Shipping
SHANGHAI PUSHES AHEAD WITH DEEPWATER PORT PLAN
June 8, 2016

China’s sub-7% GDP growth rate in 2015 took a toll on the busiest port in the country (and the world), but the Port of Shanghai isn’t letting that hinder its vision to continue to be the world leader.

 

“It is true that the slowdown of the Chinese economy has affected the port,” says an industry expert at the Port of Shanghai who declined to be named. “However, because of variations in currency exchange rates and freight rates, the effect on imports and exports is comparatively less significant than the effect on foreign trade turnover.”

 

In 2015, the port handled a total of 513 million tonnes of cargo, which was a year-on-year drop of 4.8%. But containerized throughput actually grew, having increased 3.5% to 36.5 million TEUs.

 

The port is pressing ahead with the development of its Yangshan deepwater port, which mostly handles vessels on the European, Mediterranean, Eastern US, South American and African trades. According to the source, construction of the Phase 4 infrastructure is nearly complete, with part of the equipment installation to begin next month. Trial operations are expected to start at the end of the year or the beginning of next year.

 

“Almost 50% of Yangshan’s current container cargo is transhipment cargo and 10% is international transhipment cargo,” he says. “With a more efficient operation and environment, we hope to be able to attract even more international transhipment cargo and derive some extended services from that. This can reduce the direct effects of economic slowdown in the hinterland areas.”

 

Self Photos / Files - SIPG

 

Despite the signs of an overall slowdown, economic growth is still relatively high and the Yangtze Delta region is still one of the most prosperous areas in the country, which has benefited logistics providers such as C.H. Robinson, which has offices in Hangzhou, Nanjing, Ningbo and Shanghai.

 

“We saw moderate yet fulfilling business growth in the Yangtze Delta area in 2015,” says Wayne Chang, regional manager of global forwarding at C.H. Robinson. “This achievement, in part, is attributed to the economy of both China and the Yangtze Delta region, which maintained a consistent amount of growth.”

 

According to Chang, the company’s performance in the region was also because of the strategy it employs.

 

“With our asset-light business, we provide a holistic solution from factory to delivery through data analysis and system optimization,” he says. “We help improve efficiency and reduce costs for our customers’ supply chains. As a result, we have many loyal customers who have long-term relationships with us and continue to secure new business and grow our customer base. These all contributed to C.H. Robinson’s growth in 2015.”

 

In the months to come, the growth in throughput at Shanghai’s port will be more reliant on transhipment, according to the source, with the hinterlands along the Yangtze River Delta being a prime cargo source.

 

One of the challenges the port is facing is the upsizing of ships. Vessels from the major shipping lines in the 18,000+ TEU range now regularly call at Yangshan. The source says that, while container vessels have been getting bigger and bigger for a long time, this has been happening particularly fast over the last five years.

 

“This causes problems for many ports, including Shanghai,” he says. “One of the more serious problems is that we now have to deal with a new round of equipment upgrades and dredging before we’ve even had time to digest the previous investment. In addition, facilities that are tailor-made for megaships are wasted on relatively small ships most of the time.”

 

Although the port and shipping industries are both high-investment businesses, the source argues that the situation is even more difficult for ports because they are highly limited by their location.

 

“Once a port has been put into operation, it will require considerable running and financial costs,” he says. “With ships, you can terminate the lease, sell them, scrap them, put them into storage or redeploy them to reduce your losses. Because of that, ports will always see the importance of upgrading their capabilities to handle megaships, but it must be done on a cost-effective basis.”

 

Another potential problem is congestion. Although C.H. Robinson wasn’t overly affected by this in 2015, Chang says that if Shanghai is to become more competitive in the market while having a global view, what it needs is higher operational efficiency.

 

“That’s the bigger issue,” he says. “For instance, as the import business grows day by day, in order to meet the needs of the domestic consumer market, there is still room for improvement in terms of simplifying the customs clearance process and elaborate governmental regulations compared with other international seaports and airports.”

 

But the source at Shanghai Port says that that’s not as easy as it sounds, and that there are other factors to consider.

 

“As economic growth slows, can ports like us rely on technological innovation and process optimization to increase efficiency and lower costs?” he says. “The downturn of the shipping business has a big impact on ports. If fuel prices rebound sharply, there will be both positive and negative effects. While cargo volumes might go back up, the cost structure of the port and shipping businesses will change. One of the challenges is to work out how to derive revenue from the new structure.”

 

In the year ahead, the Port of Shanghai source says that, based on what he has observed in terms of trade, it’s hard to say for certain whether there will be any positive change to the shipping industry, particularly in the coming three to five months.

 

“After the new Panama Canal opens, there will be quite a noticeable change to US East Coast routes, and the new Suez Canal could also come up with ways to attract shipping companies,” he says. “As for the upsizing of vessels, we think that will basically stop. Most shipping lines will not choose to have ships with even larger capacities anymore.”

 

In this evolving landscape of containerized shipping, it’s clear that all those who are involved have their work cut out for them.

 

“In order to provide a better service, the industry needs to lower the cost of logistics in the supply chain, optimize the distribution of profits and improve the cooperation between ports and shipping lines,” the source says. “Only then will we be able to see some improvement.”

 

 

By Jeffrey Lee

Asia Cargo News | Hong Kong