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Slowdown seen in logistics industry

By Chen Yang (Global Times)

09:54, August 20, 2012

China's logistics industry saw slower growth in the first seven months of 2012, caused by slackening demand, high costs and decreasing profitability, a logistics association said over the weekend.

The total value of the logistics market in the January to July period grew by 9.8 percent year-on-year to 98.3 trillion yuan ($15.4 trillion), down 3.8 percentage points from the same period in 2011, the China Federation of Logistics and Purchasing (CFLP) said in a statement Saturday, citing reasons including the country's economic slowdown and seasonal factors.

The federation forecast earlier this month the sector's value would grow by 11 percent for the whole of 2012, based on a batch of favorable policies for the industry and an anticipated economic recovery.

On August 7, the State Council published guidelines to promote the development of the logistics sector, including reducing tax burdens on logistics companies and giving them favorable land policies.

In the first seven months, the logistics sector's total costs rose by 11.8 percent year-on-year to 4.8 trillion yuan, the CFLP said.

"The costs have been boosted by road tolls, rising fuel, rental and labor costs," Wang Xianqing, director of the Research Institute of Circulation Economy at Guangdong University of Business Studies, told the Global Times.

"High logistics costs have in turn pushed up prices of consumer goods," he noted.

China's logistics costs accounted for 18 percent of the country's GDP in the first half of 2012, data from the CFLP showed last month.

"The ratio is equivalent to almost twice the amount in developed countries such as the US," Wang said. "The domestic logistics sector still faces the problem of low operational efficiency."

Meanwhile, freight prices are still at low levels, especially shipping freight rates. The China Coastal Bulk Freight Index stayed at 1,044.5 in July, down 25.1 percent year-on-year, according to the CFLP.

"Many shipping companies are suffering profit decreases or losses this year, and some small ones are on the verge of bankruptcy or being acquired by big companies," Kang Shuchun, CEO of Dalian-based industry website ShippingChina, told the Global Times.

Major logistics companies' average profit margin was 4.8 percent in the first half of this year, down from 5.1 percent in the first five months, the CFLP said, noting that logistics firms that focus on commodities are facing a particularly difficult situation this year.

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