As China’s throughput volume declines and economic growth slows, container terminal operators, COSCO Pacific and China Merchants Holding International (CMHI), are expanding to overseas markets.
The country’s economic growth has declined from 14.1% in 2007 to 7.8% in 2012. So, for Chinese ports, especially those which focus on the major tradelines between Asia and North America and Asia and Europe, rapid overseas investments could prove crucial, according to Drewry Maritime Equity Research (DMER).
COSCO Pacific recently acquired assets in Greece, while CMHI has been expanding its presence in emerging markets such as Africa and Sri Lanka, giving port authorities looking to tender container terminal management concessions a choice of players.
Almost half of CMHI’s equity throughput comes from the Pearl River Delta, where growth has been stunted due to the economic environment and high labour costs.
DMER says that by 2015, CMHI’s overseas assets will account for around 20% of equity throughput, compared to negligible levels in 2011. This would leave the company’s net income attributable to its overseas assets at 12.4% of the total by 2015.
DMER adds that overseas investment will need significant capital expenditure and could stress short term cash flows. Global risks such as political environments, integration of operations and weak recovery in the US and Europe, could also challenge new operations.
