SWIRE JOINS P&O IN 50 PERCENT PURCHASE OF CHINESE TERMINAL

SWIRE JOINS P&O IN 50 PERCENT PURCHASE OF CHINESE TERMINAL

Hong Kong and British companies are teaming up to buy half of a container terminal in southern China with plans to more than double its capacity.

Peninsular & Oriental Steam Navigation Co. of London and Swire Pacific Ltd. said Monday they will pay HK$615 million (US$79 million) for 50 percent of the facility in Shekou. P&O will take over management Jan. 1.The Port of Shekou adjoins the special economic zone of Shenzhen about 20 miles north of Hong Kong.

The terminal has two container berths with capacity equivalent to 550,000 20-foot equivalent units (TEUs) a year. It is forecasting output this year of between 80,000 and 100,000 TEUs.

Swire and P&O acquired their stake from China Merchants (Holdings) Ltd., the mainland's local flagship conglomerate, and China Ocean Shipping Co., the state-owned steamship line.

China Merchants will retain 32.5 percent and Cosco 17.5 percent with P&O and Swire each holding 25 percent.

"The project represents P&O's first major step into management and ownership of materials-handling facilities in mainland China and the first in a series of planned acquisitions," said Lord Sterling, P&O's chairman.

P&O took what many in the industry described as a risky step last February when it began sailing to Shekou with a 2,700-TEU ship, the first direct container service to the port. It connects to the thrice-weekly Far East- Mediterranean-Europe service.

Last August, it put a 3,000-TEU vessel into Shekou, handling 1,881 TEUs for P&O and the Maersk Lines unit of Denmark's A.P. Moller group.

Plans call for an expansion of Shekou's facilities to handle 1.2 million TEUs by the end of 1996.

Ian Mullen, regional managing director of P&O, said the company has an option to acquire a share in future development.

"Landfill work for berth three is almost complete and it is the intention of (China Merchants) and P&O to acquire both berths three and four," he said.

Peter Sutch, Swire's chairman, described Shekou as a good fit with Hong Kong's containerport, which is straining at the seams with double-digit growth in volume.

"I envisage that (Shekou) and the terminals in Hong Kong will cooperate closely to service the growing demand for freight-handling in southern China," he said.

That area, based on the Pearl River delta, is the fastest-growing in China, fueled by heavy investments from Hong Kong.

Shekou has a container frontage of 236 feet with draft of 39 feet adequate for ships of 50,000-gross registered tons. There is also a bulk cargo area with 13 berths.

A recent study by the Hong Kong Port Development Board said access problems hamper any big expansion. Large vessels must hit the channel at high tide, meaning they don't get to Shekou until well into its ebb cycle. This could mean a wait of 12 hours.

East of the port, water depths are as shallow as three feet as far as 3,000 feet from the foreshore. To the west and south, development is constrained by the alignment of the approach channel.

"Although this port may handle direct calls by large container vessels, capacity is unlikely to exceed 1 million TEUs by 2003 (though) it has strong potential to be a significant feeder port," the report said.