total revenue, whereas the same-city courier service accounted for 25.5% of total pieces, representing 11.3% of total industry revenue.
  • The new “Postal Law” was announced and implemented in 2009, under which foreign investors are not allowed to provide express delivery service which, from accepting mail through delivering mail, all occurs within the territory the Chinese mainland. In January 2012, the State Post Bureau announced that it is now reviewing an application for a license to do business on the mainland filed by a foreign express delivery firm. It also said that China will open its express delivery market to foreign firms gradually.
  • FedEx’s Asia-Pacific Transshipment Centre at Guangzhou Baiyun International Airport has begun operations since February 2009. It is the biggest logistics centre of FedEx outside the US, with the capability to handle up to 24,000 packages per hour (pph) at the start of operations.
  • UPS’s new intra-Asia air hub in Shenzhen was officially opened in May 2010. The new hub has a capacity of 18,000 pph, 1.4 times larger than the old one in the Philippines.
  • In July 2012, DHL’s Qianhaiwan Integrated Logistics Centre (QHWILC) was officially opened. The logistics centre, with 71,000 sqm, is the first pilot cooperation project between DHL and China Merchants Group, operating as a regional shipping hub and distribution centre in southern China.

Content provided by Picture: Jacqueline Yuen