CJ Logistics to build logistics centers in US with $416 mn investment

CJ Logistics Corp. and Korea Ocean Business Corporation (KOBC) will together build three logistics centers in the US with an estimated investment of 600 billion won ($416 million) to better deal with the reshaping global supply chain landscape in the post-pandemic era amid the ongoing US-China trade war.    

South Korea’s largest logistics provider announced on Wednesday that its American operation CJ Logistics America LLC and KOBC agreed last week to build three new logistics centers -- two in Illinois and one in New Jersey -- by 2027.

The logistics centers will be built on CJ Logistics-owned land totaling 360,000 square meters, equivalent to 50 soccer fields, while KOBC will provide funds for their construction, which is estimated to cost about 600 billion won.

The partners aim to break ground on the logistics centers in the first quarter of next year.

This would mark Korea’s first private-public collaboration to build logistics centers abroad. KOBC, 53% owned by the Korean government, was set up in 2018 to carry out the state’s policy mission to restore the country’s maritime transport industry.

Once the three logistics centers are built, they are expected to play a vital role in fostering the export of Korea-made products, especially those by small- and medium-sized Korean companies without their own warehouses in the US.

“The centers will facilitate Korean exporters and e-commerce companies’ advance into North America,” said CJ Logistics Chief Executive Officer Kang Shin-ho.

“We have decided to make this investment to reinforce the competitiveness of our country’s global supply chain,” added KOBC CEO Kim Yang-soo.

US AS GLOBAL LOGISTICS HUB FOR KOREAN GOODS

The Korean government’s investment to build US logistics centers with CJ Logistics comes as export-reliant Asia’s fourth-largest economy is seeking to improve the nation’s global supply chain management and agility after witnessing pandemic-driven supply chain bottlenecks during the COVID-19 crisis.

“Before COVID-19, West Coast logistics hubs like Los Angeles and Seattle were sufficient to serve as the main distribution centers in the US,” said Lee Sung-woo, director at Korea Maritime Institute. “But we saw that a black swan event like COVID-19 could cripple such a system and completely shut down global supply chains.”

The new logistics centers by CJ Logistics on the East Coast are expected to diversify Korea’s supply chains to help the country's companies better deal with a future crisis.

Especially, the new centers should lower the financial burden of Korean suppliers of high-tech components and materials to the country’s major manufacturing conglomerates that are building semiconductor and battery pack factories in the US.

Without their own distribution centers in North America, they have been grappling with high storage and delivery costs charged by local logistics centers in the US.

The centers will also speed up the shipment of Korean goods to the US. Currently, it takes at least one to two months for Korean exporters to deliver their orders to US customers directly from Korea.

RESHAPED GLOBAL SUPPLY CHAIN LANDSCAPE

After the pandemic and the US-China diplomatic and trade rows triggered the tech and manufacturing exodus from China and the US reshoring, Korea and its major exporters are also forced to re-evaluate their supply chains.

Samsung Electronics Co. will build 11 chip manufacturing facilities in Texas, and LG Energy Solution Ltd. will build its battery plant in Arizona.

As the major Korean conglomerates have chosen Southern and Eastern states for their US operations for better tax benefits, the new logistics centers to be built on the East Coast would play a critical role as main distribution centers for Korean contractors for bigger partnering companies.

Elwood, Illinois, where CJ Logistics’ new logistics center will be built, is considered a US land transport logistics hub equipped with extensive road and railway transportation infrastructure.  

The city is located near the intermodal terminals of BNSF Railway, one of the largest freight railroads in North America, and the Union Pacific Railroad, a freight-hauling railroad that operates in 23 US states.

This means CJ Logistics would be able to ship and deliver goods from its logistics center across the US in one to two days.

Another logistics center will be set up in Des Plaines, another city in Illinois, which is close to Chicago O’Hare International Airport, the largest cargo airport in the US.

The center is expected to serve as a main distribution center for Korean e-commerce operators targeting the US consumer market.

Secaucus in New Jersey, the last destination for CJ Logistics' new logistics center, is also close to New York City, the largest consumer market in the US.

BOON TO CJ LOGISTICS’ US EXPANSION

The latest investment is also expected to be a boon to CJ Logistics’ efforts to expand its presence in the US.

The Korean company expects the new logistics centers to create great synergy with its existing 57 logistics centers in the US.

It will develop the most optimized logistics operation model for the new centers that will be fitted with data and artificial intelligence-based logistics forecast systems, autonomous mobile robots, autonomous forklifts and a smart packaging system.

The Korean logistics giant under CJ Group acquired American Logistics company DSC Logistics based in Chicago in 2018. It later changed the name of its American operation to CJ Logistics America LLC after combining DSC Logistics with CJ Logistics USA and CJ Logistics Canada.

REINFORCED US-KOREA ECONOMIC ALLIANCE

The latest investment is expected to create about 500 jobs in the US, said a CJ Logistics official, projecting that it would also further enhance economic ties between the US and South Korea.

The world’s biggest economy became Korea’s biggest export destination in the first quarter of this year.

Korea exported $28.6 billion worth of goods and services to the US in the cited period, up 3.5% from the same period a year earlier. This resulted in a $7.2 surplus in Korea’s trade with the US.

According to data from the Korea Trade Statistics Promotion Institution, Korean e-commerce exports to the US jumped 23.8% on-year to $323 million in 2022.

Write to Dong-Hui Park at donghuip@hankyung.com

Sookyung Seo edited this article.