China’s Ports to Play Fair.. with Each Other

Tuesday, November 27, 2007 12:42

In any developing economy, there is a feeling that one must take advantage of any opportunity. for China’s part money has flowed into nearly ever sector of the economy from domestic and foreign investors..

From a manufacturing perspective, the same mentality also exists. Manufacturers will cut to the bone to get business, and there are some firms who have done very well through this system in knocking down costs.

When I read the Cargonews Story (free subscription) Mainland ports take off the gloves and focus on integration I was not surprised to learn that the ports themselves have also been agressively pricing and attracting business from neighboring ports.

The bruising rivalry between ports in the Yangtze River Delta – most notably that between Shanghai and Ningbo – is over, and the focus is now on integration and quality rather than boosting box numbers.

It is something that is prevalent in the trucking, warehousing, and other areas of logistics, however as few manufacturers or traders operate at this level it is a problem that many would not see DIRECTLY on a regular basis.

I say directly, because there are tons of indirect costs that result, and some of these costs are why we see logistics account for 20% of GDP in China vs. less than 10% for US/ EU.

Through our recent research on the Yangtze, we ran into a lot of cases where Shanghai port had investments in upstream ports, and at first I thought it a bit odd. We were told of the “synergies” being created and how ports were trained by the Shanghai Port officials… which made sense at the time, but apparently that wasn’t the whole story.

“It is quality instead of just quantity that should be the goal of Shanghai. It’s high time for Shanghai and other delta ports to improve their software environment and ocean services.” Xu Peixing, a Shanghai Port Authority director

He noted Shanghai has injected more than US$134 million in port facilities in Wuhan, Chongqing, Anqing, Yangzhou, Nanjing and Nantong over the past two years and Ningbo  is no longer a staunch rival.

Xu pointed out that Shanghai and Ningbo were jointly investing in the fifth-phase construction of Longtan port in Nanjing.

In the end, this integration and collaboration should have a positive impact on the shipping industry, and that benefit will trickle through to the manufacturing community as well.

The volumes of containers and break bulk items going through the various river and sea ports have been growing at a rapid pace, and that will only continue if everyone looks to the long term and works together.

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4 Responses to “China’s Ports to Play Fair.. with Each Other”

  1. Chris Devonshire-Ellis says:

    November 27th, 2007 at 9:15 pm

    Ningbo is an excellent port. Has deep water facilities that Shanghai doesn’t really possess. We have just opened an office there now giving us three in the region – but why isn’t Nanjing and Zhejiang taking off ?

  2. Rich says:

    November 28th, 2007 at 12:15 am

    Chris,

    yeah, Ningbo makes a lot more sense actually as the port is a natural one and doesn’t need dredging on a frequent basis.

    For Nanjing, Taicang, and Zhangjiagang are seeing a lot of activity in those cities on the container side, and as Zhangjiagang brings in more chemical investment I am sure you will see more activity there.

    There will definately be a push up river, but as we have covered before, there are 24 hurdles above the water (bridges) in the way of the big ships… and a number of spots where even the medium sized ships are having trouble with water levels (see post last week).

    R

  3. Chris Devonshire-Ellis says:

    November 28th, 2007 at 10:34 am

    THE port to watch isn’t Zhangjiagang. It’s Lianyugang, also in Jiangsu. That port, along with Tianjin, has rights to ship fully documented via Mumbai and on to Bandar Abbas (Iran) then through to Astrakan (Caspian Sea), then through the Volga Straits up via Moscow and St. Petersburg through to Northern Europe. This, Russian brokered deal, shaves 50% off the current time it takes for Chinese goods to reach the EU via the Suez (10 days instead of 20) and costs an estimated USD500 less per container. THAT is the deal you should be writing about.

  4. Rich says:

    November 28th, 2007 at 11:01 am

    I read some news on that recently, and agree about Lianyugang’s potential, but had not had time to get into that agreement (buried in a freight analysis right now for 20 cities via 3 gateways… OH THE FUN!).

    Having met with both groups, I think both have a “bright future” as they say. For ZJG it is a little more tangible for me right now as I have worked in the area (although I don’t know anyone shipping through either at this point) and have cut through the smog to see that chemical investments are quite interested, and there is potential for some real container traffic as well.

    Were Suzhou and Zhangjiagang to work more closely it would be to the benefit of ZJG as Suzhou has the green lane, and I am sure they would find a way to extend that into ZJG’s new logistics zone.

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