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Korea's logistics firms upscale facilities on Chinese e-commerce rise

By Shim Woo-hyun

Published : May 7, 2024 - 18:10

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CJ Logistics' global distribution center in Incheon (CJ Logistics) CJ Logistics' global distribution center in Incheon (CJ Logistics)

Korean logistics companies are boosting their investment in their facilities to cope with the country’s increasing direct purchases from China, industry sources said Tuesday.

According to Korea Customs Service, the number of items purchased through Chinese online shopping platforms last year reached 88.8 million, up 70.3 percent on-year. The combined value of those transactions also came to some 3.3 trillion won ($2.43 billion), up 121.2 percent from a year ago.

The number of monthly active users of the two main Chinese online shopping platforms, AliExpress and Temu, was estimated at above 8 million each as of April.

In line with the increasing shipments from China, Hanjin Logistics, an affiliate of the nation's airline-to-logistics conglomerate Hanjin Group, has recently started a 10 billion won construction project to expand its self-clearance facility at Incheon Airport Global Distribution Center (GDC).

With the expansion, Hanjin Logistics aims to double the monthly processing capacity of the self-clearance facility from the current 1.1 million boxes to 2.2 million boxes. The company plans to operate the expanded facility during the second half of this year.

After its opening in 2020, Hanjin expanded the self-clearance facility at Incheon Airport GDC once in 2022. Hanjin deemed it insufficient due to the recent increase in direct purchases.

Hanjin Logistics currently plans to handle 70 percent of online shipping made through Temu and 10 to 15 percent of shipments from AliExpress.

CJ Logistics, Korea’s other leading logistics firm, could also expand its inbound custom clearance (ICC) center in Incheon, which can currently handle 2 million boxes per month. According to a report from Daishin Securities, CJ Logistics is reviewing options to increase the capacity to 10 million boxes per month.

CJ Logistics' potential investment is in line with the increasing shipments from AliExpress. CJ Logistics has been responsible for the customs clearance and distribution of around 80 percent of shipments made through AliExpress, and the number of parcels could jump if CJ Logistics wins AliExpress’ bid opened in March, in which the company competes with Hanjin and Lotte Global Logistics.

“It is likely that the two companies (CJ Logistics and AliExpress) will continue their partnership, as it will cost additional money and time for AliExpress to change its logistics partner here,” an official from a local logistics firm said.

The source added that CJ Logistics remains the best option for AliExpress, as Hanjin and Lotte Global Logistics’ capacities fall short of handling the increasing orders from AliExpress.

Even after AliExpress builds its logistics center in Korea, the Chinese e-commerce giant is expected to continue its partnership with local logistics firms, industry sources said.

Previously, AliExpress unveiled plans to invest $1.1 billion in Korea over the next three years. Around $200 million would be spent on building a logistics center on a 180,000-square-meter plot of land this year.

“AliExpress’ investment to build a logistics center could be the Chinese e-commerce giant’s move to use Korea as a base for its overseas logistics network rather than using it just for distribution in Korea,” an industry source said.

“Although AliExpress builds its own logistics center here, the company is also expected to continue its partnership with CJ Logistics or other companies for their delivery services,” the source added.