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June 23, 2014

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38 THE JOURNAL OF COMMERCE JUNE 23.2014 SPECIAL REPORT ASIA TRADE LOGISTICS PROVIDERS HAVE their jobs cut out for them as China's rapid urbanization, growing middle class and improved access to health insurance is stoking massive invest- ment in the health care sector. A recent KPMG report indicated that China within the next 12 to 18 months will become the world's second-largest pharma- ceutical market after North America. Yet enabling the supply chain to actually get the medicine, medical devices and health care to people outside the biggest cities is a major challenge for logistics providers. "Provinces such as Jiangsu have seen sig nif icant g rowth in pharmaceutical manufacturing in the last decade, and this has brought with it higher demands on infrastructure," said Alex Maxwell, the Shanghai-based vice president for business development, life sciences and health care at DHL Supply Chain. To meet these demands, the world's pharmaceutical giants are reaching for their checkbooks. Pharmaceutical manufacturers will spend hundreds of millions of dollars in the next year stepping up production and expanding facilities in China, preparing to meet the rapidly growing demands of the mainland. Bayer HealthCare in May said it plans to invest $138 million to expand its packaging and logistics plant in Beijing to increase pro- duction of cardiovascular and anti-diabetes medicines. Johnson & Johnson's Janssen unit will spend $200 million to $300 million on a 2.8 million-square-foot plant in Xi'an, and Merck will invest $107.7 million to build a 430,000-square-foot facility in Shanghai that will produce diabetes drugs. Beijing in 2009 accelerated reforms to make health care more accessible, and 95 percent of the population is now covered by health insurance. Consumer demand is rising sharply because of rising disposable income, urbanization, an increase in health awareness and predictions that 24 percent of the population will be older than 65 by 2050. "With the industry growing as it is, there also comes a greater need for supply By Greg Knowler With China's pharmaceutical demand soaring, attention is turning to healing an ailing suburban supply chain PUTTING MONEY IN MEDICINE considered an intra-Asia specialist, while 53 percent of OOCL's total traffi c came from intra-Asia, Drewry said. OOCL saw a 1.2 percent return on sales. The intra-Asia market, including service from Asia to Australia, was also OOCL's fast- est growing in terms of volume in the fi rst quarter of 2014. Its intra-Asia trade grew 14.5 percent year-over-year, to 723,000 20-foot-equivalent container units in the quarter, while the rest of its global volume increased just 3 percent. Drewry said regional carriers are join- ing forces to compete more effectively against the bigger players in an effort to limit further capacity growth on certain trade routes. Although Drewry noted the diffi culty in quantifying growth in intra-Asia trade, mostly because there is no centralized data source and because the market includes trade within countries and between them, members of the Intra-Asia Discussion Agreement reported a 9 percent gain in vol- ume, to 7.2 million TEUs, last year. "To put this in perspective, that is more cargo than was shipped between Europe and the whole of North America in 2013 (6.7 million TEUs), and over double (the market's) annual growth rate of 4.3 per- cent," Drewry said. IADA is an informal discussion agree- ment composed of 11 lines operating containerized services on the intra-Asia lanes. Although the intra-Asia trade is mark- edly smaller than some global trade routes, experts believe it could signal trends. Jim Blaeser of the consulting firm AlixPart- ners said the small gap between intra-Asia trade and global trade could indicate future growth in the global market. "Typically, when the intra-Asia trade growth is higher than global trade growth, it's a good sign for the future of global growth, since so much of the intra-Asia trade is base materials and semi-manufac- tured goods," he said during a conference call with Stifel this month that concentrated on the global container trade outlook. "So it's good to see intra-Asia freight moving with a little bit more velocity or volume. It means that good things are coming down the pike." JOC Contact Corianne Egan at and follow her on Twitter: @CEgan_JOC.

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