August 2009

Logex Line

From the Ernst & Young desk..........................................................
From Ernst & Young’s desk                                                                1

Welcome to the August edition ...
In focus                                    2
 Containerized rail haulage

 Introduction                               ...
Growth in container rail haulage                                                                                          ...
Railways to regain market share from roads                                  • Lack of last-mile connectivity with rail tra...
Strategic shift in the focus of Indian Railways                           Dedicated freight corridor to unleash the
• Indi...
NMDP aiming to double port capacity by FY12                                          Investment and development of major p...
India sector news                                                                3

A. Policy and infrastructure       ...
Port users will benefit from the following:
    •   Reduced per tonne ocean freight due to larger parcel
        sizes at ...
Other key initiatives announced in FY10 budget:
                                                             •   Formation...
India wastes 25–30% of its fresh produce due to lack of              3. DHL focusing on automotive supply chain in India
6. Kalindee Rail Nirman banking on freight corridor project                8. Growth in domestic traffic reported by Conta...
Market watch; logex v/s sensex
C. Market watch
      The Logex index provides a quick snapshot of the
International sector news                                                                        4

1. FedEx Ground ope...
The new site will have a 15,000 square meter hall on the
     ground floor. The second floor will have a 10,000 storage
Logistics and deals                                                         5

International deals                     ...
7.   Sinotrans Air Transportation Development (SADC) sells                     ABG has hived off its bulk cargo-handling a...
References                                  6

• “Krishnapatnam port project,” Lloyd’s List, 31 July 2009, via        •...
• “FedEx Ground opens $90m northern Ohio hub,” CEP                    • “Geodis Calberson to acquire business of Cool Jet,...
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Ahmedabad                                                                                    Ernst & Young Pvt...
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Ey Logistics Newsletter August 2009[1]

  1. 1. August 2009 Logex Line Contents From the Ernst & Young desk................................................................ 02 In focus: ............................................................................................. 03 containerized rail haulage India sector news................................................................................. 08 Policy and infrastructure Company buzz Market watch International sector news..................................................................... 14 Logistics and deals............................................................................... 16 International deals India deals References.......................................................................................... 18
  2. 2. From Ernst & Young’s desk 1 Welcome to the August edition of Logex Line On the domestic front, the Ministry of Shipping and the Indian Railways have made various announcements relating to infrastructure development in ports and rail sectors in India, fueling optimism in the logistics industry. Global logistics players such as DHL, Universal Success Enterprise and domestic players such as All Cargo Global Logistics, Container Corporation of India, Pratibha Shipping and Poompuhar Shipping have all announced their expansion plans. On the global front, players such as Fedex, Sino-Global Shipping, ProLogis and Schenker Rail have announced their expansion plans, based on their optimistic long-term view of the global economy. We have highlighted the long-term growth opportunity in the containerized rail haulage segment under the “In focus” section of this issue. This month, the Logex and the Sensex have both gone up by 8%. We hope you find this edition interesting and informative. We welcome your feedback on it. Please write to us for any further information or to add people to our mailing list.
  3. 3. In focus 2 Containerized rail haulage Introduction • According to various estimates, India’s EXIM container traffic is set to reach >22m TEU by FY16, led by rising foreign trade In spite of being cost-effective, the share of the railways in the and containerization. overall cargo and containerized cargo traffic in the country has remained low due to longer lead and turnaround time, EXIM traffic break-up reveals potential for increasing infrastructure bottlenecks, the congested rail network and containerisation (USD million) the railways’ preference for passenger trains. However, this scenario is expected to change due to various drivers such as: Exports FY04 FY08 CAGR Potential ex-oil FY08/04 containerisation • Long-term opportunity due to revival in trade (%) (%) • Potential from increasing container traffic Agri & allied 7,328 16,210 22 90 • Likelihood of domestic container traffic improving products • Railways to regain market share from roads Ores & 2,369 9,124 40 20 • Strategic shift in the focus of Indian Railways minerals • Dedicated freight corridor to unleash the rail potential Leather 2,163 3,504 13 100 • NMDP aiming to double port capacity by FY12 goods Gems & 10,573 19,688 17 NA Long-term opportunity due to revival in trade jewellery • Historically, India’s foreign trade has grown at 2.5x GDP Sports 99 134 8 100 and the correlation of its cargo traffic with its GDP is just goods above unity. Chemicals 9,960 22,358 22 25 • However, globally and in India, rising containerization has Capital 12,406 37,371 32 100 outpaced the growth of normal cargo traffic. Further, India’s goods level of containerization is less than 25%, which is well below Textiles 13,495 22,138 13 100 the global average of 60–70%. Unclassified 1,881 4,079 21 25 Growth in containerized cargo Total 60,275 134,607 188 66 700 23% 25% Imports ex-oil 600 20% Gems & 8,690 32,480 39 NA 500 16% jewellery 15% 15% % of total cargo 14% 14% 13% 15% Machinery 7,129 7,980 3 75 Million tons 400 12% 300 460 640 Project 9,304 45,197 48 75 10% 370 goods 200 320 340 147 290 300 310 5% Other bulk 396 1,294 34 25 100 46 50 58 73 32 36 40 imports 0 0% 2001 2002 2003 2004 2005 2006 2007 2012E Others 32,062 84,927 28 60 Total 57,580 171,879 152 175 Major port traffic (Million tons) Containerized cargo (%) Containerized cargo (Million tons) Source: Secondary sources Logex Line 3
