SIPG seeks easing of transshipment rules

PUBLISHED : Monday, 29 October, 2007, 12:00am
UPDATED : Monday, 29 October, 2007, 12:00am

Shanghai International Port Group (SIPG), the mainland's largest port operator, is urging Beijing to open the domestic shipping market to international lines in a bid to promote Shanghai's port as northeast Asia's transshipment hub.

'International lines should be allowed to operate between two domestic ports,' Chen Xuyuan, president of SIPG, said last week.

His comment came after giant Mediterranean Shipping Company (MSC) returned to Busan port in South Korea as its transshipment centre in April. In 2005, the second-largest shipping line in the world moved its transshipment hub to Ningbo port, located about 100km away from Shanghai port, to be near the mainland's vast manufacturing facilities.

Foreign shipping companies are not allowed to operate between two domestic ports in most countries.

But MSC consolidated shipments at Ningbo by moving cargo from other domestic feeder ports, working in the grey area of international maritime law.

The Ministry of Communication banned it from the illegal routes, resulting in its withdrawal from Ningbo, which lost one million 20-foot equivalent units (teu) per year, according to Mr Chen.

International lines have to outsource the domestic trade leg to local shipping lines in the mainland, increasing their operating costs. That is a problem because there are not enough domestic shipping lines in the country. The Ministry of Communication was studying whether to open the domestic market to international shipping lines, said Mr Chen.

'It is all about sovereignty,' said Vincent Wang, chairman of China Merchants International Terminals in Daxie, Ningbo. 'Just like in air rights, the opening of domestic ports should be bilateral.'

Since there are not enough domestic shipping lines to go between feeder ports and sea ports, he suggested Beijing create an incentive programme for domestic shipping lines. In the past, over-competition had withered the capacity of domestic shipping lines. In addition, as ports gave priority to larger vessels, it hindered the development of domestic shipping companies, Mr Wang said.

Shanghai, trying to become the northeast Asian transshipment hub, wants to increase ship-to-ship transshipment operations in Yangshan port, which was completed in 2005.

Mr Chen said the goal was to increase the percentage of international cargo from Japan and Korea bound for the United States and Europe to 30 per cent from 10 per cent within three years. To attract more ship-to-ship transshipments along the Yangtze River to Yangshan, the port operator lowered the handling fee for such cargo by 50 per cent when Yangshan's first phase came on stream last year. The discount rate is currently at 30 per cent.

Volume at Yangshan will increase to six million teu, up from last year's 3.2 million teu, after phase two enters operation in December. It will rise to nine million teu next year when four berths in phase three are completed.

A Sino-foreign joint venture, led by Maersk, Hutchison Whampoa and SIPG, will be formed in the first quarter of next year. The joint venture will operate the first and second phase of Yangshan, which cost 17 billion yuan to build.

Including the old port in Waigaoqiao, Shanghai Port will handle 26 million teu this year, compared with Singapore's 28 million teu and become the second-largest port in the world, surpassing Hong Kong.

Shanghai Port's compound growth in the next three years is expected to be 18 per cent, reaching 33 million teu in 2010. The port's robust growth stemmed from Hutchison's investment in 1993 when throughput was less than one million teu.

But, after fresh investment and technology, volume increased to 10 million teu in 1997. Export growth in the mainland further fuelled demand and added another 11 million teu in Shanghai in the following 10 years.