The ride of a lifetime

Recently shipbroker Clarkson proclaimed the current shipping boom was the best on record since 1774. Back in the late eighteenth century transatlantic voyages from the New World to Britain and France made shipping a hugely profitable business. These days galleons have been traded in for containerships and the cargo origin has shifted east to Asia, specifically China,the manufacturing powerhouse of the world.

The pace of port development in China has been remarkable especially post World Trade Organisation accession in 2001. Indeed, it is arguable that the Communist nation is one of the few states in the world that could have pulled off such a dramatic coastal catharsis.

Ten years ago there was just one Chinese port handling more than a million teu a year: Shanghai.This year there is likely to be 10 ports – excluding Hong Kong – handling in excess of 1m teu.

The container throughput of Chinese ports in 1995 was less than 5m teu, only a fraction of Hong Kong in that year. In 2001, Chinese container traffic of approximately 27m finally overtook Hong Kong. Even senior politicians a decade back had no inkling of the export growth. “Container capacity (in 2010) will reach 8m-10m teu,” said Xu Kuangdi,the then mayor of Shanghai, at the Marintec conference in 1995, the year

Shanghai handled 1.52m teu. A decade on and it handled 18m teu last year and will be number one in the world next year with Shenzhen not far behind.And there is no let up in sight for the sky-high China container numbers. Boxed cargo volumes out of China are conservatively estimated to grow by 12% a year for at least the coming five years.

Drewry Consultants’ managing director Nigel Gardiner speaking at a recent one-day UK government sponsored seminar this autumn had some astonishing statistics on both the past and future potential of container ports in China. Chinese ports’ container throughput has a compounded annual growth rate of 30% over the 15 years to 2005,thrashing the 14% fellow Asian tiger mustered in the same period. China now accounts for close to 20% of world container trade yet generates only 4.8% of world gross domestic product.

During the tenth five-year plan spanning 2001- 2005, $8.7bn was portioned off for port investments. Drewry suggest the actual figure was closer to $16.4bn thanks to massive private investment. In a bullish note Mr Gardiner suggested China needs to build another 20 additional 350 metre long box berths a year costing up to $2.5bn annually. A similar figure would be needed to expand bulk facilities.

Drewry’s figures are astonishing in their bullishness and run contrary to others in the industry for whom so-called ‘China fatigue’ is setting in. Without doubt, there are pockets of the People’s Republic where irrational exuberance and regional rivalry has led to a severe glut of overcapacity in the medium term, as Port Strategy analyses over the following pages in a regional breakdown of port developments across this gigantic country.

Likewise, there are many areas where up until recently geographic constraints had minimised container progress and are only now ripe for development. For every 50 km inland one travels in China is the equivalent manufacturing output of the whole of Thailand. In terms of size it is worth bearing in mind that the distance between Hong Kong and Shanghai (which is only half way up the country) is the same as between Genoa and Hamburg. Without doubt, that’s a lot of box potential.