  4. 4. Growth in container rail haulage Likelihood of domestic container 45% traffic improving 16 14 40% 40% • Empirically, rapidly developing countries such as India exhibit 35% transport elasticity exceeding unity. Historically, the elasticity % of container cargo 12 32% 31% 30% 30% 30% of rail freight to the country’s GDP has ranged from 0.6 to Million TEUs 10 33% 31% 31% 25% 0.75 (except during the 10th Plan). 14.2 8 5.44 20% • This is primarily because containerization of cargo is as low as 6 4.74 5.6 3.36 3.9 4.23 15% <5% in the domestic sector. However, the increasing market 4 2.47 2.88 1.55 1.71 10% share of the organized sector in retail is likely to increase 2 1.37 0.75 0.9 1 1.2 5% containerization of domestic cargo. Further, on a targeted GDP 0 0% of 7% for the 11th Five Year Plan, we believe that domestic 2001 2002 2003 2004 2005 2006 2007 2014E container traffic will reach 2x GDP. Total container traffic Railways share (%) Domestic container rail traffic is still small as Rail container traffic compared to EXIM Source: Secondary sources 4000 3500 Potential from increasing container traffic 3000 • Although key container cargo such as capital/project goods, 2500 000 TEUs machinery and other cargo have grown at a fast pace, overall 2000 container traffic growth has been rather low In india. 1500 • Due to the various advantages of containerizing cargo, e.g., 1000 cost economics, easy handling, less damages, fast turnaround 500 time and multi-modal transport options, containerization is 0 slated to grow in the future. FY09E FY10E FY12E FY03 FY11E FY04 FY05 FY08 FY06 FY07 • This will be due to more cargo being containerized, and its penetration is likely to see a significant increase as ports and inter-modal infrastructure improve. Total EXIM rail traffic • Based on the potential containerization of individual items, Total domestic rail traffic overall containerization is forecasted to be 50–60% of India’s Source: Secondary sources EXIM trade in the next four to five years, which is almost twice the current rate of containerization at 25%.
  5. 5. Railways to regain market share from roads • Lack of last-mile connectivity with rail transporters • For long-haul transportation, rail is a less expensive option • Flexibility provided by road transport operators than road transport. However, even with the cost differential • Inefficiencies associated with the current monopoly of rail being as high as 2-3x, road transport has garnered the bulk of haulage providers, delays, etc. the traffic in the country. We believe that the share of rail has The share of the railways is projected to increase in the lagged behind road transport due to the following: transportation pie from 17% in FY07 to 23% at the end of the 11th Five Year Plan by FY12. Rail-linked logistics sector to drive growth 2001-02 2006-07 2011-12 1% 1% 2% 8% 7% 10% 3% 2% 4% 2% 4% 3% 17% 23% 19% 65% 69% 60% Road Rail Sea Air Services Storage Source: CSO Logex Line 5
  6. 6. Strategic shift in the focus of Indian Railways Dedicated freight corridor to unleash the • Indian Railways’ strategy of improving its efficiency and rail potential performance has helped it show an impressive turnaround • Setting up of dedicated freight corridors (DFCs) would unravel over the last few years. It is set to regain some of its lost the potential of rail and significantly accelerate its growth after market share on the back of the following initiatives: 2014, when DFCs are expected to become operational. • Improved capacity and productivity: • DFCs will have various advantages over the current system and • There has been an increase in axle load from 20.3 tonnes are expected to achieve the following: in FY07 to 22.9 tonnes over FY08 and a reduction in • Reduce delays (Exclusive tracks will ensure that turnaround time from seven days in FY03 to around goods traffic is not affected by the movement of five days in FY08 in its generated incremental freight- passenger trains.) loading capacity. • Enhance the carrying capacity of trains (The increase in • Freight rate reforms: the axle load will raise the carrying capacity per train.) • The tariff structure has been changed from a fixed to a • Lower turnaround time (This can be accomplished market-driven tariff policy, which is linked to seasonality by using superior rolling stock and advanced and price elasticity of demand. These initiatives have signaling systems). helped to increase the volume of key commodities. • Value-added services beyond transportation: • To improve its market share, Indian Railways has attempted to transform itself from a pure transport provider to a service- oriented logistic solution provider. • It has tried to do this by providing warehousing and cold storage facilities, and increasing freight terminals and containerization. • It is also looking at setting up logistics hubs through public-private partnerships (PPP) near or along side important railheads. • Share of rail to improve with entry of private players • With the entry of private players in the rail haulage business in 2007, the share of railways is likely to improve since they are expected to provide last-mile connectivity, better service and quicker turnaround at terminals. Logex Line 6
