Shareholders of the first and second phases of the Shekou container terminal (SCT) are considering placing their stakes under one entity to unify commercial interest in western Shenzhen. Tim Shen, investor relations manager at China Merchants Holdings (International) - the largest shareholder in both phases - confirmed shareholders had discussed for more than a year how they could bring themselves in line so the two phases came under one shareholding entity. Roger Davies, director of Asia-Pacific operations of London-based shipping group Peninsular & Oriental Steam Navigation (P&O) - one of SCT's investors - said late last month mainland authorities would prefer a single entity to own and operate the two phases. Mr Shen said the Shenzhen Government might have wanted a consolidated shareholding structure for the two phases but he believed the main driving force behind the talks was the commercial interests of the shareholders. 'It's like property developers. When you have different ownership of two developments next to each other, it would be advantageous for their owners to band together and act in each other's interests,' Mr Shen said. He said the talks were still in preliminary stages and did not expect any imminent agreement. 'It's like we have gone to the movies together a few times, but we have not reached the stage of a proposal for marriage.' China Merchants is the largest shareholder in both phases, with a 32.5 per cent stake in the first and 40 per cent in the second. Shekou Industrial Holdings, an unlisted sister company of China Merchants, owns 11 per cent of the second phase. P&O has a 25 per cent interest in phase one and 19.6 per cent in two, while Swire Pacific owns 25 per cent of phase one and 9.7 per cent of phase two. Wharf (Holdings) and China Ocean Shipping (Group) (Cosco) are the only two parties that did not have stakes in both phases. Wharf's 55.3 per cent-held Modern Terminals has a 19.6 per cent in phase two, while Cosco has a 17.5 per cent stake in phase one. Modern Terminals and China Merchants were joint managers of both phases, Mr Shen said. After Beijing's recent relaxation of restrictions on foreign investment in mainland ports, each of the shareholders are theoretically allowed to wholly own a container terminal. The relaxation has enhanced flexibility of shareholding re-shuffles in the two phases. The 1.6 billion yuan (about HK$1.50 billion) second phase expansion - expected to come on stream by the end of next year - will see the addition of two berths, which will double the first phase's annual container throughput to 1.6 million teu (20 foot equivalent units). Mr Shen said the five western Shenzhen terminals in which China Merchants had stakes recorded a 23 per cent year-on-year growth in throughput last year to 2.25 million teu. Shekou Container Terminal phase one (SCT1) saw a growth of only 4 per cent to 751,000 teu, while sister ports Chiwan grew 33 per cent to 253,000 teu and Kaifeng rose 43 per cent to 644,000 teu. In the first two months of this year, SCT1 reported a 17 per cent year-on-year decline in throughput to 100,000 teu, while Chiwan increased 25 per cent to 36,000 teu and Kaifeng rose 91 per cent to 161,000 teu. Mr Shen said Cosco moving its business to Kaifeng was the main contributor to the fall in SCT1's throughput. Western Shenzhen's terminals are estimated to have accounted for about 40 per cent of entire throughput of the Shenzhen port, which is dominated by Yantian International Container Terminals. Shenzhen is forecast to process about 25 per cent of containers shipped through major ports in the Pearl River Delta by 2005, up from 20 per cent in 1999. Hong Kong's share is projected to fall from 79 per cent to 73 per cent.