Aug 14, 2013

JR Freight beefing up international logistics biz, expanding Sea & Rail svc

Japan Freight Railway Co. (JR Freight, led by its president, Shuji Tamura) is reinforcing its activities in the field of international logistics. In the Sea & Rail Service (S&R) that consistently uses 12-foot rail containers at sea and on trains, the company will partner with operators and marine forwarders toward the reinforcement of marketing activities in a bid to stimulate the needs of customers. It also aims to address the positioning demand of operators in relation to ISO marine containers. The S&R and ISO container services have been suffering from a gradual decline since the Lehman shock, but JR Freight believes that the market has already bottomed out and will revert to a path of growth henceforth. With this in mind, the company will strive to realize year-on-year increases of 10-20% in both segments in fiscal 2013.

JR Freight has established the international logistics development department within its logistics headquarters and such department has been mounting marketing activities and developing products in the area of international logistics. The company also put up JR Freight International (JRFI), its subsidiary that will take charge of international forwarding, in 2009. These moves show that the JR Freight Group has been reinforcing its system to better cope with the multimodal transport needs in the market.

The company's activities in the international logistics segment are pillared on three services, comprising the S&R, ISO containers and cross-dock services at the port's entry/exit areas. Armed with such weapons as less environmental load compared to trucks and a higher degree of punctuality in its services, JR Freight has been promoting modal shift even with import and export cargoes.

The S&R, which utilizes in international hauling operations the 12-foot containers that are used for domestic rail transport, handled about 4,300 containers in fiscal 2012. While the volume last year plunged compared to the peak (6,000 units) level that was recorded in 2007, before the Lehman shock hit the market, JR Freight for fiscal 2013 has partnered with operators and marine cargo forwarders in a bid determine the target areas, such as Kyushu, and then concentrate its drive to expand sales in those regions.

The S&R service mainly handles precision machines, household appliance components and other product-related cargoes. It also hauls consumer-related cargoes where Japanese brands are highly regarded, such as cosmetics. Marine transport is primarily carried out with the help of RORO ships and cargo ferries. In particular, nearly half of the cargoes are transported using the Shanghai Super Express (SSE) that is commissioned to ply between Hakata and Shanghai. Further, the company offers such services as the Rail & Sea & Rail (RSR) service that is linked to the Korea Railroad network.

Cargoes can also be loaded onto the usual containerships by using 40-foot flat-rack containers, which can fit in three 12-foot containers, that were developed and owned by Zenkoku Tsuun (Zentsu), in which JR Freight has a stake. Chinese operator COSCO and other entities utilize such flat-rack containers. JR Freight aims to engage in business on a project-by-project basis in this area by teaming up with COSCO Logistics Japan of the COSCO Group.

The volume of cargoes hauled using ISO marine containers in fiscal 2012 jumped 8.4% from a year earlier to 21,185 TEUs, marking the first upward trend since the Lehman shock. In particular, cargo traffic evolved on a bullish tone in the area linking Morioka Cargo Terminal Station (Photo) and Keihin (Tokyo and Yokohama) ports, providing the traction to the entire throughput by posting a 16% year-on-year growth to 11,581 TEUs (including cargoes to/from Sendai). Featuring inland container depot and bonded zone, this station has been positioned as a base that has export/import cargoes in mind, as evidenced in such services as JRFI's customs clearance service.

Looking at the handlings in the above area, imports have been dominated by feed crops and distribution-oriented consumer goods, while exports are mainly made up of machine-related cargoes. Inquiries are also reportedly on the rise for hauls related to the automobile companies that are concentrated in the Tohoku region. Now there may be competition with regional ports, but an official from JR Freight's international logistics development division claimed that, "There will be adequate advantages if we take into account the state of commissioning of oceangoing ships (at the Keihin ports)." The strength is particularly evident in the trade with North America and Europe, as the key routes in this trade do not sail to the regional ports.

Much attention is also being directed to the market west of Keihin. JR Freight landed a deal to haul cargoes to Fukuoka from Nagoya for a major furniture manufacturer a couple of years back. Long-distance transport of ISO containers is also being undertaken between Hakata and Tokyo corresponding to the day of arrival/departure of the SSE. Tunnels west of the Keihin ports have height limitations that prevent 9.6-foot high-cubes from going through, but JR Freight still expects to be able to cope with the demand by using the usual vans (that are 8.6 feet high).

Further, JR Freight is targeting the positioning demand of operators. This is quite tight in terms of freight rates as it will involve empty containers that will not be loaded with cargoes, but the company will proactively offer this service as it will also result in the effective utilization of space.

JR Freight shifted to high gear its cross-dock services in fiscal 2012. With this, ISO containers and rail containers are transferred at the Tokyo Cargo Terminal in Oi, Tokyo and at the train station at Honmoku in Yokohama and then connected to the nationwide network of JR Freight. This service used to be utilized by importers of apparel and other goods, but has begun to be commissioned for exports as well in July this year. Cargoes are hauled into 12-foot containers at the factories where vanning into marine containers cannot be done due to issues with facilities. The cargoes are subsequently transferred to 40-foot ISO containers at the CFS within the station premises. JR Freight reportedly handles about 20 FEUs worth of cargoes per month in this segment.

With regard to future business expansion overseas, Hiroyuki Kikuchihara, group leader at the international logistics development division, expressed the company's commitment toward the reinforcement of its existing businesses, saying that, "First, we want to solidify our foothold." He added that, "We want to deploy personnel to overseas sites in the long run toward the formulation of products and services that will directly penetrate trades in South Korea, China and other countries. We are also exploring the possibility of building a China land bridge in cooperation with China Railway."

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