  7. 7. NMDP aiming to double port capacity by FY12 Investment and development of major ports under the 11th Five Year Plan • The National Maritime Development Programme (NMDP) Capacity (million tons) NMDP launched an investment plan of INR1,003 billion in 2005, Major ports FY05A FY07A FY09E FY12E No of (INR which covered 387 projects that are to be implemented projects billion) by FY12. Kolkata (incl 43 55 54 95 40 65 • The program, which includes ports, inland waterway transport Haldia) (IWT) and shipping projects, aims to increase capacity, raise Paradip 39 66 60 106 28 24 private participation, and improve the quality of service and Visakhapatnam 50 56 75 108 38 26 efficiency in the port sector. Ennore 12 13 35 64 14 65 • Under the port sector, 276 projects have been identified in the 12 major ports in the country, with an anticipated Chennai 42 49 74 72 14 22 investment of INR558 billion. The various projects, when Tuticorin 16 21 36 64 24 46 completed, are expected to increase the total capacity of Cochin 15 19 33 55 14 79 these ports from 508 million tonnes in FY07 to 1,002 million New Manglore 30 38 48 60 20 71 tonnes by FY12. Mormugao 28 29 41 67 12 8 Mumbai 43 44 58 92 14 28 JNPT 33 52 59 96 32 73 Kandla 45 67 77 122 26 51 Total 396 509 650 1001 276 558 Source: Planning Commission (Working group-11th plan), NMDP, Centrum research Conclusion The share of the railways is expected to increase substantially in the long term due to various drivers such as increasing exim and domestic volumes, containerization, investment in port and rail infrastructure and the entry of private players. This will benefit players who have made heavy investments in rail infrastructure. References • Logistics Sector, April 2009, © Centrum Broking Private Limited • India Transportation: Sea and Land Cargo, February 2009, © Nomura Financial Advisory and Securities (India) Private Limited • Ernst & Young research and analysis Logex Line 7
  8. 8. India sector news 3 A. Policy and infrastructure INR574.5 billion. The projects are expected to involve upgrading or construction of berths, deepening of channels 1. Government lays down plans for port expansion and procurement or replacement of equipment. To augment the capacity of major ports in the country, The government is also planning to set up a regulatory body, the Ministry of Shipping (MOS) has identified 21 which will consist of a Chairman and four members, who will expansion projects on a PPP basis at a total investment of oversee the functioning of major ports. It has drafted the INR160 billion. Major Ports Regulatory Authority Act, 2009. The authority will fix the rates from time to time and will lay down the These projects are scheduled to be awarded in a phased performance norms and standards of quality, continuity and manner by March 2010 and will involve mechanization of reliability of service. berths, construction of new berths, and development of 2. Meager addition of gross tonnage (GT) by Indian shipping bunkering and cruise terminals. The bidding process for 16 companies in 2008 projects is currently under way and requests for qualification have been issued. The MOS is also in the process of The country’s total shipping GT increased from 9.03 million identifying another 10 projects that are to be developed in 2007 to 9.3 million in 2008. Its GT fell from 9.32 million during FY11. on 1 February 2009 to 9.28 million by the first week of J une 2009, although the number of ships increased from 916 Proposed investments to 938. Port Facility Cost (INR billion) 3. Authorization of ports by the Government of India (GOI) JNPT New container 67 to award contracts independently terminal The GOI has empowered port authorities to award contracts Standalone 6 to selected bidders under the PPP mode without the prior container terminal approval of the MOS. Paradip Deep drought iron 6 The MOS has written to all port trusts, authorizing them ore berth* to sign concession agreements for PPP projects at their board level. However, the MOS must be informed about all Deep drought coal 5 the work awarded. berth Tuticorin Container terminal 3 4. Gangavaram port inaugurated Mormugao Coal terminal 2 Gangavaram port, built at a cost of INR20 billon near Visakhapatnam on the Bay of Bengal coast, was inaugurated New Mangalore Mechanized iron NA in July 2009. The port is built by the D.V.S. Raju-led ore terminal consortium on land provided by the Andhra Pradesh Ennore Container terminal 14 state government. *This project has already been awarded to a consortium comprising Gammon It is the only port in the country with the infrastructure Infrastructure, Minerals and Metals Trading Corporation and the Nobel Group. to handle super cape-size vessels of up to 200,000 dead During the 11th Five Year Plan period, investment in weight tonnage (dwt) carrying coal and iron ore. In the first the PPP mode is estimated to be INR380.8 billion out of phase, five berths have been constructed with an annual the total planned investment in ports amounting to capacity of 35 million tonnes. In the second phase, the port will add nine more berths that will handle dry and break bulk and container cargo with dedicated cargo-centric zones. Logex Line 8
