News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News". |
31 May 2010
An intriguing sign of the times for China's ports and shipping sector emerged in March, when Shanghai and Ningbo-Zhoushan, the two largest ports in the country, which are traditionally seen as bitter rivals, announced they were setting up a CNY100mn
(US$14.6mn) joint venture to capitalise on opportunities in the domestic
shipping sector. We believe this new spirit of cooperation indicates a
significant change in the industry. After over a decade, breakneck
export growth may be slowing, and both ports seem to have realised that
further increases in their container-handling capacities may no longer
be required. The joint venture suggests they have detected a new
opportunity in domestic, river-based shipping, particularly in the
Yangtze Delta.
It is clear that the Chinese macroeconomic environment is changing, and
the ports and shipping sector needs to adapt. We note that growth, which
slowed during the global recession in 2009, is again surging ahead in
the first half of 2010, so much so that there is a real danger of
overheating. We expect that the Beijing authorities will tighten credit
in the second half of this year, provoking a controlled ´double dip´
recession with growth slowing again in 2011. The key risk concerns the
authorities´ ability to fine-tune the economy; any overreaction or
combination with renewed global financial worries could turn the
expected dip into more of a plunge. An important point is that the
Chinese economy is undergoing a qualitative change during this
transition: as the economy matures export-led growth is moderating and
the country´s foreign trade is rebalancing. Imports are now more dynamic
than exports. Indeed, over the next five years we expect import growth
to run at above-GDP levels, while exports will lag behind GDP. Strong
volume increases are being notched up across China´s main ports this
year. However, over a oneto two-year period we expect the growth of
cargo handling to drop from the high double digits to low single digits,
reflecting the combined effect of the expected double dip recession and
the longer-term rebalancing of foreign trade. At Shanghai and
Ningbo-Zhoushan, for example, this year´s tonnage growth will range from
over 15% to just under 30%. But these numbers will fall sharply to the
2-3% range in 2011, and remain moderate over the next five years.
The box sector will also lose dynamism as Chinese imports, many of them
in the form of commodities and bulk cargo, emerge as the new growth
sector. We believe China´s trade is at something of a crossroads. Up
till now foreign trade has grown at a much faster rate than the domestic
economy, a natural reflection of the way that the huge economy has been
opening up to the world. As the economy begins to mature the pace of
foreign trade growth is moderating. Our prediction is that over the next
five years foreign trade will grow at an average rate of 7.9% per
annum, on a par with the overall economy. As noted above, imports are
expected to grow slightly faster than GDP, while exports will lag a
little. This may explain why some shipping companies are now looking to
the import business as the focus of their new investment, and to the
Yangtze Delta (traditionally the main inward shipping route) rather than
the Pearl River (traditionally the main export channel).
On the whole, the risks to our shipping and ports forecast scenario are
on the downside. Our central double dip scenario is quite an undramatic
affair, and one that many emerging economies would love to suffer. It is
best described as ´fast-slow, fast-slow´ with the dip years being 2009
and 2011, when growth comes down to ´lows´, by Chinese standards, of
8.7% (2009) and 7.5% (2011). Simply put, the risk is that the 2011 low
could be significantly lower. A combination of factors could make this
happen. They could include an over-tightening of China´s monetary
policy, a sharp revaluation of the yuan, and some kind of local or
global negative shock to investor confidence.
Source: Companies and Markets