Invest KOREA

In March 2023, the monthly container traffic volume at Busan Port reached a record high of 2.05 million TEUs. This represents a 9.3% year-on-year increase (the previous record was 2.02 million TEUs). Despite the prolonged global crises such as the endemic and Russia's invasion of Ukraine, Busan Port achieved best-ever results in transshipment cargo (T/S Cargo) traffic (approximately 1.09 million TEU), which is one of the port’s main strengths. A close look at the transshipment volume in March shows that the transshipment volume of Maersk, which uses Busan Port for transshipment, increased by about 53% (about 80,000 TEU).

In 2022, Korea's major second-party logistics providers (2PLs) grew both in size and profit on the back of favorable marine freight rates and traffic growth. In 2022, the average operating margin of Korea's top five 2PLs was 3.3%, up 0.7 percentage points from the previous year. They are preparing to grow into global players as they are expected to introduce AI technology to their logistics centers.

Similarly with Busan Port, container traffic volume at Incheon Port increased by 20% year-on-year to 298,933 TEUs, which is the highest traffic volume ever for the month of March. Factors contributing to the increase include ▲ strong imports and exports from China, Thailand, and Vietnam due to the longer stopovers of container ships ▲ an increase in the recovery of empty containers for loading automotive parts ▲ and an increase in the repositioning of empty containers to China. ¹⁾

In 2023, the logistics industry will inevitably be affected by the global economic slowdown caused by the war in Ukraine, inflation, and high interest rates. However, the overall traffic volume is expected to increase, boosted by the transformation of digital logistics and the expansion of platform businesses, and Korea's import and export container traffic volume is expected to grow by 4.2% year-on-year, and shipment of daily goods is expected to increase by 10.9%. ²⁾

With the increase of transportation volume and the introduction of low-volume and multi-product processing facilities, shippers are becoming larger, more advanced, and concentrated through M&A. Recently-built logistics centers are actively leveraging AI-based robot systems (e.g., China's Geek+) for increased safety, efficiency and accuracy.

At the same time, the explosive growth of the quick commerce market triggered by COVID-19 resulted in the growing number of small-sized warehouses in urban areas. In addition, more urban logistics centers* are being introduced by reducing the size of existing large-sized stores (dark stores, MFCs, PPCs, etc.) ¹⁾

Based on the forecasts of various research organizations, the global cold chain market is expected to double in size from about USD 224 billion in 2020 to USD 438 billion in 2026, growing at an average annual rate of about 15%.

In Korea, the cold chain sector was estimated to be worth KRW 49 trillion in 2018, compared to the logistics industry's KRW 120 trillion. By 2028, the cold chain sector will catch up with the logistics industry by reaching KRW 195 trillion and surpass it afterwards.

With Busan Port, the world's second largest transshipment port ¹⁾ and Incheon Airport, the world's second largest air cargo hub ²⁾, Korea offers fast turnaround times and low costs for importing and exporting ³⁾, making it easy for businesses to trade. The ports are located at the center of mega-markets of Japan and China, which make them excellent logistics hubs. Busan Port is a world-class terminal operator with a skilled workforce and is currently home to global terminal operators (GTOs) such as PSA, DP World, and Hutchinson.

Busan Port can operate year-around and is safe from natural disasters such as typhoons and fog. Considering that major ports in China are closed for an average of 22 days each year in 2021 (Shanghai 22 days, Ningbo 32 days, and Qingdao 28 days), Busan Port's 24/7 operation can serve as a great strength. Moreover, Busan Port’s deep water depth (16-17 meters) allows the berthing of even the world's largest container ships.

Before the 2000s, the Korean logistics industry grew rapidly in size backed by the rapid economic growth and export-oriented economic structure. Since the 2000s, it has also grown in quality thanks to the rise of the Chinese market and the government's investment in logistics infrastructure (Incheon Airport, Busan New Port, inland logistics bases, etc.). Due to the narrow land space and being disconnected from the Asian continent blocked by North Korea, domestic cargo is mostly handled by trucks while international cargo is handled by ports and airports. Surrounded by sea on three sides and located between China and Japan, Korea has an export-oriented economy which helped the development of international logistics industry centered the capital region (Incheon Port and Incheon Airport) and the Busan region (Busan Port). The logistics belt connecting Seoul and Busan is filled with logistics infrastructure encompassing transportation networks, airports, ports, and inland logistics bases.

As of 2020, Korea's FDI in the logistics and distribution industry amounted to USD 1.831 billion, with a 38.7% year-on-year increase in FDI in transportation and warehousing (logistics). Greenfield investment accounted for 92%, with companies from various countries such as Hong Kong, the United States, China, Singapore, Germany, and the United Arab Emirates entering the Korean market.

As of 2020, Korea's FDI in the logistics industry (transportation and warehousing) totaled USD 632 million in 44 projects, with the country attracting a total of USD 3,154 million over the past seven years. The size of investment appears to be fluctuating considering that FDI is significantly influenced by the investment climate (policies, facilities, market size, etc.) of neighboring competitors as well as by the domestic economy.

In the past, the industry merely attracted USD 66-143 million from 2011 to 2013, whereas in the last seven years, the amount increased significantly to USD 300~600 million and is stabilizing at these level. The size of investment (in terms of declared amount) was 17% for M&A type investment, while the absolute majority or 83% was greenfield type.

Since its establishment in Korea in 2010, Coupang has invested KRW 6.2 trillion to build more than 30 logistics hubs nationwide in the past 12 years and emerged as a major investor greatly contributing to the national economy. Taking advantage of the explosive growth of the e-commerce market in Korea, Coupang has made aggressive investments and established itself as an industry leader.

Over the past few years, Coupang directly employed more than 60,000 people in the domestic market, contributing to the revitalization of local commercial districts by creating large-scale employment. It is also leading the advancement of the logistics industry by introducing AI algorithms and robot automation in its state-of-the-art large-scale logistics centers (e.g. Daegu FC).

EMP Belstar is a global investor that has established cold chain clusters in major logistics hubs across Korea, including Busan, Incheon, and Pyeongtaek Ports. As its first project in Korea, EMP Bestar has built an ultra-low temperature logistics complex facility in Oseong Industrial Complex in Pyeongtaek, completed and launched in January 2019. It is also building ultra-low temperature facilities in Busan and Incheon, with a vision to establish its Asian cold chain hub in Korea.

The total amount of executed and planned investment in Korea reached USD 2-3 billion, and EMP Belstar aimed to increase its market share to 25% by building five to six cold storage facilities nationwide, starting from investing in major logistics clusters.