Keeping up with demand

Keeping up with demand

When China's exports began increasing at double-digit rates, everyone wondered when the country's ports would be overwhelmed. The thinking was that there was no way China could build and expand enough marine terminals to keep up with demand.

The experts, however, are being proved wrong. Ports such as Shanghai, Yantian, Qingdao, Tianjin, Ningbo and Hong Kong are accommodating this year's peak-season cargo volumes without major problems.

October normally is the height of the peak season for holiday exports from China. This month, carriers have been filling their ships without the schedule disruptions and congestion that normally characterizes the peak season at Chinese ports. "I am not aware of any specific actions that had to be taken by carriers or ports to deal with the heavy season volumes," said Peter Talbot, director of operations at China Shipping Container Line.

The smooth operation of the ports is especially encouraging because of the unexpected surge in growth at ports such as Shanghai, Ningbo and Qingdao in central and northern China. Until recently, Hong Kong and the Shenzhen ports of Yantian, Chiwan and Shekou dominated China's trade with the U.S.

During the past two years, factories that produce consumer goods have popped up throughout central and northern China, especially in the Yangtze River corridor near Shanghai. Ports in those regions have experienced phenomenal growth. Shanghai will handle about 11 million TEUs in 2003, an increase of 28 percent over last year. Last year the port posted a 35.8 percent increase, making it the world's fourth-busiest container port.

Ningbo, just south of Shanghai, handled 1.9 million TEUs in 2002, a 53.7 percent increase over 2001. Ningbo this year will exceed 2 million TEUs. Similar growth is occurring in Qingdao in northern China. Qingdao last year handled 3.4 million TEUs, an increase of 29 percent over 2001.

The Yangtze River corridor from Shanghai to Chongqing, an inland city of more than 30 million people, is the epicenter of manufacturing growth in China. The Chinese government is encouraging investment in ports, inland infrastructure and manufacturing throughout the Yangtze corridor.

Trans-Pacific shipping lines are responding, not only with increased liner capacity from Shanghai to the U.S., but with feeder services and overland transportation services within China. "Carriers that develop their multimodal capabilities will be at an advantage," said Frank Caradonna, president of consulting firm Pegasus Ltd. and a former shipping executive.

China recently completed the $25 billion Three Gorges Dam on the Yangtze River. In addition to the increased electrical power it will supply to the region, the project has resulted in deeper water for the 26 river ports along the Yangtze. This will be a major boost for the Port of Shanghai, because larger feeder vessels will be able to carry cargo from the upriver production centers to Shanghai, near the river's mouth. "Completion of the Three Gorges Dam makes opportunities possible that didn't exist before," said Jon Monroe, a transportation consultant who this month led a trade and investment delegation to the Yangtze River region.

Cargo shipped by river from the ports on the Yangtze accounted for less than 1 million of the 11 million TEUs that Shanghai handled last year. With completion of the dam and infrastructure development projects planned for the region, the Yangtze River Transportation Bureau projects that freight traffic on the river will grow at 3.7 percent a year. By 2009, the freight volume will be five times greater than it is today, the bureau projects.

Shanghai is working feverishly to complete construction of a $5 billion port expansion project about 20 miles downriver from the city. The Yangshan deepwater port will eventually have 25 berths. Monroe said initial phase-in of the facilities could begin in 2004, instead of 2005 as originally scheduled.

The ports in central and northern China are growing more rapidly than the southern ports, but those regions still have a long way to go before overtaking South China ports. Hong Kong and the Shenzhen ports account for about 65 percent of China's containerized exports, with the Shanghai-area ports capturing about 25 percent and the far northern ports of Qingdao, Tianjin and Dalian accounting for about 10 percent.

Just when it appeared that Hong Kong was reaching its capacity, the world's busiest container port opened a new facility last summer at Terminal 9. The first berth, operated by Hong Kong International Terminals, began operation in July. The second berth, operated by Modern Terminals Ltd., is scheduled to open at the end of this month. Four additional berths will be phased in between December 2003 and September 2004.

Terminal 9 is the largest container facility ever built in Hong Kong. When completed, it will increase the port's annual capacity by 2.6 million TEUs. Hong Kong already is studying the feasibility of developing another container facility, to be called Terminal 10. Hong Kong last year handled 19.1 million TEUs, a 6.6 percent increase over 2001. It should surpass 20 million TEUs this year.

The Shenzhen ports in South China continue to grow rapidly. Shenzhen last year handled 7.6 million TEUs, a 50 percent increase over 2001. The ports, which serve the eastern Pearl River delta, are projected to exceed 9 million TEUs this year.

The Shenzhen region east of the Pearl River is becoming congested. If South China is to compete with central and northern China for a growing share of the export market, the western Pearl River Delta must be developed. Also, transportation links must be developed from that region to Hong Kong, the port of choice for cargo originating in the west Pearl River Delta. Construction of the Shenzhen Western Corridor bridge, along with completion of Terminal 9, should produce another spurt of cargo growth through Hong Kong.

While China has been able to accommodate cargo growth during the current peak season, so have the major West and East Coast ports that dominate the China-U.S. trade. Marine terminals in Seattle-Tacoma, Oakland, Los Angeles-Long Beach, Savannah, Norfolk and New York-New Jersey report little congestion at the gates or in the container yards.

One reason the terminals have done so well is that this year's peak season has not been a normal peak. Container volumes have not been weak, but neither have they jumped dramatically as they normally do this time of year. According to the Pacific Maritime Association, containerized imports through the West Coast increased 9.1 percent in the first eight months of the year. Containerized imports from Asia have grown at a faster pace at the major East Coast gateways, but volumes there also leveled off last summer.

Marine Terminals Corp., which handles about 27 percent of the container volume on the West Coast, saw cargo volumes at its facilities hit a plateau in late July and remain at that level throughout the summer and fall, said Doug Tilden, chief executive.

The mild peak season has kept U.S. ports operating smoothly during the summer and fall. "We see absolutely no problems. Terminals are fluid. There has been only a slight problem with certain intermodal connectors in the southwest," said China Shipping's Talbot.

Last month's retail sales figures in the U.S. indicated that consumer spending has picked up. Tilden said that if consumer spending stays strong through the holidays, retailers will have to replenish their inventories, so the traditional slack season in the winter months may be busier than usual for shipping lines that carry cargo from China.