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Lack of cold storage capacity for air freight in China

THE logistics sector is scrambling to keep up with rising demand for cold chain services in China's air cargo market.

In 2013 US$16 billion was invested into cold chain assets in China, and one estimate forecasts 30 million tonnes of additional cold storage capacity will be required in the next five years, reported Air Cargo World.

Some of the larger players have already made substantial investment to meet this demand. For example, FedEx is targeting the Chinese market for temperature sensitive shipments. In August, the company launched a cold-chain product on its International Priority Service for outbound shipments, as well as on its Priority Delivery Service in the Chinese domestic market.

Earlier this year DHL Global Forwarding (DGF) implemented measures to boost its capabilities to handle temperature-sensitive cargo in China. The US$18 million expansion of its air cargo facility at Shanghai Pudong included the construction of a 1,600-square-metre cold storage facility, which marked a twenty-fold increase in the company's cold chain capacity at the airport.

At the first Cool Logistics Asia conference in September, director and general manager of Swire Pacific Cold Storage, Clement Lam, predicted that the percentage of products being transported and stored in proper cold chain facilities will increase disproportionately to the growth of capacity.

According to DGF's CEO for the Asia Pacific region, Kelvin Leung, the forwarder is the only logistics company in the Shanghai No. 1 Customs Supervised Bonded Zone that can offer cold storage in a multi-temperature controlled space.

Handling firm Pudong Air Cargo Terminal Ltd (Pactl) has built a new perishable centre at the airport with a deep-freeze area, several cool storage facilities and an ambient temperature storage zone. The centre has an acceptance area with separate X-ray machines and a build-up zone, a 1,500-square-metre handling area for quick breakdowns, and a specially designated delivery sector.

"As most of our airline clients are offering and further developing sophisticated perishable and pharmaceutical services, we expect the recent growth in our perishable and pharmaceutical business to continue," Pactl vice president Lutz Grzegorz was quoted as saying.

As cargo product and marketing manager at Cathay Pacific, Jack Lo noted, the growth in pharmaceuticals shipments is not solely down to Chinese consumers being able to pay more for imported products - although imports still far outweigh exports.

Outbound volumes, he said, have been rising even faster, as more pharmaceuticals produced in China have gained international certification and are increasingly shipped to North America and Europe. Investment from international pharma players is increasing, which improved quality, he pointed out.

"In addition, increasing numbers of traditional Chinese pharmaceutical companies and R&D-oriented Chinese biotechnology companies also join in the service," said Mr Lo.

Albeit smaller in volume than imports, it is export traffic that exerts the strongest pressure on cold-chain infrastructure at airports in China. Typically, cold-room capacity on the export side of cargo terminals is considerably smaller than in the import area, and large outgoing volumes sometimes overwhelm the infrastructure, Mr Lo observed.

For all the carrier's efforts to beef up its perishables-carrying capabilities, there is still limited suitable capacity flying into the Pearl River Delta today, Mr Lo said. Cathay has been utilizing the bellyholds of sister company, Dragonair, to fly perishables in and out of destinations in China, such as Chongqing, Chengdu and Zhengzhou.

"We are making efforts to qualify more China stations to become Pharma LIFT capable stations whenever demand is available," he said, adding that Cathay has also brought in more active temperature control containers.