UPS has announced that it has started the construction of its new facility at Shanghai, Pudong airport. This represents the next stage in the development of its China Express network.

The hub is scheduled to open next year and will connect UPS' China network to its international services. UPS already has Express services in China covering most of the country's cities, with an air cargo service complemented by an alliance with the Chinese cargo-airline, Yangtze River Express. UPS also has large operations in Hong Kong. The construction of the hub in Shanghai will mark the next stage in developing dedicated rather than shared facilities in China, as well as an expansion of UPS' capacity in China.

Located at Shanghai's Pudong International Airport, which itself is still in the process of construction, the UPS facility will be 1million sq ft (96,000 sqm) and is projected to handle 17,000 parcels per hour by 2012. UPS will move from using its older MD-11 aircraft to its new Boeing 747-400 freighters, with almost 100 flights a week into the facility within a couple of years.  

UPS, along with competitors DHL, FedEx and TNT, continue to make major investments in China. FedEx also has a strong Express presence in Shanghai in addition to a major facility located in Shenzhen, near Hong Kong. DHL and TNT have also prioritised the market through a combination of acquisitions and organic growth.

This expansion is partly a result of the Sino-U.S. Civil Aviation Transportation Air Services agreement of 2004, but largely of the WTO agreements on access to Chinese domestic markets. The result has been a transformation of China's previously closed domestic air freight sector in just the past 18 months. Companies such as UPS now offer very substantial freight services across China on their own account, rather than through joint ventures, posing a big challenge to domestic operators who up until recently had the market to themselves.

Deutsche Bahn (DB) has been the latest big logistics service provider to announce bumper profits and big increases in revenue. The headline figures announced by the CEO, Hartmut Mehdorn, were strong with a 20% increase in revenue to €30bn and an EBIT up by €1bn to €2.5bn, but the figures for DB's logistics business seem even stronger.

Its Transport and Logistics business unit has grown by over 25% to €17bn and EBIT has increased to €609m led by a doubling at Schenker. A large proportion of this growth is due to the acquisition of BAX Global, although profitability seems to have increased organically. Both air and sea freight volumes have grown strongly, with growth of 16% and 18% respectively. Rail-freight volumes are up 10% leading to greatly improved profitability at Railion. What is not clear from these figures is the strength of businesses such as Schenker's network road transport or its contract logistics although the company will elaborate on these in the near future.

The big picture from these results is that Hartmut Mehdorn is building up the company for its launch on the German stock exchange in 2008. It is critical that there is a constant stream of good news to create confidence in the IPO. In this the company is being aided by Germany's reasonably healthy -although not hugely dynamic - rail sector both for passengers and particularly for freight. There is a general trend in the sector of low double-digit increases.

DB is positioning itself as a "European Champion" in the rail sector, but its overall strategy will inevitably be affected by domestic politics. Like its rival DPWN, DB is changing into some sort of new company, although it is still not entirely clear what that company will look like.