  9. 9. Port users will benefit from the following: • Reduced per tonne ocean freight due to larger parcel sizes at deep draft berths. • Reduced waiting time and faster turnaround of vessels. • Cost-efficient logistics solution to high-speed cargo evacuation systems. • Competitive tariffs. The port has already achieved record discharge rates of 70,000 tonnes of coal every day. It has set a target of reaching 200 million tonnes with 29 berths between 2015 and 2020. 5. Concession agreement signed for Paradip port The MOS signed a concession agreement to construct a deep draught iron ore terminal at Paradip port. The pact was signed between the Paradip Port Trust and Blue Water Iron Ore Terminal, the concessionaire for the project. Blue Water is a special-purpose vehicle floated by the consortium Proposed investments of the Nobel Group of Hong Kong, MMTC Ltd. and Gammon Infrastructure Projects Ltd. Categories Investment (INR billion) The consortium will build a deep-draught iron-ore terminal Gauge conversion 19.1 at a total cost of INR5 billion (USD11 million). The terminal Machinery and plants 17.9 will have a draught of around 16 meters, which will enable it Restoration of dismantled 20.5 to handle vessels of up to 180,000 dwt. Currently, the port lines can accomoodate vessels of up to 75,000 dwt. Construction Building new lines 29.2 is expected to begin in the next three months and will be completed by mid 2011. Amenities of staff and 15.3 It is the first port project to be implemented under PPP passengers in the sector according to the new model concession agreement approved by the cabinet and the tariff fixed by the Tariff Authority for Major Ports (TAMP). 6. Railway budget proposes infrastructure development Indian Railways (IR) plans to invest INR2,300 billion during the 11th Five Year Plan period to improve its productivity. In the FY10 budget, IR announced its plans to invest INR407.5 billion in activities related to throughput enhancement of high-density network routes, improvement and expansion of traffic facilities and networks, construction of flyovers and by passes and improvement of goods sheds. Logex Line 9
  10. 10. Other key initiatives announced in FY10 budget: • Formation of expert panel for rail optic fiber network In the FY10 budget, IR announced its plans • Use of rail land bank for industrial purposes to invest INR407.5 billion in activities • Setting up of a coach-manufacturing factory with a related to throughput enhancement of high- capacity of 500 coaches per year density network routes, improvement and • Acquisition of 18,000 wagons during FY10 as compared expansion of traffic facilities and networks, to 11,000 wagons in FY09 construction of flyovers and bypasses and • A 700 km lane, doubling in FY10 as compared to doubling of 363 km lane in FY09 improvement of goods sheds. • The Delhi Mumbai Industrial Corridor to be developed in the PPP mode • Setting up of a 1,000 MW power plant with NTPC • Gauge conversion of 1,300 km during FY10 • Development of an Eastern Industrial Corridor and utilization of railway land bank for it 7. IR focusing on PPP IR is planning to implement various PPP projects, including the construction of 50 world-class stations, medical and nursing colleges, logistics parks and cold storage facilities. The biggest project is the Delhi-Mumbai Industrial Corridor, which will include industrial hubs, rail port connectivity, logistics parks and mega power plants — all through PPPs. The Railway Ministry aims to encourage private ownership of special- purpose rolling stock and private operation of freight terminals. The Ministry unveiled a new policy to allow construction and operation of private freight terminals and multi-modal logistics parks. It will also allow containers to access private sidings to attract piecemeal traffic presently not being carried by the railways. 8. Tax incentive to attract funds for warehouses and cold storages In the FY10 budget, the Finance Minister announced a tax incentive scheme to attract investments in the warehousing and cold storage sector. The scheme proposes that all capital expenditure, other than expenditure on land, goodwill and financial instruments to build and operate such facilities, can be treated as tax deductions. Logex Line 10
  11. 11. India wastes 25–30% of its fresh produce due to lack of 3. DHL focusing on automotive supply chain in India post-harvest management facilities, absence of suitable DHL is planning to augment its automotive supply chain cold storage facilities and lack of an organized distribution by building warehouses in major cities to provide system. The industry estimates this spoilage to be worth warehousing services for export of automobiles and INR500 billion at current prices every year. automotive components. Within India, DHL has dedicated automotive teams that B. Company buzz provide strategic consulting services to a diverse range of customers, from international players seeking to 1. Dolphin Offshore to build shipyard expand their presence in the domestic market to domestic Dolphin Offshore has laid down its plans to construct a companies aiming to go global. The company services more greenfield shipyard at Jaffrabad in Gujarat. This shipyard than 50,000 customers across India. Its key customers will be built in three phases during the next five to six years. include Mahindra and Mahindra, Skoda, Maruti Suzuki India A total land area of over 250 acres is to be built at a cost of Ltd., Hyundai and Tata Motors Ltd. USD85 million. The company is also looking for a JV partner for the proposed shipyard. 4. Pratibha Shipping planning to expand fleet The shipyard will focus on small and medium-sized anchor Pratibha Shipping plans to expand its fleet to honor handlers, supply vessels and multipurpose support vessels its long-term business contracts with the Jamnagar-based and will also repair offshore vessels and jack-up rigs. Reliance refinery. The company is scouting the second-hand market for two crude tankers. It is looking for double-hull In the first phase, expected to be completed in the next two panamax and suezmax units that are around 10 years old. years, the company plans to set up a fabrication facility for its own offshore engineering contracts, one slipway, Poompuhar Shipping seeking to expand fleet machinery shops and an office block. State-owned Poompuhar Shipping plans to acquire two The second phase involves the construction of two jetties bulkers of between 28,000–55,000 dwt on a long-term and an outfitting berth, while in the final phase it is planned charter to transport coal for state-owned utilities in Tamil that a drydock facility will be developed in the yard to repair Nadu. The bulkers will ship coal from either Haldia or the jack-up rigs. Currently, no domestic yard in India has facilities Paradip port to Tuticorin. to undertake repair of jack-up rigs. 5. Universal Success Enterprise Ltd. to invest in ports 2. Launch of operations to India by Maximus Air Cargo Singapore-based Universal Success Enterprise is looking to Abu Dhabi-based Maximus Air Cargo has started operating invest nearly USD1.5 billion in ports to serve two 10,000- seven cargo flights a week between the Middle East, the MW power facilities in West Bengal and Gujarat and one Indian sub-continent and East Africa for Etihad Airways. 