Hong Kong-based ports and shipping conglomerate China Merchants Holdings has focused its efforts on expanding overseas. Its latest major terminal to go into operation in Colombo handled a container throughput of 0.28 million teus in the first half of 2014, according to the company’s interim report. Recently, at a ceremony attended by Chinese president Xi Jinping and Mahinda Rajapaksa, president of Sri Lanka, the company also signed an agreement to invest in the development of the second phase of Hambantota Port, 240 km to the southeast of the Port of Colombo, as well as an agreement to develop an international shipping centre in the country.
“Colombo has an excellent location because it is in the middle, in between Asia and Europe or Africa,” said David Deng, vice president of China Merchants Holdings (International) Co.
China Merchants also has a brand new terminal in Lomé, Togo, under construction which the company is expecting to complete by the end of the year. It will be the biggest and deepest cargo terminal in West Africa, according to Deng.
Deng said that this move away from China reflects a change in the company’s international strategy. The company does not have any terminals currently under construction in China.
“Our China terminals are quite steady now. For example, in the 1980s, the container throughput at the Shenzhen port grew very quickly, but it gradually slowed down, and now the room for additional business and investment is decreasing,” he said. “I think Africa could be the last continent for fast growth. We’ve seen more manufacturers shift from China to Africa, but there is a lack of infrastructure, so that gives us a reason to move in.”
In China, the emphasis is on improving existing facilities. This includes upgrading capacity and productivity, as well as new IT systems and the automation of equipment.
One of the major challenges facing terminal operators in China is the size of the ships. “They just keep getting bigger and bigger,” said Deng. “Ten years ago, ships were only capable of carrying around 5,000 teus, but now they can carry up to around 20,000. There will have to be denser investment at terminals to meet the demands of these ships, and better cost-saving.”
The increasing size of ships, coupled with the natural growth of ports, means that terminals may have to relocate to more remote areas, leading to long commutes for workers and Customs officials. This was the case with the Nansha terminal in western Shenzhen about 10 years ago, Deng said.
Cooperation with rail freight is another issue. At the Shenzhen port, for example, the throughput for trains is relatively small, but service will gradually increase to two or three times a week, connecting the port to inland areas such as Changsha in Hunan province. Trains at the Ningbo port connect to areas such as Xinjiang.
“The situation is getting better, but costs are still a problem,” said Deng. “For example, you have to transport your goods from the factory to a train station, and then from the station to the port. That’s why trucking is more popular for shorter distances of up to 800 km.”
As for the months ahead, Deng said that he would remain cautious. “There is still a very big challenge in terms of capacity,” he said. “If the Chinese economy slows down and GDP growth stays below 7.5%, shipping lines might decide to cut costs and that will have an impact of terminal operations. We hope shipping lines will have a better management strategy.”
By Jeffrey Lee
Staff Writer | Hong Kong
