Billions for Yangtze canals to take pressure off roads

PUBLISHED : Saturday, 11 September, 2010, 12:00am
UPDATED : Saturday, 11 September, 2010, 12:00am

The centuries-old canal network in the Yangtze River Delta will get a multibillion-yuan injection to allow goods to be moved more efficiently around the ports of Shanghai and Ningbo.

Tom Lau Ko-yuen, managing director of port-operator PYI Corp, said the government aimed to use the canals to reduce worsening congestion on roads into the world's two busiest ports by cargo tonnage.

The government planned to spend tens of billions of yuan on the project over 10 to 15 years, Lau said. Part of the plan involved creating eight new feeder ports in the delta.

Last year, cargo tonnage along the Yangtze River - including Shanghai and Ningbo - accounted for 58 per cent of the country's cargo throughput of 6.9 billion tonnes and 36 per cent of the country's foreign trade of US$2.2 trillion, according to PYI.

The Hong Kong-listed port and infrastructure firm forecasts tonnage along the Yangtze River, excluding Shanghai and Ningbo, will rise 9.7 per cent to 1.24 billion tonnes this year.

The delta's maze of canals - which have been compared to those of Venice and the Netherlands in terms of their complexity - is expected to serve a vital role in boosting trade.

At present, the canals are narrow and mostly used to transport low-value cargo such as sand, cement and stones. In partnership with local governments, the Ministry of Transport plans to deepen them to 12.5 metres and lift their bridges so bigger ships can pass, Lau said. By doing this the ministry hopes to shift more cargo, including containers, from roads serving the ports to waterways.

Using the canals would be at least 25 per cent cheaper, Lau said. 'The congestion caused by container trucks into Shanghai is worse than Hong Kong's Kwai Chung port,' he said. 'It is much more beneficial to move cargo through the water.'

To improve transport to Shanghai and Ningbo, the ministry plans to create eight feeder ports in Suzhou, Wuxi, Changzhou, Jinghua, Shaoxing, Hangzhou, Jiaxing and Huzhou. These feeder ports will transport cargo to Ningbo and Shanghai through the canals and rivers in the delta.

With the completion of the Grand Canal during the Sui dynasty (AD589-617), Suzhou became a thriving commercial district as items such as silk were transported along the bustling waterways.

Each feeder port would cost an estimated 300 million yuan (HK$343 million) and provide a planned annual container capacity of 300,000 20-foot equivalent units (teu), Lau said. So far, Jiaxing is the only completed feeder port and is undergoing trial operations. PYI holds 85 per cent of the Jiaxing port, which has a registered capital of 128.8 million yuan.

A Zhejiang port and shipping official, Zheng Huiming, said the aim was to create an internal waterway transport system to ship containers across the Yangtze River Delta.

PYI signed a non-binding memorandum of understanding (MOU) in May to take a 40 per cent stake in the Suzhou feeder port. The remaining stake will be taken by a logistics subsidiary of the China-Singapore Suzhou Industrial Park, one of the country's earliest foreign-invested industrial parks, where Beijing owns a majority stake and a minority is owned by a Singapore consortium.

In the past two years, PYI signed non-binding MOUs to invest in the Huzhou and Wuxi ports, Lau said. Whether they result in agreement 'will depend on the upgrading of canals. We will not invest in feeder ports ahead of the upgrading.' For now, PYI did not have the resources to invest in ports, given its net debt of HK$1.5 billion, Lau said. 'Under the constraint of our balance sheet', any new investment was on hold, he said.

If PYI does not invest in Suzhou this year, it hoped to do so next year, Lau clarified. For the year ended March 31, PYI's net profit rose 8 per cent to HK$149 million; turnover fell 12 per cent to HK$4.26 billion.

To allow the passage of ships, the canals will be deepened to: 12.5 metres

Using the water route to transport cargo will result in cost savings of at least: 25%