5,000 MW facility in Maharashtra. The ports will initially manage coal imports, but are eventually expected to handle Maximus is deploying Airbus A300-600RF aircraft and ore and containers. serves Nairobi, Chennai, Colombo and Bangalore. From September 2009, it will begin two flights a week to The ports’ facilities will have a draught of between 18–20 Khartoum, Kolkata and Dacca. In addition, the company will meters and will be able to accommodate vessels of up to acquire another factory-built A300-600 freighter to fulfill its 250,000 dwt. Work is expected to commence by the middle Etihad contract. of next year and will be completed in 2015. Logex Line 11
  12. 12. 6. Kalindee Rail Nirman banking on freight corridor project 8. Growth in domestic traffic reported by Container Kalindee Rail Nirman expects to receive orders worth INR5 Corporation of India (Concor) billion from the Indian government’s freight corridor projects Concor recorded a 14% y-o-y growth in its domestic traffic in FY10. It is anticipated that the government will allot during 1Q09. However, its international traffic declined by orders worth INR20 billion for the freight corridor projects 9%, y-o-y, during the same period due to global recessionary in FY10. trends. The company has increased its focus on improving The corridor seeks to link north India with ports on the its share in the domestic market to offset the decline in country’s eastern and western coasts. Kalindee Rail will contributions from its EXIM segment. supply signaling systems and carry out gauge conversions of 9. Sical Logistics enters JV for automotives rail tracks. management yard 7. All Cargo Global Logistics (AGL) scouting for international Sical Logistics signed a JV agreement with Japan-based acquisition Mitsui OSK Lines Ltd. (MOL) to set up an automotive AGL is exploring global acquisition opportunities in the management yard at Ennore port near Chennai. The yard non-vessel- owning common carrier (NVOCC) space. The will manage automotives in complete built-up unit (CBU) company is looking for country-specific NVOCC firms to form and will cater to automotive exporters and importers consolidate its presence in markets including Europe, US based in India. and China. This proposal has come at a time when AGL has put all its major expansions on hold. The company is currently only investing in capacity expansion at its existing container freight station locations in Chennai and Mumbai. It has also deferred its plans of setting up 10 logistics parks, at a cost of INR3.4 billion, for which it had acquired land at various places. Logex Line 12
  13. 13. Market watch; logex v/s sensex C. Market watch The Logex index provides a quick snapshot of the 100 performance of Indian logistics companies as compared to 90 the market as a whole. This index comprises 12 logistics 80 companies listed on Indian stock exchanges. Index number 70 We have highlighted the performance of the Logex as 60 compared to the Sensex over the last 12 month period. 50 40 In July, the Logex continued its journey upward by closing 30 at 8% higher than in June. The Sensex also shows a positive 20 performance by moving up by 8%. 10 0 Jul Aug Sept Oct ' Nov' Dec' Jan' Feb' Mar Apr May Jun Jul '08 '08 ' 08 08 08 08 09 09 '09 '09 '09 '09 '09 Logex Sensex Company Fiscal year end Current FY2009E FY2010E FY2011E Domestic P/E EV P/E EV/ P/E EV/ P/E EV/ EBITDA EBITDA EBITDA EBITDA 1 All Cargo Global Logistics December ‘08 19 15 17 10 15 na 13 na 2 Arshiya International Ltd March ‘09 40 40 10 4 na na na na 3 Blue Dart Express Ltd. December ‘08 16 9 na na na na na na 4 Container Corporation of India March ‘08 17 14 17 12 15 11 na na 5 Gati Ltd. June ‘08 17 12 na na na na na na 6 Gateway Distriparks Ltd March ‘09 11 10 13 na 10 na na na 7 Transport Corporation of India March ‘09 19 8 15 7 12 7 na na 8 Sical Logistics Ltd. March ‘09 31 na na na na na na na 9 Aegis Logistics Ltd. March ‘09 8 5 na na na na na na 10 Balmer Lawrie & Company Ltd March ‘09 7 6 na na na na na na Average 185 119 72 33 52 18 13 na Intenational 1 Kuehne & Nagel December ‘08 19 10 20 11 19 10 17 9 2 CH Robinson December ‘08 25 14 25 14 23 13 20 12 3 United Parcel Service December ‘08 19 9 25 11 20 10 16 8 4 Wincanton March ‘09 17 4 9 4 9 4 8 4 5 TDG September ‘08 13 9 14 9 13 9 13 9 Average 93 46 93 49 84 46 74 42 Source: BSE, Bloomberg and Ernst & Young research. The Logex and the Sensex are indexed by taking the value of the last trading day of September 2007, with 100 as the base. The Logex is calculated based on the sum of the market capitalization of 12 selected logistics companies. Logex Line 13
