Cosco sees breakeven in 2007 for Nansha
Company investing US$300 million in total of nine port projects this year
Port and container operator Cosco Pacific expects its controversial Nansha port project in Guangzhou to break even in 2007, according to deputy managing director Kelvin Wong Tin-yau.
The development, which Mr Wong said was Cosco's focus, was one of nine new port projects of the firm in the mainland and Europe this year involving a total investment of US$300 million.
The annual handling capacity of the Nansha terminal would be one million 20-foot equivalent units (teu) in the first year of operation and 1.5 million teu the following year, Mr Wong said yesterday after a meeting with shareholders.
'After that, the capacity will reach 4.2 million teu a year. We expect the project will break even in 2007,' he said, adding that the company had US$200 million cash on hand.
The port operating arm of the mainland's largest ship-owning firm, China Ocean Shipping Group, has formed a four billion yuan joint venture with Guangzhou Port Group to build and operate the container terminal at Nansha.
In an earlier statement, Cosco said it would hold a 56 per cent stake in that business and contribute US$95 million in cash to the venture's registered capital of 1.4 billion yuan.
A new terminal at Nansha Port phase two will have six berths and a water depth of 14.5 metres, which could be dredged to 17 metres. It would be operational in July next year, Mr Wong said.
The Nansha port development - backed by the Guangzhou municipal government - has been mired in controversy since its inception because it competes with Shenzhen and Hong Kong and has silting problems.
The only deepwater port in Guangzhou, owned by the city and the Guangzhou Port Group, was operating at just 25 per cent capacity in the first four months after opening in late September, sources said. It has four berths, with a total monthly capacity of 164,000 teu.
A south China port executive said earlier this year that containers were barged from Shenzhen ports upriver to Nansha Port for the official opening of phase one to make it appear busier than it otherwise would have been.
Mr Wong said yesterday four of the nine projects had already been completed. He said 33 per cent of the US$300 million investment would come from Hong Kong-listed Cosco, the rest from bank loans. But the company has said at least twice this year that it would invest a total of US$350 million in ports.
New projects are planned for Dalian, Yangzhou, Guangzhou and Europe. Mr Wong declined to specify where the European project would be situated.
He said there were no plans for the company to acquire or develop new ports in Hong Kong this year.
Mr Wong said Cosco had bought half of the 160,000 containers it planned to buy this year.
'Our container rent is 95 [US] cents per day this year, a substantial increase from the 85 cents last year. This is because demand is surging,' he said.
Cosco Pacific declined to comment on its parent's plan to spin off Cosco Container Lines in Hong Kong.