Our global networks leverage the NOL group's particular strength across Asia.

NOL’s North Asia region includes some of the world’s most dynamic origin and destination markets. In 2008, about half of total Group revenue was generated by container shipping, terminals and logistics activities that touched North Asia.

A key driver of North Asia’s contribution is Mainland China, which the APL business has been serving since 1867. In the early 21st century, NOL has played a lead role in servicing the booming export-driven economy of China as the country – particularly the southern Pearl River Delta (PRD) region – has become the world’s premier sourcing location. In late 2008, however, the PRD faced major challenges as global demand deteriorated and foreign buyers placed fewer orders.

Manufacturers increasingly sought ways to further reduce costs. For example, major users of air freight began looking for more affordable alternatives such as day-definite ocean-truck transportation services. To meet this need, APL Logistics upgraded its OceanGuaranteed® LCL service in 2008. Guangzhou became the service’s ninth Asian point of origin and first inland node. Eight of the nine origin points for this popular service are in North Asia. North Asia also provided the foundation for the new APL Guaranteed™ Continental time-definite service for FCL shipments.

Another important service innovation was the expansion of the industry’s first ocean capable 53-foot container service to Qingdao, North China in early 2008. The “big box” economics of the Ocean53™ service create distribution cost savings, shorten transit times and lessen environmental impacts by eradicating the need to transload cargo from standard containers to 53-footers, which have been the standard size for rail movements in North America since they were introduced to the market by APL in the 1980s.

In the future, the Chinese Government’s focus on increased domestic spending can be expected to provide opportunities for Contract Logistics leaders such as APL Logistics to provide more domestic warehousing and distribution services.

NOL operates three marine terminals in the North Asia region: at Kobe and Yokohama in Japan and Kaohsiung in Taiwan. While the Japanese terminals performed satisfactorily in 2008, the Japan market, in general, along with South Korea, was adversely affected by worsening trading conditions.

NOL renewed its lease at the key transhipment point of Kaohsiung for a further 10 years. The extension will enable the continuing provision of efficient and cost-effective terminal services to support the APL business. This paves the way for further upgrading of facilities and positions the Group to harness new cross-straits opportunities between Mainland China and Taiwan.

APL’s close ties with China’s maritime authorities saw the creation in 2008 of a joint training scheme with the China Marine Pilots Association. APL was the first foreign shipping line to offer this kind of attachment scheme, which is designed to raise the professional standards of Chinese pilots by providing them with real-world experiential training opportunities. The first batch of Chinese pilots sailed on APL vessels between August and November 2008.

APL was the only foreign shipping line named a Five Star Carrier at China’s Shipping Star Awards and picked up the Shipping Line of the Year accolade at the Supply Chain Asia Logistics Awards ceremony in Shanghai.

A Leader in Intra-Asia Trade

NOL is among the world’s leading Intra-Asia container shipping operators and our expertise in this region is unmatched in our industry. In 2008, Intra-Asia was NOL’s single largest container trade, representing 35% of the total volume mix. Full year volumes of 852,000 FEU represented a rise of 9% on the prior year. Full-year average revenues per FEU for Intra-Asia were up 5% on 2007.

This performance was largely due to solid demand for short sea services and successful fuel cost recovery. However, this growth was to some extent offset by the decline in the main East-West trades, with significant vessel capacity at an industry level being cascaded from the struggling Asia-Europe trade to the Intra-Asia longhaul (Middle East and Indian Subcontinent).

Fourth-quarter volumes and average revenues per FEU declined by 3% and 9%, respectively. Late in the year, NOL responded to tougher market conditions by moving to remove about 16% of ship capacity from Intra-Asia trades.