  14. 14. International sector news 4 1. FedEx Ground opens northern Ohio hub 4. Sino-Global Shipping America enters partnership with FedEx Ground, the small package ground delivery unit of Forbes & Company FedEx, opened a new USD90 million distribution hub at Sino-Global Shipping America has signed an exclusive Toledo in northern Ohio as part of its ongoing network partnership agreement with India-based Forbes & Company. expansion initiative across the US. Under the terms of the agreement, Forbes will recommend The hub uses advanced material-handling technology that Sino-Global as its exclusive business partner to all its existing will boost its processing rates to 22,500 packages per hour clients in India, and Sino-Global will serve all the company’s on 15 miles of conveyor belts. With its projected future vessels appointed by Forbes in China. Similarly, Sino-Global expansion, the facility will have the capacity to process will recommend Forbes as its exclusive business partner 45,000 packages per hour at full capacity. to all its existing clients in China, and Forbes will serve all vessels appointed by Sino-Global in India. The new FedEx Ground hub is part of the company’s countrywide network expansion plan to exponentially 5. Aramex joins Cargo 2000 increase its daily package volume capacity and enhance In July 2009, global logistics provider Aramex joined Cargo the speed and service capabilities of its network further. 2000, which is part of the International Air Transport Since embarking on the multi-year expansion program in Association and provides quality management systems to 2002, FedEx Ground has opened eight new hubs that use the global air freight industry. advanced material-handling systems and has expanded and/ Cargo 2000 re-engineers air cargo transportation schemes or relocated more than 500 local facilities. for shippers and consignees. Its processes are backed by 2. FedEx Ground opens hub in Chicago measurable quality standards to improve the efficiency of FedEx Ground opened a new USD125 million distribution air cargo. The company’s members include around 60 major hub in Chicago to boost its daily package volume capacity airlines, freight forwarders, ground-handling agents, trucking and increase the speed and service capabilities of its companies and IT providers worldwide. network further. 6. ProLogis leases 200,000 sq ft in Japan The new 131,064 square meter facility will provide ProLogis, a leading global provider of distribution facilities, enhanced processing rates of up to 30,000 packages an signed two new lease agreements during the second quarter hour, additional load and unload doors, and more scan of 2009 that totaled 200,000 square feet of recently tunnels and sorters. developed distribution space at ProLogis Parc Zama I 3. UPS reports sharp decline in profit in Japan. UPS Inc., the world’s largest shipping carrier, reported a 49% The transactions included leases with the SEI Logistics y-o-y decline in its net profit to USD445 million for 2Q09, Network and Kawataki. The distribution facility has several as its sales declined by 16.7% y-o-y during the ongoing energy-efficient systems including a photovoltaic array and economic downturn. a state-of-the-art seismic isolation structure. It is located in a prime location with convenient access to the Greater Tokyo The company reported that the decline in its domestic and and Greater Nagoya areas. international businesses is stabilizing, but volumes are still significantly below last year’s levels. The average daily 7. Schenker Rail to set up cargo hub at Frankfurt Airport volume of UPS’ US domestic package segment has declined Germany-based Schenker Rail, a unit of local state-owned by 4.6%; its air volume has been flat while its ground volume railways operator Deutsche Bahn AG, will invest EUR50 has fallen by 5.4%. Its average daily export volume has million to set up an air cargo hub in Frankfurt. decreased by 7.3%. Logex Line 14
  15. 15. The new site will have a 15,000 square meter hall on the ground floor. The second floor will have a 10,000 storage space for aircraft replacement parts. 8. Global Ground Support awarded supply contract by US Air Force Global Ground Support LLC, a wholly owned subsidiary of Air T, has been awarded a new contract to supply deicing trucks to the US Air Force. The contract was awarded for one year with four additional one-year extension options that may be exercised by the latter. The award includes standard deicer trucks and extended- reach deicer trucks along with shipping and training costs. Air T provides overnight air freight services, manufactures and sells aircraft deicers and other special-purpose industrial Aramex joins Cargo 2000 equipment and offers ground support equipment and facility maintenance services to airlines through its subsidiaries. In July 2009, global logistics 9. All Nippon Airways (ANA) to merge Overseas Courier provider Aramex joined Cargo 2000, Service (OCS) and Allexs which is part of the International Air Japan-based airline ANA is merging its two express holdings, Transport Association and provides OCS and Allex, to create a new regional integrator that will quality management systems to the offer door-to-door services using ANA’s airlift capacity. The new company will benefit from OCS’ experience and global air freight industry. Allex’s sales network to leverage their respective strengths and thereby expand their share of the region’s international express market. OCS and ANA had already launched a joint door-to-door delivery service, known as BEAM, in July 2007. This service provides high-speed, top quality and reliable international deliveries, primarily between Japan and China, through ANA’s freighter network and OCS’s collection and customs clearance system. 10. Zhejiang HSD Industrial to purchase logistics assets China-based Zhejiang HSD Industrial, which is engaged in the development of real estate and provision of data system integration services, plans to acquire a 100% stake in a Shanghai-based logistics firm through a private placement. Logex Line 15
