Problems begin to stack up for China’s ports
The days of double-digit growth and rapid expansion are over as mainland ports struggle with external and internal issues.
Three serious obstacles stand in the way of China ports’ growth in the next few years: Slowing demand for exports, poor to non-existent rail connections between ports and factories forced to move inland, and a shallow Yangtze River.
With the US and Europe struggling to work out their debt issues, and falling stock prices making everyone poorer, there is unlikely to be any mad rush by consumers to consume in the next year or so.
So demand for exports from China will continue to slow and ports will start to see some surplus capacity emerging as the boxes thin out, which in turn will affect investment in those ports. The slowdown in throughput can already be seen most markedly in South China’s ports. Growth in seven months this year at Shenzhen, Guangzhou, Hong Kong and Xiamen has been in the single figures, while Yangtze River Delta and North China ports are posting double-digit growth over last year.
And remember that the inventory bounce in 2010 led to a steep increase in export containers, so to report growth on top of that is pretty impressive.
But this pretty picture is about to change. What is clear is that the rest of 2011 won’t bring any exciting export surges. Gone are the days when the market reacted in predictable ups and downs. There was a peak season in the third quarter then volumes tapered off for Christmas and the slack season before a sharp upturn in the run up to Chinese New Year.
This year we will be lucky to see even a mild season, let alone a peak one.
And then there are the rail connections we mentioned earlier. Or rather the lack of them.
In China, the only bit of rail that the state seems interested in is the massive ego-driven high-speed system that has been characterized by massive corruption in the Ministry of Railways, shoddy workmanship, routine power failures and a deadly accident that killed 40 people.
The slower moving rail wagons are used to carry coal and ore and there is little room for containers. This is becoming a growing problem as the government forces lower value, higher polluting factories to move inland. It says a lot about the problem that the best way to get containers to the ports is by road, even though the roads are choked with trucks and there is not a port city in China that does not experience crushing gridlock.
Having increasing numbers of trucks travelling greater distances is not an efficient, economical or environmentally acceptable way to move large volumes of containers. And the greater the distances the trucks have to travel, the more expensive the moving of boxes by road will become because the vehicles will be largely empty on the return journey.
The third reason restricting the volume of export containers is an area we covered in an earlier blog. But just to recap, the Yangtze is too shallow and until a deeper channel is dredged from Chongqing down to the delta, containers will have to be transported on smaller vessels. This will take a couple of years and in the meantime, countless small vessels will swamp the locks and narrow sections of the river and cause congestion and delays.
This may be a bleak a portrayal of the future, but it seems that each step of China’s development unveils some previously unknown problem. Maybe it’s time to take the foot off the gas and reassess exactly what is important.
It's not called “breakneck speed” for nothing.