COSCO  Enters Chemical Logistics Sector


Three years ago, in order to serve customers better, cater for
the trend of international transportation market and actively
involve in integrated service sector, China Ocean Shipping Group
(COSCO) established COSCO Logistics Co. Ltd and confirmed six
key sector that will be focused on, such as household appliances,
automobile, fair and exhibition, retail, electric power and
chemical industry. In the past three years, new established
COSCO Logistics has suddenly risen as a new force in the domestic
logistics market of household appliances, electric power and
automobile, and has gained compelling achievements. Well
matched with its designed five-year plan, COSCO Logistics
formally pushes forward into chemical logistics market in 2005.


   CCR editor has a talk with Mr. Ye Weilong, Director and
General Manager of COSCO Logistics Co. Ltd. about the chemicals
logistics.


Editor: Although COSCO Logistics has already taken leading
position of domestic market in household electric appliance,
automobile, fair and exhibition, retail, etc., presently it
decided to push forward into chemical logistics, which is a
relatively more professional marketplace. What consideration
does this base on? What does this rely on?


Mr. Ye Weilong: We wish that COSCO Logistics can take lead in
domestic chemical logistics market. We conducted sufficient
feasibility study and investigation before we decided on
entering chemical logistics sector. China's petrochemical
industry is developing at a high speed, not only large
multinational corporations are investing in China
enthusiastically, local chemical enterprises are also behaving
actively. Huge business opportunity interests us into the huge
market.
   Our chemical logistics business is divided into two segments.
The first is engineering logistics, i.e. infrastructure
construction in chemical enterprises. A lot of facilities need
to be imported from foreign countries during the process of
building new plants and renovating the existing plants. COSCO
Logistics can provide such service perfectly. Secondly, after
chemicals are produced, we again provide products logistics
service, shipping, distributing and accompanying products all
over the country, which forms perfect supply chain links.
   There are three aspects of advantages for COSCO Logistics
pushing forward into chemical logistics market, we think.
   Firstly, relying on our settled advantages in engineering
construction logistics, we naturally extend to the engineering
construction logistics in the back-end logistics services of
chemicals. In the sector of engineering construction logistics,
we have established obvious advantages in the aspects of
technician, vehicle facility and ship, therefore we actively
involve in the construction of large scaled chemical plants by
providing the contractors with chemical engineering
construction logistics service. For example, we successfully
won the tender of the largest chemical engineering construction
logistics project - CNOOC and Shell petrochemical project in
Nanhai. This public bidding was carried out in global market by
the EPC company who contracted with CNOOC and Shell. COSCO
Logistics, as the only native Chinese enterprise, finally won
the contract of more than RMB100 million. We established
creditable cooperative relationship through good front-end
service, providing a naturally extending opportunity for us to
enter back-end market, i.e. front-end advantage ensures
back-end development.
   Secondly, we possess certain advantage of logistics
personnel, especially on the aspect of internationalized
talents.
   Thirdly, through many years experiences and development,
COSCO Logistics and its parent company both have possessed a
relatively perfect service network inside and outside of China.
   The above mentioned three advantages give us strong support
to possess certain preemptive advantage at the time of entering
chemical market.


Editor: What benefit will be brought to the local chemical
enterprises by adopting the third party professional chemical
logistics service?


Mr. Ye Weilong comments: I think current chemical logistics
market in China has not entered the stage where the third party
logistics resources are utilized sufficiently. The major reason
is that most of existing large scaled chemical enterprises had
their own logistics business department, therefore the third
party logistics company at first needs to make these chemical
enterprises realize and enjoy the advantage of using the third
party logistics, then they will initiatively give the contract
related operation to the third party logistics company. Two
types of domestic chemical enterprises prefer to accept the
services supplied by the third party professional logistics
companies rather than do logistics themselves, one is the sole
funded company established by a multinational corporation, the
other is large scale joint venture corporation. These two types
of enterprises use the third party logistics companies to make
their logistics safer, operate more professional and save more
cost. This favors chemical manufacturing enterprises to reserve
more energy for production and market share.
   What need to pay more attention to is that using the third
party logistics service can help chemical enterprises save at
least 10% of logistics cost. The logistics service departments
of the enterprises often have very high logistics cost because
of not facing the society and without transverse cooperation.


Editor: What conditions are needed for China's huge potential
market of chemical logistics to be transformed into realistic
and standardized market, and when this can be actualized?


Mr. Ye: Firstly, several premise conditions are needed for
China's chemical manufacturing industry:
   1. Local chemical manufacturing players must understand what
the third party logistics company can do for them, they should
study and understand the benefit brought to their production and
operation by the third party logistics service; 2. Local
chemical manufacturing players should effectively integrate
logistics related links inside their own enterprise, otherwise
logistics cost will be higher and higher; 3. Although China has
a very large chemical market volume, the competition will be more
and more drastic. Chemical manufacturing enterprises should
realize that in order to win competition advantage they must pay
attention to supply chain. Relative to China's household
electric appliance and automobile manufacturing industry,
current chemical industry of China is obviously lack of
attention to supply chain competition.
   For logistics companies, in order to help reduce logistics
cost for chemical enterprises, the third party professional
logistics companies firstly should provide more professional
service for chemical companies. Chemical industry is a special
industry. It has higher requirements for security and cargo's
being in time, therefore logistics companies should further
improve the professional standards of their service, letting
cargo owners feel secured to consign their cargoes to logistics
companies. Secondly, logistics companies should strengthen
transverse cooperation to reduce transportation cost
effectively. One of the b