¡¡¡¡An interview with Yu Zhaojun, Chairman of SIPGL
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¡¡¡¡To upgrade its industrial structure, SIPG has planned to develop ¡°four major industries¡± including container terminal, bulk groceries terminal, port services and port logistics (collectively viewed as the four ¡°Golden Flowers¡±) during the process of its development transformation. SIPG Logistics Co. Ltd. (SIPGL) is proving one of the youngest and most promising of the four.

¡¡¡¡In recent years, domestic port and shipping enterprises have been successively established their own logistics companies. These companies can basically be divided into two categories, namely, those that base their profit strategies on logistics business, and those that seek to integrate various industries in logistics. To determine a proper solution depends on the demands of a certain enterprise. Recently, with a focus on relevant topics, we conducted a special interview with Mr. Yu Zhaojun, Chairman of SIPGL.

¡¡¡¡Destination port to port of origin

¡¡¡¡We started the talk by discussing a new concept put forward by Fu Yuning, Chairman of China Merchants Group, during the 2007 Asian Terminal Operators Conference. When commenting on maritime logistics, Fu Yuning pointed out: ¡°The destination port should be transformed into a port of origin.¡± That is to say, the classification, packaging and necessary processing of goods should be completed in the port of origin, and once they have arrived in the destination port, they are immediately available to be sent onto the shelves. The question we raised is: ¡°How do you view this possible trend of port logistics development?¡±
¡¡¡¡¡°What Mr. Fu Yuning concerns is precisely the focus of our consideration,¡± Yu Zhaojun stated clearly. ¡°By this I include port logistics parks, which are to open large-scale logistics parks around the port itself, so that distribution agents as well as logistics operators are able to provide warehousing, classification, packaging, processing, distribution and other value-added services. Many of the world¡¯s developed ports are surrounded by logistics parks, where there are a number of large-scale distributors and logistics park operators to directly carry out classification, packaging, etc. And now we are doing the same.¡±
¡¡¡¡For example, wine purchased by operators from Europe is bound for Japan, so it is to be processed and packaged in accordance with Japan¡¯s demand. In the past, these used to be finished in Japanese ports, but the local cost was relatively high and it was rather time-consuming. Now, however, logistics operators and dealers are able to rent warehouses in logistics parks within Shanghai Port for direct packaging and processing, with loaded containers then delivered to Japan. Yu Zhaojun said: ¡°This requires ports concerned to provide good facilities as well as a satisfying environment, such as a favourable warehouse leasing charge and comprehensive support services. Of course, corresponding ports and customs policies should be established to support the practice as well.¡±

¡¡¡¡A way to optimise the industrial structure

¡¡¡¡During 2006, SIPG started preparation of a large-scale logistics enterprise, and by the year end, SIPGL was officially set up based on two factors. Firstly, it was need for SIPG¡¯s industrial integration. At that time, SIPG had determined to develop the four major industries including container terminal, bulk groceries terminal, port services and port logistics. Some logistics enterprises within the group, as well as some regional logistics services, such as freight forwarding, shipping forwarding, storage, transportation and so on, were combined into a single port logistics industry by the group. Secondly, SIPG as a whole was preparing for market listing. There was already a listed company (Shanghai Port Container Co. Ltd.), which has, after listing in 2001, gathered a majority of quality assets and most logistics enterprises within SIPG. However, this listed company is growing complex in terms of its internal industrial structure, which is increasingly contradictory to the Group¡¯s overall industrial layout as well as industrial division of labour. Consequently, SIPG started on a plan targeted at listing itself as a whole. In Oct. 2006, by way of equity exchange and a merger with Shanghai Port Container Co. Ltd., SIPG was wholly listed on the A-share market, with the new listed company appearing as SIPGL.
¡¡¡¡After a year of integration and adjustment, SIPGL already has a comprehensive structure and even made considerable progress. ¡°Since the integration, SIPGL has evolved into a parent company, but has it already replaced the original Shanghai Port Container Co. Ltd.?¡± In view of the series of changes, we could not help but raise such doubts.
¡¡¡¡¡°This assumption can hardly hold water,¡± Yu Zhaojun replied, explaining: ¡°Shanghai Port Container Co. Ltd. was an investment and management company that presided over more than 30 companies, with its headquarters mainly implementing the investment and management instead of production and operation. Now even if SIPG is a parent company, according to the Group¡¯s labour division, it is an operating enterprise directly engaged in production and operation. Currently, the 26 joint ventures left mostly have their main business concentrated in the headquarter and our goal is to enable SIPGL grow into an operating entity with an enlarged scale.¡±

¡¡¡¡Gathering advantages and expanding function

¡¡¡¡When it comes to the approach of developing the port logistics industry, we combine nurturing with integrating: to integrate the obsolete and to expand the new. Firstly, to focus the development of the logistics parks. To establish large portside logistics parks surrounding the port so as to provide port logistics with supporting services. Secondly, to emphasize the development of chemical logistics. Local companies should be equipped with supporting warehouse for dangerous chemicals to assist those domestic and foreign large chemical enterprises. Thirdly, to develop engineering logistics. End of last year, the Group decided to allocate derrick barge, seagoing barge, tugs and other large equipments into our assets, by which we now have acquire the ability and resources to compete. Fourthly, to strengthen the container liner services, offer an all-round service package including freight forwarding, shipping forwarding, booking, warehousing and container yard, so that we are not only to make the best of resources, and also to be the most competitive in the market. Fifthly, to establish both international and domestic business network with the current focus in China. We will improve the information-based system to cover all service lines in port logistics.
¡¡¡¡When discussing various domestic and international port and shipping enterprise groups that have successively set up their own logistics companies, Yu Zhaojun expressed frankly: ¡°The whole logistics industry is fairly market-oriented. After this integration, the first priority would be to cultivate our competitiveness. Since preliminary integration has been achieved, we are now re-positioning ourselves in the market. At present, SIPGL is actively accumulating resources and enhancing strength, towards clear goals set firmly ahead.¡±