Other examples of the broader trend of logistics players expanding their capacity include Cainiao buying a 15 percent stake in Air China Cargo last year and entering into long-term partnerships with LATAM Airlines Group and Atlas Air. 1 Jia Tianqiong, Bai Yujie, and Han Wei, “China creates massive state-owned logistics group,” Caixin, December 7, 2021. It also has a fleet of three million vehicles across the world. By bringing together the former China Railway Materials Group, China National Materials Storage and Transportation, CTS International Logistics, China Logistics, and China National Packaging, the newly formed China Logistics Group directly owns 120 railway lines, 42 warehouses, and 4.95 million square meters of other storage facilities. The China Logistics Group, with a registered capital (the amount of capital that a company is allowed to get from selling shares) of $4.7 billion, was formed by a merger of five state-owned companies and is the country’s largest logistics player by revenue. One of the most significant deals was the birth of a new Chinese logistics juggernaut in December 2021. The lines between freight forwarders and contract logistics providers are being increasingly blurred. The value of M&A activity, IPOs, and start-up deals in China shot up by more than $7 billion in 2021 compared with the previous year. Many companies have sought to lock in longer-term capacity, expand their digital capabilities, and move toward omnichannel integration. The flurry of mergers among third-party logistics players will probably continueįreight forwarders and third-party logistics (3PL) providers have been eagerly searching for ways to quench the seemingly insatiable thirst for their services. Container supply chain congestion and limited cargo-belly capacity should probably allow logistics suppliers to keep their high profit margins for 2022, which spells good news for their investors and shareholders. The emergence of Omicron and other potential coronavirus variants, along with China’s continuing zero-case policy, means that Chinese borders will remain largely closed. The same dynamics will probably continue into 2022, as supply chain challenges are unlikely to be resolved immediately. In China, freight volumes have risen by between 1 and 14 percent since 2019 and were higher in some key trade lanes such as between the country and North America. So as more people bought more products (many of them made in China) to upgrade their homes and convert their living spaces to offices, shipping volumes soared across all modes last year, including road freight, container, and air freight (Exhibit 1). Increased savings from staying home more and government financial aid boosted people’s purchasing power for tangible products such as furniture-partly because they couldn’t spend this money on services like eating out, traveling, or getting their nails done. While the initial shock of the pandemic depressed freight volume growth in early 2020, the world recovered its appetite for more physical goods shortly thereafter. If you’re a logistics provider, chances are 2021 was a profitable year. Most logistics players are looking forward to another bumper year in 2022 Whichever stakeholder you are, an understanding of these trends can help with your decision making for 2022. While we see greater consolidation and integration in some subsectors such as third-party logistics and express-delivery carriers, we’re also expecting growth in other areas such as warehouse automation and air cargo. The COVID-19 pandemic also sped up the industry’s sophistication. Generally speaking, surging demand for logistics services coupled with supply chokeholds resulting from pandemic lockdowns and travel restrictions have translated into a profitable year for many logistics players. In this article, we present five insights global investors, logistics companies, and shippers should be aware of. How has the Chinese logistics market fared during the pandemic, and what’s the outlook for 2022? And while many customers in other countries only awakened to the convenience of online shopping and delivery during the pandemic, millions of drivers have long been zipping through Chinese cities to deliver parcels of all sizes. For decades, the country has been a crucial node in the supply chain of companies around the globe. The COVID-19 pandemic has only accelerated development of China’s logistics industry, which was already moving at breakneck speed.
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