DHL to set up terminal in Moscow

In 2005 DHL controlled by Deutsche Post World Net plans to set up its own terminal worth EUR9.5mln with an area of 10,000 square meters in Moscow. Besides, DHL targets to construct terminals in St.Petersburg and Samara. A total of EUR20mln will be invested in these projects. The above-said terminals are designed for receipt and handling of foreign and domestic cargo that will be delivered to Russian regions, Vedomosti said

DHL TO INVEST $20 MILLION IN BROADENING OF RUSSIAN CHAIN
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DHL is the first company from the "big four" of international express shippers that has dared to make large investments in Russia. In 2004, DHL will invest 20 million euros in creation of terminals in Moscow and provinces. Its main competitors also cherish the plans to build logistic centers but in amore distant future. All of them say that the market of express delivery in Russia is growing increasingly attractive for investments.

A 100% stake of DHL belongs to Deutsche Post World Net. In 2003, revenue of DHL amounted to 22 billion euros. In Russia DHL has been working since 1984. Now it has 100 its own and agent offices in the territory of the country. Turnover of the company in Russia is not disclosed. According to the Russian division of DHL, in 2004 it will transport 3.2 million cargoes including 60% inside of the country. According to Post of Russia, the market of Russian express delivery market is estimated at $200-250 million (some market players estimate it at $500 million), $150 million of this sum being international delivery more than 70% of which is controlled by the "big four": DHL -45% (DHL estimates its share at 57%), UPS and TNT- 15% each and FedEx – about 4%. In domestic delivery market significant market shares belong to Pony Express and SPSR Express.

Mark Hughes, manager of DHL for cargo delivery in Russia, reports that in 2005 DHL plans to build its own terminal with overall area of 10,000 square meters in the Moscow Region investing about 9.5 million euros in the project. According to Hughes, in 2005 DHL is also going to build terminals in St. Petersburg and Samara. Overall investments in the three projects will reach 20 million euros. All terminals will be intended for reception and processing of international and domestic cargoes and their delivery to the regions. The manager adds, "That is why in Moscow it would be ideal for us to make a terminal near Sheremetyevo airport." DHL considers various options from construction of a brand new logistic center to acquisition of existing objects. To date, the company rented small premises for terminals in Sheremetyevo and in the southeast of Moscow and hired contractors for processing of its cargoes. According to Roland Thomas, Commercial Director of DHL CIS, so far the company invested a few millions of dollars in training and personnel and purchase of equipment in Russia and had to increase investments due to rapid growth of business. Although DHL does not disclose its financial parameters, Thomas says that in 2004 turnover of its operations in Russia will grow by 50% and with regard to domestic delivery turnover will grow by 60%. Thomas adds, "Local contractors cannot keep up this dynamics and DHL will create its own infrastructure."

Sergei Grigorenko, director of the PR directorate of Post of Russia, confirms that growth of domestic Russian express delivery market exceeds the growth of international delivery of all market players. They also consider increase of their own premises. Bogdan Butyrev, Sales and Marketing Director of TNT Express-Russia, also says that his company considers various options from construction to rent of an existing terminal but the deadlines for the project are not determined yet. He explains this need by the rapid growth of the company's business. In 2003, turnover of TNT in Russia grew by 33%. An increasingly growing number of companies also demonstrate the interest in reassigning of their logistic operations to professionals. For example, TNT provides logistic services in Russia to Sony, Lucent Technologies and Hewlett-Packard.

Head of UPS Russia Ivan Shatskikh states that his company does not rule out construction of its own terminals in Russia too, although only in the future. Shatskikh says that so far it is more profitable for the company to work on rented premises.

This way or the other, plans of international operators are less ambitious than the plans of state-run Post of Russia. In October, Post of Russia signed an agreement with Italian Elsag Spa on construction of a mail processing center worth 52 million euros by 2006. In 2004, Post of Russia launched an express delivery program in cooperation with international Express Mail Service.

Vedomosti, November 02, 2004