World Trade - September 2008 - (Page 12) TRADEWINDS THE LATEST TRENDS IN THE WORLD OF TRADE Crunch Time for China’s Couriers INTERNATIONAL COMPETITION SQUEEZING PRIVATE DELIVERY COMPANIES Increased competition from global express companies coupled with rising fuel costs are putting the pressure on China’s private delivery companies, which are reporting declining profit margins. Costs have risen 16 percent since fuel prices were raised in late June, and private couriers in China are struggling to absorb the losses before hiking rates. “It’s difficult to raise the charge while other competitors are offering lower prices,” said the general manager of ZTO Express in the Shanghai region. The private express company operates a nationwide network via franchises. “About 13 percent of the district level contractors have reported net losses and said that they are unable to continue doing business,” he said, adding that small private delivery companies in the country, estimated at 100,000 or so, were offering unbelievably low prices to compete for business opportunities in one of the world’s largest markets. Another private delivery company says it has stopped using motorcycles for deliveries and is using electric bikes instead to cut down on fuel consumption. An executive with one of the largest private couriers in China, SF Express, said the sharp increase in costs in recent months means he now has to spend more time persuading his customers that he could no longer afford discounts. “We used to provide impressive discounts to attract customers, who were always making comparisons between different local competitors for lower prices. But we can’t do that now under the rising costs,” he remarked. Meanwhile, global competitors continue to make inroads into the Chinese market. FedEx, the second-largest U.S. package shipping company, has readjusted its delivery rate scheme in China since June. The charge for overnight express delivery has been cut from 34 to 18 yuan per kilogram from Shanghai to Beijing, which is much lower than the 30 yuan offered by local players such as SF Express. The price cut, which is unusual given foreign couriers’ higher operational costs compared with domestic competitors, is indicative of FedEx’s determination to compete in China’s express delivery market, according to an analyst from Anbound Group, a consulting firm headquartered in Beijing. At the same time, FedEx is scheduled to open its AsiaPacific hub in Guangzhou in December this year. The company said in a public announcement earlier that the relocation of the hub from the Philippines to China is based on the estimates on the growing demands for air express in the region. Transportation Services Index (TSI) June 111.5 Mexican Maquiladoras on the Rebound HIGH-VALUE SECTORS SPURRING GROWTH A new report from real estate developer ProLogis entitled, “Mexico’s Maquiladoras— Climbing the Ladder of Success,” finds that despite competition from low-cost manufacturing countries such as China, the Mexican industry has been successful at attracting new business from high-value sectors, specifically aerospace, custom-order electronics, and pharmaceuticals. “Much has changed since the early 1960’s, when Mexico first became a popular loca- July 108.5 November October 110.2 December August 109.5 108.8 108.9 September 108.1 January February 111.5 111.5 March 109.4 April 109.4 May 111.4 JULY 2007 – JUNE 2008 The Freight Transportation Services Index (TSI) increased 0.1 percent in June to a level of 111.5 (2000=100), rising for the second consecutive month, according to the U.S. Department of Transportation’s Bureau of Transportation Statistics (BTS) office. TSI is a single seasonally adjusted index of the month-to-month changes in the output of services provided by the for-hire transportation industries, including railroad, air, truck, inland waterways, pipeline, and local transit. 12 WORLD TRADE SEPTEMBER 2008
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