PORT COMPETITION IN CHINA Prof. Kevin Cullinane Director, Transport Research Institute, Napier University

PORT COMPETITION IN CHINAPORT COMPETITION IN CHINA

Prof. Kevin Cullinane

Director, Transport Research Institute,

Napier University

23 October 2007 ITRR Seminar 2

Presentation OutlinePresentation Outline

Port Throughput

China Trade

Background: The Economy of China

Port Competition by Region

Complications & Conclusions

Inland Mode Choice


0

5000

10000

15000

20000

1970 1975 1980 1985 1990 1995 2000 2005

Year

Rm

b (

bil

lio

ns)

-5

0

5

10

15

20

25

Per

cen

tag

e

GDP at current prices Real annual growth rate (%)

CHINA’S GDP GROWTHCHINA’S GDP GROWTH


CHINA’S REAL GROWTH IN CHINA’S REAL GROWTH IN INDUSTRIAL OUTPUT INDUSTRIAL OUTPUT

0

5

10

15

20

25

1980 1985 1990 1995 2000 2005

Year

Per

cen

tag

e


0

20

40

60

80

100

120

140

1985 1988 1991 1994 1997 2000 2003

Year

US

$ B

illi

on

s

Contracted Utilised

FDI INFLOWSFDI INFLOWS


FDI INFLOWS IN ASIAFDI INFLOWS IN ASIA



Port Throughput

China Trade




Inland Mode Choice


0100200300400500600700800900

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

US

$ b

illi

on

Exports Imports

CHINA’S INTERNATIONAL CHINA’S INTERNATIONAL TRADETRADE


Commodity Description US$ billion

Electrical machinery & equipment 172.32

Power generation equipment 149.72

Apparel 65.90

Iron & steel 34.12

Optics & medical equipment 25.48

Furniture & bedding 22.36

Toys & games 19.12

Inorganic & organic chemicals 19.06

Footwear & parts thereof 19.05

Plastics 17.78

Commodity Description US$ billion

Electrical machinery & equipment 174.84

Power generation equipment 96.37

Mineral fuel & oil 64.10

Optical & medical equipment 49.97

Plastics & articles thereof 33.32

Inorganic & organic chemicals 32.83

Iron & steel 31.91

Ore, slag, & ash 26.01

Copper & articles thereof 12.90

Vehicles & parts other than rail 12.31

CHINA’S TOP IMPORTS CHINA’S TOP EXPORTS

20052005


CHINA’S TOP IMPORT ORIGINS

CHINA’S TOP EXPORT DESTINATIONS

Country/Region US$ billion

Japan 100.45

South Korea 76.82

Taiwan 74.68

United States 48.73

Germany 30.72

Malaysia 20.10

Singapore 16.52

Australia 16.19

Russia 15.89

Thailand 13.99

Country/Region US$ billion

United States 162.90

Hong Kong 124.48

Japan 83.99

South Korea 35.11

Germany 32.53

Netherlands 25.88

United Kingdom 18.98

Singapore 16.63

Taiwan 16.55

Russia 13.21

20052005



Port Throughput

China Trade



Other Influential Factors & Conclusions

Inland Mode Choice


GROWTH IN CHINA’S GROWTH IN CHINA’S CONTAINER THROUGHPUTCONTAINER THROUGHPUT

0

10

20

30

40

50

60

70

80

1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Mil

lio

n T

EU

s


Port 2005 2004 2003

Singapore 23.20 21.34 (2) 18.10 (2)

Hong Kong 22.43 21.99 (1) 20.10 (1)

Shanghai 18.08 14.55 (3) 11.28 (3)

Shenzhen 16.20 13.66 (4) 10.60 (4)

Busan 11.84 11.50 (5) 10.40 (5)

Kaohsiung 9.47 9.71 (6) 8.84 (6)

Rotterdam 9.30 8.30 (7) 7.10 (8)

Hamburg 8.10 7.01 (8) 6.14 (9)

Los Angeles 7.50 7.32 (9) 7.18 (7)

Long Beach 6.70 5.78 (10) 4.69 (13)

WORLD CONTAINER WORLD CONTAINER THROUGHPUTTHROUGHPUT



Port Throughput

China Trade




Inland Mode Choice


Internal DistributionInternal Distribution

CharacteristicsModes

Truck Rail Barge and coastal ship

cost high low low

market coverage point-to-point terminal-to-terminal

terminal-to-terminal

speed fast slow-moderate slow

schedule casual fixed fixed

damage low moderate-high low-moderate


Disadvantages ofDisadvantages of Truck Haulage Truck Haulage

Poor quality highwaysPrevalence of non-ISO containersShortages of dedicated container haulage

companiesShortages of tractor and container unitsMany small operators


Disadvantages ofDisadvantages of Rail Haulage Rail Haulage

Old technology and poor train facilitiesPoor quality railway infrastructureInadequate ICDsNetwork priority given to military, coal,

passengers, rather than containersThe prevalence of non-ISO containersThe poor quality of the tracking systemInadequate softwareNo effective competition


Modal SharesModal Shares

85%

13%2%

Truck

Water

Rail



Port Throughput

China Trade




Inland Mode Choice



Top Ten Container Ports in China in 1998Top Ten Container Ports in China in 1998

0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000

Zhuhai

Ningbo

Zhoushan

Dalian

Xiamen

Guangzhou

Tianjin

Qingdao

Shenzhen

Shanghai

0 5 10 15 20

TEUs (Millions)

Dalian

Xiamen

Guangzhou

Tianjin

Ningbo

Qingdao

Shenzhen

Shanghai

Top Eight Container Ports in China in 2005Top Eight Container Ports in China in 2005

