Shenzhen port operators seek new revenue source

As growth in the fourth-busiest port of the world stagnates, wharf companies are diversifying to boost their incomes

PUBLISHED : Wednesday, 10 October, 2012, 12:00am
UPDATED : Wednesday, 10 October, 2012, 3:39am

Faced with stagnant growth, port operators in Shenzhen are investing in faster-growing ports in other parts of the country and diversifying their business.

"Shenzhen port companies are already investing in other mainland ports. They think northern ports have greater growth potential," said Ma Yongzhi, a vice-director general of Shenzhen Port Administration.

In the first eight months of this year, container throughput at Shenzhen, the mainland's second-busiest port and the world's fourth-busiest, grew 1.4 per cent to 15.09 million teu, according to official data.

At Ningbo, the mainland's third-busiest port, throughput rose 8.7 per cent to 10.8 million teu.

"I won't rule out the possibility of Ningbo surpassing Shenzhen in future," said Bank of China analyst Matthew Xu. "A lot of industries are shifting from the Pearl River Delta to the Yangtze River Delta and central China including Chongqing, which benefits Ningbo.

"What the Shenzhen port companies are doing is to find a new source of growth.

"It's pretty obvious the growth of Shenzhen will slow or stagnate in the next couple of years. Investing in other areas is the only way for the business to grow."

Shenzhen Yantian Port Holdings has invested in ports and even a toll-road company.

In August last year, the Shenzhen-listed firm paid 1.36 billion yuan (HK$1.67 billion) for a 35 per cent stake in the port of Caofeidian, in Jiangsu province.

It said the aim of the investment was to create a new profit growth driver.

"The company will use this investment to extend its business to the Bohai Sea [where Caofeidian is located], which is of great strategic importance and will benefit the company's long-term development," it said.

In the first half of this year, Yantian Port booked its first profit of 32.54 million yuan from Caofeidian. This was a significant portion of overall group profit, given that it dropped 23.62 per cent to 179.79 million yuan in the period.

Caofeidian's cargo throughput jumped 70.8 per cent to 23 million tonnes in the first half.

In contrast, the container throughput of Yantian International Container Terminals, a joint venture between Yantian Port and Hutchison Port Holdings, dropped 7.95 per cent to 1.31 million teu.

Yantian Port's toll-road subsidiary in Xiangtan, Hunan province, also made a significant contribution to its revenue of 160.3 million yuan in the first half.

While revenue from Shenzhen's port operations fell 12.84 per cent to 150.26 million yuan, Xiangtan's rose 25.25 per cent to 10.04 million yuan.

In April last year, Yantian Port invested 233.33 million yuan for a 70 per cent stake in a coal terminal in Huizhou, Guangdong province.

With this investment, it sought to diversify its business to coal, "which is of great strategic importance", the company said.

"After the Huizhou coal terminal begins operations, it will significantly increase the company's revenue and become a new profit growth driver, which will benefit the company's long-term development," it said.

In March, Yantian Port invested a further 2.49 billion yuan in the terminal.

Meanwhile, Shenzhen Chiwan Wharf Holdings, which is also listed in Shenzhen, has been acquiring other ports too.

In August 2010, it completed the acquisition of a 40 per cent stake in Laizhou port for 749.66 million yuan.

"The company must continue to aggressively seek to develop and invest in ports with growth potential to create new growth drivers and expand its port assets," it said.

Laizhou, at the mouth of the Yellow River in Shandong province, is a hub for bulk cargo including oil, minerals and metals.

The port was highly profitable, Chiwan Wharf said.

"The company believes Laizhou has great development potential, especially in oil, coal and minerals," it said.

In August, the company's container throughput dropped 15.6 per cent to 482,000 teu, while its cargo throughput dropped 8 per cent to 5.55 million tonnes.

In the first half, net profit fell 14.9 per cent to 219.63 million yuan, while revenue rose 1.1 per cent to 854.1 million yuan.

"Chiwan exports mainly to Europe. The European debt crisis has had a bad impact on Chiwan," said Sunny Ho Lap-kee, an executive director of the Hong Kong Shippers' Council.

"We are seeing the springing up of small cargo ports in China close to the cargo sources, because it's cheaper with lower transport costs. Shenzhen port companies will invest in these small ports in future."