Asia roars with fast-growing express and parcel markets

Asia is poised to race ahead in 2006 with strong growth rates in the express and parcelsmarkets, and catch up on the USA and Europe in the global rankings. This week’s $400 million

There are several key market trends expected this year. China and India look set to maintaintheir high double-digit growth rates, Japan is firmly back on the track, and the smaller markets inthe “tiger states” are also growing rapidly. The main driving factors behind this growth areincreasing intercontinental trade flows thanks to globalisation, the continuing relocation ofproduction – mostly to China – as well as ongoing market liberalisation in the region.

The international express market leader in Asia is DHL with a 32 per cent share, according tofigures recently published by the Deutsche Post subsidiary. Then follow FedEx (24 per cent), UPS(14 per cent) and TNT (8 per cent). The region’s post offices have an 11 per cent share throughtheir EMS services, and local express firms also have an 11 per cent market share. The four globalintegrators – DHL, FedEx, TNT and UPS – are all investing heavily in Asia to build up theirnetworks and local presence. But while they already dominate the international express routes toand from the region, there are many “local heroes” with leading positions in the domestic andintra-regional markets.

From a competitive point of view, the key developments in 2006, experts believe, are likely tobe further expansion of the “Big Four” in Asia, the strategic responses of local and otherinternational CEP operators, and more alliances and acquisitions in the region as all carriers seekto profit from these dynamic growth markets.

Double-digit regional growth for the next decade

Figures on the current and future size of the Asian CEP market vary considerably, dependingmostly on market definitions and which sectors are included in the data. Figures recently publishedby DHL put a value of four billion euros on the Asian international air express market in 2004.This was 21 per cent of the total 19 billion euro international air express market. DHL estimatesthat the Asia-Pacific international air express market will grow by 15 per cent a year on averageup to 2015 compared to more moderate 7 per cent average annual growth in the rest of the world. TheAsia-Pacific international air express market would thus be worth some 19 billion euros in 2015, or37 per cent of a total world market worth 52 billion euros. This market will continue to be dividedroughly 50-50 between intercontinental and intra-regional traffic.  

These figures, however, do not include the domestic express markets, including the largedomestic Japanese market and the fast-growing ones of China and India. Taking a wider marketdefinition, covering international and domestic express and deferred parcels as well as associatedfreight business, the Asian CEP market could already be worth as much as 50 billion euros (2005),according to CEP-Research data.  

According to John Mullen, DHL CEO Asia-Pacific, the region’s express markets can currently bedivided into four types. The mature markets such as Japan, Hong Kong, Singapore and Korea arecharacterised by strong competition, high service levels and moderate growth. China, with its rapiddevelopment and high growth rates, is a unique case. The mid-level markets such as India andsouth-east Asia are becoming more competitive while developing markets such as Vietnam have entrybarriers and poorer infrastructure but higher growth rates.  

China catches up on Japan 

The largest individual Asian market by far is Japan. The market, including both internationaland domestic express and deferred parcels services, was worth over 20 billion euros in 2002 andcould now be worth about 28 billion euros, according to CEP-Research data. The bulk of this is thelarge domestic market in the world’s second-largest economy. The Japanese market is predicted togrow at a moderate single-digit rate per year over the next decade or so as the country’s economycontinues to recover from its stagnation of recent years.  

China will catch up fast on Japan over the coming decade as the country draws more foreigninvestment and strengthens its growing role as the “world’s manufacturing base”. The Chineseinternational express market is forecast by DHL to grow at 27 per cent a year on average from lessthan one billion euros to 9 billion euros by 2015. The domestic express market, including air- androad-based transport, will probably grow at similar but slightly lower rates. Liberalisation andthe associated market entry of UPS and FedEx will have a major impact on the Chinese domesticmarket over the next few years.

India is expected to be the other major growth market in Asia as it benefits from economicliberalisation and globalisation. The country’s express and parcels market, where internationalshipments make up about a quarter of total revenues, could grow at up to 20 per cent per year froman estimated one billion euros in the years to come. This would probably see it overtake Korea asthe third-largest market in Asia, even though the Korean market is expected to grow at double-digitrates as well. In contrast to China and India, with their large international markets, Korea islikely to remain very much a domestic market.