NORTH - BOHAI BAYNORTH - BOHAI BAY


Competition FactorsCompetition Factors

Proximity to Beijing Access to traditional industry sector in

Liaoning province Presence of major international container

handling companies in competing ports Poor inland transport links except for Tianjin Sea distance and time to Tianjin Air freight potential at Tianjin Political preference for Tianjin

CENTRAL EASTERNCENTRAL EASTERN SEABOARDSEABOARD


Historic Throughput at Shanghai Port

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998

Year

TE

U (

Millio

ns)

)

Imports Exports


Container Throughput for Shanghai and Ningbo

0

2

4

6

8

10

12

1997 1998 1999 2000 2001 2002

Year

TE

U (

Mil

lio

ns)

)

Shanghai Ningbo


Annual Growth Rates in Container Throughput for Shanghai and Ningbo

0

10

20

30

40

50

60

70

1998 1999 2000 2001 2002

Year

Gro

wth

Ra

te (

%)

Shanghai Ningbo


SCT

WAIGAOQIAO PHASE 1~4

YANGSHAN TERMINAL

NBCT & BL2CT

BL3CT

HANGZHOU BAY BRIDGE


YANGSHAN DEEPWATER YANGSHAN DEEPWATER PROJECTPROJECT

Total Investment = $US 40-50 billion Duration = 20 years 27.5 kilometres from Shanghai 31 kilometre bridge Completed by 2020 52 berths Capacity = 25m TEU/Year Area = 20-22 square km Maximum Draft = 14.5 – 15m Depth of Channel = 15.5m


YANGSHAN PHASE 1YANGSHAN PHASE 1(ARTIST’S IMPRESSION)(ARTIST’S IMPRESSION)


YANGSHAN PHASE 1YANGSHAN PHASE 1(OPEN FOR BUSINESS)(OPEN FOR BUSINESS)


DONG HAI BRIDGE DONG HAI BRIDGE PROJECTPROJECT

Links Yangshan with mainlandCost estimated at US$ 11.5bn4-5 years to complete – 200531.3km long31.5m wide with six lanesShanghai Municipal Government

responsible for all investment




HANGZHOU BAYHANGZHOU BAYBRIDGE PROJECTBRIDGE PROJECT

Construction started in 2003In service in 2009Total length = 36 kilometres6 lanesBoth sides of bridge connect

directly with expressways – no congestion problems


JIAXIN

Cargo through Ningbo Cargo through Shanghai.


SOUTHERN CHINASOUTHERN CHINA

Main Container Ports in Main Container Ports in the PRDthe PRD


Hong Kong's Total (Inward and Outward)Freight Movement

0

50

100

150

200

250

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Year

Mil

lio

n T

on

ne

s

Seaborne River Road Rail Air


Modal Split in 2005Modal Split in 2005

Seaborne: 85%

Road: 14%

Road has stabilised

Water has grown tremendously

Rail continues to decline

Air continues to increase – now carries 4 times that of rail


FEU Transport Costs FEU Transport Costs (Dongguan to Long Beach)(Dongguan to Long Beach)

Via Hong Kong (US$)

Via Yantian (US$)

Cost Differential

(US$)Trucking to main terminal 360 166 194Declaration fee 50 30 20Documentation fee 14 14 0Basic oceanfreight charge 1160 1210 -50Destination delivery 740 740 0BAF 230 230 0Origin receiving Charge N/A N/A 0Terminal handling charge 366 269 97

Total 2,920 2,659 261


Projected Container Throughput for the Port of Hong Kong

16.2

29.5

40.135.7

24.9

0

5

10

15

20

25

30

35

40

45

1999 2005 2010 2015 2020

Year

Mill

ion

TE

Us


PORT CARGO PORT CARGO FORECASTSFORECASTS

Forecast average annual growth rate for PRD cargo base is 8.6% to 2020

Forecast average annual growth rate for Hong Kong port is 4.4% to 2020

This implies the market share of Shenzhen will grow from 16% as of 1999 to 55% by 2020



Port Throughput

China Trade




Inland Mode Choice


What China DoesWhat China Does(Policy Decisions)(Policy Decisions)

Infrastructure Improvements The ‘Go West’ Policy Yangszte River Improvements Deregulation and privatisation

New port clusters announced in Xiamen and Zhuhai

If trade relations are restored between Taiwan and China Taiwan will take all of the North China trade

and 65% of the South China trade that moves through Hong Kong



Impact of China’s accession to the WTO Changes to customs procedures etc Impact on FDI and trade Port Law 2004 Opening up of port and logistics market

Price vs Efficiency – you get what you pay for! Larger Containerships

Maintain load factors Load centring/ Hub and spoke systems

Increased concentration in liner shipping Vertical integration by liner shipping

Dedicated terminals Whole ports

Role of 3PLs in port choice

BUSINESS STRATEGYBUSINESS STRATEGY


Become more price competitive Improve service quality Expand service range (logistics parks

etc) Reap economies of scale

Greater efficiency Lower prices

Globalisation and concentration of port operations

Diversification into logistics

PORT SECTOR PORT SECTOR RESPONSERESPONSE



Port Throughput

China Trade




Inland Mode Choice


China economy will continue to grow and trade expand – demand increasing

Infrastructure investment and improvements in ports and inland logistics will continue – fuelled by WTO accession, FDI, technology & knowledge transfer

Continued service rationalisation and the deployment of large containerships


Reinforcement of load centre concept and expansion of ports

Hinterlands will increasingly overlap and ports compete for the same cargo base

Greater industrial concentration in ports and in shipping sectors is a complication (economic vs commercial benefits, as is vertical integration into logistics (capturing the cargo)

Thank You

Documents

PORT COMPETITION IN CHINA Prof. Kevin Cullinane Director, Transport Research Institute, Napier University