China Merchants takes Newcastle stake amid Australia trade friction

China Merchants takes Newcastle stake amid Australia trade friction

Container ship near the Port of Newcastle, Australia.

China Merchants’ purchase of a stake in the Port of Newcastle, Australia’s largest east coast port, would be its first in Oceania. However, the deal, subject to Australian review, occurs at a time of increased political and trade tension between the strong-performing Asian economies. (Above: A ship approaches the Port of Newcastle, Australia.) Photo credit:

China Merchants Port Holdings (CMPort), the Hong Kong-listed arm of the state-controlled Chinese group, paid A$607.5 million ($457.5 million) for a 50 percent stake in the world’s largest coal port that has ambitions to become a major container port serving shippers in New South Wales (NSW).

However, exporters in Australia’s highly successful wine sector, including Pernod Ricard, owner of the Jacob’s Creek, the country’s largest wine brand, and the NSW-based McWilliams Wines, have complained of serious delays at China Customs that could jeopardize forecasts for Australian wine exports to top A$1 billion in value for the first time in 2018.

Wine exporters are pressing the Australian government to resolve its issues with China to protect trade and revenues from one of its key export destinations.

The Newcastle deal extends the global port footprint of CMPort to six continents, after the February purchase of a 90 percent stake in TCP Participações, the operator of the Port of Paranaguá in Brazil, the second-largest container terminal in the country.

“The Port of Newcastle will complement the current trading network covered by the company’s port portfolio and will further generate synergies and positive long-term financial returns for the company,” CMPort said in a statement announcing the completion of the acquisition.

Newcastle — large, vacant port section available for development

The Port of Newcastle has a total land area of 792 hectares (1,957 acres), including 200 hectares of vacant port land available for development. It is aggressively seeking to overturn a clause in an agreement between the government of NSW and Port Kembla that prevents it from implementing a plan to develop a major container terminal operation.

“This arrangement, now under investigation by the Australian Competition and Consumer Commission, would see [Port Kembla] paid ‘compensation’ for every TEU handled [above a nominal threshold] if a successful container terminal is operated in Newcastle,” said Newcastle’s acting CEO Simon Gelder.

“The Port of Newcastle remains ready to move on the development of a world-class container terminal to service regional Australia.”

In 2017, CMPort’s volume increased 7.4 percent at its global container facilities to 102.9 million TEU. Profits rose 9.7 percent to $768 million. Revenue from the core ports business was up 9.6 percent to $3.4 billion.

At the results announcement in Hong Kong in March, Deputy General Manager Yan Gang said CMPort was not concerned about a possible China-US trade war, and may even benefit from such a situation.

“The loss [of business] from a trade war can be compensated by trade from Southeast Asia and Europe.

“Our home base in west Shenzhen serves a relatively small proportion [of US-bound trade] … [a trade war] might even benefit CMPort as our business mainly serves Southeast Asia and Europe shipping routes,” Gang said.

Of the total 102.9 million TEU handled in 2017, 77.12 million TEU was handled at Mainland terminals, up 7.2 percent from 2016. Ports in Hong Kong and Taiwan handled a combined 7.48 million TEU in 2017, up 8.8 percent from 2016.

Non-China facilities accounted for 18.3 million TEU in 2017, up 7.9 percent from 2016. The two star performers were Colombo International Container Terminals Limited in Sri Lanka and the Lomé Container Terminal in Togo, which saw volume surge 18.5 percent and 67.5 percent, respectively.

CMPort’s overseas terminals now contribute about 18 percent to total company volume.

The company said it expects strong growth to continue in 2018, due to the favorable global financial environment, strong global demand, and a projected 6.6 percent GDP growth rate for China’s economy.

Contact Turloch Mooney at and follow him on Twitter: @TurlochMooney.