Industry players say the segment is set to grow further with rapid industrialisation across Asia. VINCENT WEE reports.

Compared with the more high-profile and consumer-driven express freight business, the project logistics segment is a part of the logistics industry that is not often seen or understood.

Often described as the big boys' toys part of the business, it basically deals with the full-size version of all the building blocks and other big construction stuff that boys play with when they are kids. It plays a critical part in building the infrastructure in many parts of developing Asia, helping to transport massive pipes, reactors and other structures to often inaccessible parts of the region. This requires a high degree of customisation as well as inventiveness to circumvent some of the obstacles faced.

The business itself is not kids' stuff, although it is a big boys' club with just some 25 to 30 players able to handle the scale of projects involved. While the exact figure is uncertain, it is estimated that the market for industrial projects in Asia-Pacific is worth about US$150 billion a year. According to major player DHL Global Forwarding's vice-president of industrial projects Rufus Frere Smith, this will translate roughly into US$10 billion in freight spend per year.

'The project/heavy lift market has been enjoying a major boom in recent years due to rapid industrialisation in China and Southeast Asia,' said Mr Frere Smith. 'Furthermore, countries such as Japan and Korea have benefited from the expansion in the energy and resource sector in the region and elsewhere, particularly in the Middle East (while) Chinese companies drove resource development in Africa and the Middle East on the back of rampant demand for commodities and energy (and) China is also now a major exporter of engineering and construction expertise in sectors such as power, transport and industrial infrastructure,' he added.

And China itself is emerging as a major player in power plants of up to 600MW in size plus industrial and transport infrastructure with one power station being built per week on average, Mr Frere Smith said.

He pointed out that while there are not that many huge infrastructure projects compared with other countries in the region, Singapore is a major beneficiary of the oil and gas market boom from being the world's leading producer of oil platforms, rigs and floating production, storage and offloading vessels (FPSOs).

Meanwhile, Australia drives the development of mining projects, especially in Southeast Asia, Australasia and Papua New Guinea, and is also very active in the oil and gas sector, particularly in Western Australia, while India is a the next big market for industrial project demand.

Other Asian countries such as Malaysia, Thailand, Philippines and Indonesia also feature in the fabrication of pre-modularised industrial plants for industrial purposes in the petrochemical and upstream oil and gas structures as well as in power generation. 'Asia is truly the workshop for projects globally and is emerging as the dominant player in this sector,' said Mr Frere Smith.

Big markets for petrochemicals are in the Middle East where there are more than US$200 billion of confirmed projects where Asian countries are believed to control at least 50 per cent of the market.

'There are many hundreds of billions of dollars being spent on project activities,' said BDP Project Logistics CEO Peter Huels. 'Activity is strong everywhere, but certainly China is the largest market in the Asia-Pacific Region. It also depends on the vertical markets/industries which are extremely busy in certain markets. For example, mining is concentrated in Australia and Indonesia, oil/gas energy projects tend to happen in areas where there is exploration going on, such as India, Thailand, Indonesia,' said Mr Huels.

With relatively smaller and fewer infrastructure projects, the bulk of the market for this business is not in Singapore, although all the major players run their operations from here.

'There are not many actual projects being built in Singapore, aside from some activity on Jurong Island and a few plants for high-tech industries. However, many project management tasks are being managed and run out of Singapore,' added Mr Huels.

With Singapore as a major hub for the upstream oil and gas sector and for petrochemical development, overseas engineering firms are now executing more projects from Asia, according to DHL. For example, US engineering firms may consider executing major projects from places such as Singapore and DHL is involved in two of these. 'Singapore also controls the provision of specialised offshore marine equipment in Southeast Asia. Increasingly we see a trend for global companies to headquarter their offices in jurisdictions such as Singapore,' said Mr Frere Smith.

'Singapore has an extremely solid position as a business hub in the region, offering the advantages of a business-friendly environment, access to a highly skilled workforce, tax-friendly policies, and important geographical position being located almost dead-centre in the middle of the project activities in the wider region since BDP Project Logistics is very active in markets such as China, India and the Middle East,' said Mr Huels.

Looking ahead 'there is the possibility of some market slowdown in terms of projects being put on hold but - in general - the outlook for Asia-Pacific is very bright in terms of market volume for projects,' said Mr Frere Smith. 'Future areas of growth are in demand for energy and power, industrial infrastructure in developing economies,' he added.

'The current financial crisis has the almost perverse effect of being positive for project logistics activities due to the stimulatory actions by many governments to boost infrastructure spending,' said Mr Huels.

He pointed to government stimulus measures as possibly even helping to boost demand, with China's recent announcement of a massive spending programme targeted at improving rail, roads, ports, power and energy infrastructure and India's 500 billion rupee (S$15.3 billion) programme as examples.

'So the market is not only huge, it is growing as governments try to offset slowing economies with increased public spending and more liquidity. There are literally thousands of ongoing projects or projects in the pipeline in nearly every market in Asia,' he said.

'In addition, while the prices of many commodities have contracted sharply in recent times, we foresee the commodity cycle returning quite strongly over the medium term and long term. The growth story for China and India is still intact, populations are still growing, and many commodities are becoming scarcer or are experiencing supply-side issues. As a result, we have targeted the mining industry and the oil/gas/energy sectors as strong growth industries. The alternative energy markets such as wind or biofuels will continue to experience strong growth (and) this will be right across the region,' Mr Huels added.