  16. 16. Logistics and deals 5 International deals 4. SNCF and Eurotunnel to jointly buy Veolia’s freight arm France-based railway group SNCF and channel tunnel 1. Universal Truckload Services to acquire truckload operator Eurotunnel are expected to jointly acquire Veolia operations of Pacer Transport Cargo, the freight arm of Veolia Environnement. Universal Truckload Services has entered a limited asset Veolia Cargo was put up for sale to divest assets worth purchase agreement to acquire certain assets of Pacer EUR1 billion (USD1.4 billion). Four suitors, including Transport and two of its subsidiaries, S&H Transport and SNCF, Eurotunnel, Polish railway operator PKP and Italian S&H Leasing. competitor Trenitalia, had expressed their interest to buy the The assets include customers, operators, agent lists, files freight group. and owned trailers, used in operations consisting primarily Initially, SNCF and Trenitalia offered EUR60 million and of flatbeds, vans and specialized heavy-haul equipment EUR100 million, respectively. Later, the French railway services throughout the US. operator teamed up with Eurotunnel and the two firms The assets will be integrated into the operations of Universal submitted an offer for close to EUR100 million. Am-Can, a wholly owned subsidiary of Universal Truckload 5. Geodis Calberson to acquire Cool Jet’s business Services. The transaction is expected to be completed in France-based transport provider Geodis Calberson has August 2009. signed a framework agreement to acquire the business of 2. Reddwerks acquires SeayCo Cool Jet, a company that provides domestic groupage and Reddwerks, a warehouse performance management chartering services. software and solutions provider, announced the completion In conjunction with this acquisition, Geodis’ groupage of its acquisition of SeayCo, a warehouse control systems division and sorting software developer. is acquiring full control of Prisme, a platform for the Reddwerks’ support center and online portal will be available distribution of cultural products in bookstores, in which Cool to both Reddwerks’ and SeayCo’s clients. Reddwerks will Jet had a retain SeayCo’s customer support and development 50% stake. executives The acquisition will strengthen Geodis’s position in France to ensure continuation of the company’s product line and and accelerate the development of its European groupage service teams. activities. 3. C.H. Robinson buys Walker Logistics Overseas 6. C. H. Robinson acquires Texas customs brokerage’s C.H. Robinson Worldwide has acquired the international assets freight forwarder Walker Logistics Overseas (WLO). C.H. Robinson acquired certain assets of International Trade WLO is a global, fully integrated import and export, door- & Commerce (ITC), a Laredo Texas-based customs brokerage to-door provider specializing in air and ocean freight, company specializing in warehousing and distribution. warehousing, courier and logistics solutions. ITC provides a broad range of services that facilitate This acquisition will help the company to expand its international customs brokerage in all transportation modes. capabilities in the Asia-to-Europe trade and strengthen its Its services strengthen the company’s ability to provide distribution and gateway capabilities for the London and customers a seamless cross-border service package across Amsterdam markets. the US and Mexico. Logex Line 16
  17. 17. 7. Sinotrans Air Transportation Development (SADC) sells ABG has hived off its bulk cargo-handling assets at the Beijing Sinotrans Express to DHL-Sinotrans International government-owned New Mangalore, Paradip and Vizag ports China-based SADC has sold Beijing Sinotrans Express, its into a separate subsidiary, ABG Bulk Handling. Following the cargo fright business, to DHL-Sinotrans International Air sale of the stake, ABG Bulk Handling will be renamed ABG Courier for CNY46 million (USD6.74 million). LDA Bulk Handling, in which ABG will have a 51% stake. SADC provides airfreight forwarding, air express, domestic Further, Singapore-based container port operator PSA cargo transportation and logistics services. DHL-Sinotrans acquired a 49% equity interest in ABG Kolkata Container International Air Courier is an express delivery joint venture Terminal for USD28.9 million and a 49% equity interest of DHL Worldwide Network and SADC. in ABG Kandla Container Terminal for SGD80.9 million in 2008. India deals 3. Caravel raises INR250 million from Swiss PE firm 1. 3i Group invests in Krishnapatnam port project Swiss private equity and venture capital firm BTS Investment Advisors Pvt. Ltd. has invested INR250 million for a 17% Krishnapatnam Port Company Limited (KPCL) sold a stake in Caravel Logistics Pvt. Ltd. The latter is a Chennai- minority stake, for USD161 million, to 3i India Infrastructure based firm that runs warehouses and operates a container Fund, an investment vehicle established by international shipping service between Indian ports. private equity firm 3i Group. The investment will be used to buy a container ship that Krishnapatnam is an all-weather port with 12 kilometers can carry up to 700 standard containers, and also to set up of quays in Andhra Pradesh that are operated as a landlord a container freight station at Chennai, where cargo will be port model. The port is expected to handle around 100 consolidated and put into steel containers before it is loaded million tonnes of bulk cargo when it is completed. KPCL on ships, and vice versa. has been awarded a 30 year concession initially, which may be extended by another 20 years, to develop, operate and Caravel owns containers and tractor trailers and has finalized maintain the natural deepwater port. arrangements with private container train operators to move containers from the premises and warehouses of cargo 2. Louis Dreyfus Armateurs acquires 49% stake in owners to ports for onward shipment. The company also ABG Infralogistics plans to ship vehicles and temperature-controlled cargo such France-based dry bulk port and shipping company Louis as dairy products and fruits. Dreyfus Armateurs (LDA) acquired a 49% stake, for USD18.7 4. Ennore Port Ltd. (EPL) to sell a stake of up to 10% million, in the Indian bulk port- handling operator ABG Infralogistics (ABG). EPL is planning to sell a 10% stake to financial institutions including Life Insurance Corporation of India and General The companies seek to participate in the auction process Insurance Corporation of India. The company intends to for various bulk cargo-handling projects at Indian ports. On use these funds to partly finance a dredging project. It is winning new contracts, they plan to infuse fresh capital into also modernizing the port to enable it to handle export of the venture. Nissan cars. Logex Line 17
