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Ports are lashed in trade turmoil

By Tong Hao (China Daily)
Updated: 2009-07-06 07:57

A container is transported by a gantry crane at a container port in Shanghai. Ports in China handled 546 million tons of cargo in May, up 5 percent year-on-year. [Bloomberg News]

Even though the pace of cargo throughput at China's ports has picked up recently due largely to bulk imports, it is unlikely to overtake last year's as foreign trade remains in the doldrums.

Ports in China handled 546 million tons of cargo in May, a 5 percent increase from a year earlier as domestic trade grew 5.1 percent to 364 million tons and exports by 4.7 percent to 182 million tons, according to statistics from the Ministry of Transport (MOT).

"Major reasons for the growth were increases in import of bulk cargoes like iron ore and crude oil," said Liu Bin, director of the Institute of World Economy at Dalian Maritime University.

MOT figures show ports handled 55.5 million tons of imported iron ore in May, a 24.6 percent increase year-on-year.

Imports also included 49.2 million tons of coal and 13.8 million tons of crude oil in May, increases of 10.8 and 5.1 percent respectively.

But the momentum is unlikely to continue as slowly rising prices and expanding inventories of raw materials will slow imports of bulk commodities in the coming months, analysts said.

"Imported iron ore and crude oil increased because their prices were low during the past five months. Shipping operators also lowered shipment charges," Liu said.

Statistics from MOT show the price of iron ore dropped 42.4 percent from January to May from the same period the year previous.

"Now, due to a more optimistic outlook for the world economy and bargaining over iron ore, prices of oil and iron ore are likely to rise. I believe shipping operators will also increase charges. Import of these cargoes will as a result decrease," said Liu, also pointing to high commodity stockpiles.

Ports in China handled 7 billion tons of cargo in 2008, a figure analysts say this year has no hope of equaling due to the steep decline in foreign trade

While cargo volume seems to have stabilized and increased somewhat, the performance of container throughput, which relies heavily on exports, is still dismal.

According to customs data, China's exports dropped 26.4 percent in May and 21.8 percent in the first five months this year.

Container volume dropped 9.7 percent year-on-year to 9.75 million twenty-foot equivalent units (TEUs) in May, hitting the nation's export-oriented ports hard.

Containers handled in Shenzhen Port dropped 20.82 percent to 6.67 million TEUs during the first five months.

In April, Shanghai Port, the largest in China, registered a 18.5 percent drop in container volume to 1.96 million TEUs, according to its latest statistics.

The port's authorities said in May it might miss the full-year target of 29 million TEUs set earlier this year.

Guotai Junan Securities Co estimates cargo handled at Shanghai Port will decrease 5 percent in 2009.

"Containers have a closer tie to exports. Decline of containers shipping is a reflection of gloomy overseas demand," said Liu from Dalian Maritime University.

"China's ports handled 126 million TEUs in 2008. It will be quite satisfactory if the figure reaches 100 million this year. I think the sector won't recover until 2010," he said.

Ji Min, an analyst with Merchants Securities, estimates container volume will drop about 10 percent in 2009 but is optimistic about the future.

"The rate of decrease is getting smaller. I guess the sector will recover in the fourth quarter of this year," the analyst said.

Related readings:  China trade falls in June but decline less severe  Ministry confident on China's exports in post crisis era  Ports pin hopes on rising domestic trade  Yangtze river ports see signs of recovery in cargo

Ports in northern China, less exposed to export shipping, performed better than those in the south in the first five months.

Cargo through Yingkou Port of Liaoning province and Qingdao, Rizhao and Yantai Ports in Shandong province had increases ranging from 5 to almost 13 percent in the first five months.

In contrast, Shenzhen Port fell more than 18 percent and Ningbo-Zhoushan Port decreased 0.2 percent

"Domestic trade contributes 84 percent to the total at Yingkou Port, while export-oriented Shenzhen Port focuses on containers," Ji said. "Although foreign trade contributes 71 percent to Rizhao Port, one of its major cargoes is also iron ore, so it witnessed growth."

Falling exports, which analysts say will take time to rebound, may force many port operators to adjust their strategies.

Lianyungang Port in Jiangsu opened three shipping lines to Fujian and Guangzhou in May in an attempt to raise its proportion of domestic trade.

Yingkou and Jinzhou Port in Liaoning lowered charges to fight for more market share recently, but "such measures will sacrifice our profits", said Li Song, vice-president of Yingkou Port.