China's helping hand on cargo 'impractical'

PUBLISHED : Tuesday, 10 July, 2012, 12:00am
UPDATED : Tuesday, 10 July, 2012, 12:00am


The global shipping industry is facing its worst downturn in three decades, but industry experts say that mainland moves to boost Chinese shipping firms' business by allocating more cargo to them could be tricky to implement.

Richard Lidinsky, chairman of the US Federal Maritime Commission, said: 'Some kind of China cargo reservation system [would be] very difficult to do.'

But he also said the US had controls on freight so that at least 75 per cent of US agricultural cargoes and at least half of the freight shipped for civilian agencies must be transported on US-registered ships. This is on top of rules that all military freight must be carried on US-flagged vessels.

Lidinsky said China would run foul of the commission if there were some unequal treatment of a US shipper or discriminatory action against a US carrier.

The head of a Hong Kong shipping company added: 'It's worrying and probably highly impractical. Tampering like this usually sees someone get burnt!'

Jan Rindbo, chief operating officer of Pacific Basin Shipping, said it was impractical on a large scale, 'certainly for minor bulk trades where both tonnage and cargo to and from China is mostly controlled outside China'.

Willy Lin Sun-mo, managing director of Milo's Knitwear International and chairman of the Hong Kong Shippers' Council, said he was very surprised to hear about the move.

'In international trade, shippers mostly do not dictate which shipping line to use or which logistic provider. I believe the Chinese companies need to learn how to improve efficiency and reduce manpower. They should be lean and mean like Maersk, Zim or Orient Overseas Container Line,' Lin said.

Proposals to dedicate more of China's freight to domestic owners such as China Ocean Shipping Group (Cosco) and Sinotrans Shipping have been circulating within government for several months as a way to help the mainland's beleaguered shipping industry. China Cosco Holdings, the Hong Kong-listed Cosco offshoot, posted net losses last year and in the first quarter of this year, while China Shipping Development posted a first-quarter net loss this year.

A plan outlining possible government help was due to be submitted to the State Council by the National Development and Reform Commission and China's transport and finance ministries by the end of last month.

Shanghai Shipping Exchange president Zhang Ye confirmed the ideas included boosting the amount of cargo carried by Chinese-controlled ships, as well as tax concessions. A source within the Shanghai Shipping Exchange said: 'It is a cargo reservation policy for strategic materials and energy goods instead of the rumoured protectionism.'

Chinese shipping firms transport more than 30 per cent of the nation's oil in mainland-controlled tankers, and the government already plans to increase this to half by 2015.

But the volume of other strategic commodities, including iron ore and coal, carried in Chinese-owned ships is much lower.