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Even package deliveries take tumble with China lockdowns

Booming sector suffers rare volume setback, but some companies post higher revenues

Local authorities in parts of Shanghai and other cities have barred residents of some neighborhoods from receiving deliveries and erected barriers to restrict movement.    © Reuters

HONG KONG -- Even as millions of Chinese were forced to depend on delivery services last month while restricted to their homes in Shanghai and other cities, the country's courier companies experienced an unprecedented setback.

SF Holding and its three listed rivals saw their April package volumes fall from a year before, the first time this has happened outside of the Lunar New Year holiday season since the couriers began releasing monthly data in late 2017 in line with a Shenzhen Stock Exchange requirement.

"The shock to the express delivery industry as a whole was relatively large in April as the impact of the pandemic spread in various places such as Shanghai, Jilin, Fujian and Shandong," Liang Bo, vice president at STO Express, told investors last Friday.

"Our transshipment centers and main transport arteries were under restrictions, causing parcel volumes to slide and shipment cost per package to rise, which to a certain extent will hit our financial performance this year," he said.

The volume declines ranged from 19.4% for Yunda Holding to 4.8% for YTO Express Group. STO, YTO and Yunda are all based in Shanghai and emerged from an industry cluster centered on Tonglu County, 240 km southwest of China's commercial capital.

For the courier industry as a whole, package volumes fell 11.9% last month, according to the State Post Bureau. Outside of Lunar New Year periods, the national figure had never recorded a decline until March when it saw a 3.1% drop.

The courier companies have enjoyed bumper business for years thanks to the country's booming e-commerce sector. Alibaba Group Holding itself has invested in the three Tonglu companies.

Last year brought new milestones as the industry posted revenue of 1.03 trillion yuan ($155 billion) as package volumes reached 108.3 billion.

In April, however, online retail sales fell 6.8% as local authorities in parts of Shanghai and other cities restricted intercity trucks and even blocked residents of some neighborhoods from receiving deliveries.

Parcels delivered in Shanghai fell 26.9% to 837.34 million in April, according to State Post.

Last year, Shanghai package volumes trailed only those of Guangzhou, Shenzhen and Jinhua, a city close to Tonglu and the export hub of Yiwu that was the busiest in the country.

Despite the national fall in deliveries in April, STO and YTO each saw delivery revenues rise about 10% from a year before thanks to higher average charges per parcel. Yunda's receipts for the month were flat.

Fierce competition saw average package charges for most of the listed companies begin to fall at a double-digit pace in late 2019 and led to some industry consolidation. But the price war cooled late last year after Beijing intervened to pressure courier services to raise driver pay under the rubric of President Xi Jinping's "common prosperity" creed.

Nie Tengyun, chairman and president of Yunda, accentuated the positive trend in rates in an investor briefing earlier this month.

"The operational environment of the country's express delivery market has remarkably improved since the second half of 2021," he said. Added board secretary Fu Qin, "The ongoing trend of improvement in our country's express delivery industry has not changed."

While restrictions on the movement of drivers and residents linger in Shanghai and other cities, analysts are optimistic the worst is behind the courier services, noting that volumes rose during the annual May 1 holiday week period from a year before.

"According to our discussions with express-delivery companies, all reported improvement on a [month-on-month] basis recently," said Daiwa Capital Markets analyst Frank Yip in a client note.

"We believe the industry parcel volume will reverse to positive growth in May, led by delayed parcel deliveries from April being delivered in May, and an improved logistics supply chain as well as the pent-up demand which should be further released during the June peak season," he said.

In guarded comments, Feng Lihu, director of the Shanghai Postal Administration, projected last week that delivery volumes in the city would return to around 70% of normal levels by mid-June with the reopening of the companies' service networks.

"All sorting and processing centers, branches and business outlets of postal and express delivery companies will strive to resume operation by early to mid-June," he said.

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