  18. 18. References 6 • “Krishnapatnam port project,” Lloyd’s List, 31 July 2009, via • “Pratibha Shipping looks to buy secondhand pair,” Tradewinds, Dow Jones Factiva, © 2009 Informa PLC 17 July 2009, via Dow Jones Factiva, © 2009 TradeWinds • “Louis Dreyfus secures 49% stake in Indian bulk port operator • “Poompuhar after bulkers,” Tradewinds, 17 July 2009, via ABG,” Lloyd’s List, 31 July 2009, via Dow Jones Factiva, © Dow Jones Factiva, © 2009 TradeWinds 2009 Informa PLC • “Indian Govt authorises ports to award contracts • “Giving ports a facelift,” Financial Express (India), 30 July independently,” Asia Pulse, 16 July 2009, via Dow Jones 2009, via Dow Jones Factiva, © 2009 Indian Express Pty. Ltd. Factiva, © 2009 Asia Pulse Pty Limited • “Fleet expansion plans - Shipping cos face rough weather • “Gangavaram port inaugurated,” Business Line (The Hindu), (India adds 0.27 million tonnes in gross tonnage in 2008), 13 July 2009, via Dow Jones Factiva, © 2009 The Hindu ” Indian Business Insight, 27 July 2009, via Dow Jones Business Line Factiva, © 2009 Informatics (India) Ltd. • “Indian developer to invest in ports,” Tradewinds, 10 July • “Maximus spread its wings with Etihad cargo contract, 2009, via Dow Jones Factiva, © 2009 TradeWinds ” Middle East Company News, 27 July 2009, via Dow Jones • “India flags off another phase of port privatisation, Factiva, © 2009 AME Info FZ LLC. ” The Economic Times, 6 July 2009, via Dow Jones Factiva, © • “Caravel raises Rs25 crore from 17% stake sale to Swiss PE 2009 The Times of India Group. firm,” Mint, 25 July 2009, via Dow Jones Factiva, © 2009 HT • “Mamata boards PPPs to boost development, revenues ; Indian Media Ltd. Railways is betting big on public-private partnerships (PPPs) • “Dolphin Offshore to go ahead with new facility,” Tradewinds, to...,” Business Standard, 4 July 2009, via Dow Jones Factiva, 24 July 2009, via Dow Jones Factiva, © 2009 TradeWinds © 2009 Business Standard Ltd. • “DHL taps growing Indian automotive sector (by building • “UPDATE: Kalindee: Expect INR5 Bn of Railway Orders This warehouses in major cities to cater to exports of automobiles FY,” Dow Jones International News, 3 July 2009, via Dow and automotive components),” Indian Business Insight, 22 July Jones Factiva, © 2009 Dow Jones & Company, Inc. 2009, via Dow Jones Factiva, © 2009 Informatics (India) Ltd. • “Universal Truckload Services to acquire truckload • “Ennore Port may offer stake to FIs (the company intends to zoperations of Pacer TRANSPORT,” Datamonitor’s Financial use the funds for a dredging project),” Indian Business Insight, Deals Tracker, 29 July 2009, via Dow Jones Factiva, © 2009 21 July 2009, via Dow Jones Factiva, © 2009 Informatics Datamonitor plc. (India) Ltd. Logex Line 18
  19. 19. • “FedEx Ground opens $90m northern Ohio hub,” CEP • “Geodis Calberson to acquire business of Cool Jet, Research, 29 July 2009, via Dow Jones Factiva, © 2009 ITA ” Datamonitor’s Financial Deals Tracker, 10 July 2009, via Dow Consulting GmbH - CEP Research Jones Factiva, © 2009 Datamonitor plc. • “Sino-Global Shipping America, Ltd. Establishes Partnership • C. H. Robinson Acquires Texas Customs Brokerage’s Assets, With Forbes & Company Ltd,” Reuters Significant ” Journal of Commerce Online, 10 July 2009, via Dow Jones Developments, 27 July 2009, via Dow Jones Factiva, Factiva, © 2009 Commonwealth Business Media. © 2009 Reuters. • “ANA creates regional integrator with merger of Japanese • “Reddwerks Acquires SeayCo,” Wireless News, 24 July 2009, express firms OCS and Allex,” CEP Research, 10 July 2009, via Dow Jones Factiva, © 2009 Close-Up Media, Inc. via Dow Jones Factiva, © 2009 ITA Consulting GmbH - • “UPS says second-quarter profit plunges 49 per cent to $445 CEP Research million,” The Canadian Press, 23 July 2009, via Dow Jones • “Sinotrans Air Transportation Development sells Beijing Factiva, © 2009 The Canadian Press. Sinotrans Express to DHL-Sinotrans International, • “Aramex Joins Cargo 2000,” Journal of Commerce Online, ” Datamonitor’s Financial Deals Tracker, 9 July 2009, via Dow 22 July 2009, via Dow Jones Factiva, © 2009 Commonwealth Jones Factiva, © 2009 Datamonitor plc. Business Media. • “FedEx Ground opens new $125 million hub in Chicago to • “C.H. Robinson Buys Walker Logistics Overseas,” Journal of boost capacity,” CEP Research, 9 July 2009, via Dow Jones Commerce Online, 21 July 2009, via Dow Jones Factiva, © Factiva, © 2009 ITA Consulting GmbH - CEP Research. 2009 Commonwealth Business Media. • “Zhejiang HSD Industrial to purchase RMB 400-mln logistics • “ProLogis Leases 200,000 Square Feet in Japan; - Two New asset,” China Knowledge Press, 3 July 2009, via Dow Jones Customers Will Occupy Space At ProLogis Parc Zama I, A Factiva, © 2009 China Knowledge Online Pte Ltd. Newly Developed Distribution Facility Completed in June 2009 • “All cargo hunts for buys abroad,” DNA - Daily News & Analysis, -,” PR Newswire (U.S.), 21 July 2009, via Dow Jones Factiva, 11 July 2009, via Dow Jones Factiva, © 2009 Diligent Media © 2009 PR Newswire Association LLC. Corporation Ltd. • “Frankfurter Allgemeine Zeitung: Schenker plans to set up • “Tax incentive to attract funds for warehouses, cold storages, cargo hub at Frankfurt Airport,” Frankfurter Allgemeine ” Mint, 10 July 2009, via Dow Jones Factiva, © 2009 Zeitung, 21 July 2009, via Dow Jones Factiva, © 2009 AII HT Media Ltd. Data Processing Ltd. • “FOCUS: CONTAINER CORPORATION OF INDIA (domestic • “SNCF, Eurotunnel may jointly buy Veolia’s freight arm,” M&A traffic growth of 14% during Apr-Jun 2009),” Indian Business Navigator, 20 July 2009, via Dow Jones Factiva, © 2009 Insight, 5 July 2009, via Dow Jones Factiva, © 2009 Electronic News Publishing Informatics (India) Ltd. • “Air T (AIRT) Subsidiary Awarded Supply Contract From U.S. • “Sical forms JV with Japan’s MOL for automotives Air Force,”, 15 July 2009, via Dow Jones management yard,” United News of India, 4 July 2009, via Factiva, © 2009 Dow Jones Factiva, © 2009 UNI. Logex Line 19
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