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Approval comes early with two berths expected to be operational by end-2007

The seven billion yuan first phase of Shenzhen's massive Dachan Bay container terminal project has been approved by state planners, paving the way for another entry into the region's increasingly crowded port scene within two years.

The first five-berth phase of Dachan Bay, a joint venture between the Wharf Group's Modern Terminals Ltd (MTL) and the Shenzhen municipal government, was approved by the National Development and Reform Commission on March 29 and is expected to be operating two berths by the end of 2007.

'The first phase of the project received official approval ... two months ahead of the expected schedule,' said a spokesperson for MTL, which owns 65 per cent of phase one. 'Reclamation is under way; the plan is to develop Dachan Bay in four phases.'

In all, the Dachan project is expected to add  20 berths - 15 for deep-sea vessels - to the south China port  mix.

Approval comes just over a year  after planning authorities in the mainland unofficially called a moratorium on port development in the Pearl River Delta region, delaying construction of Dachan, phase IIIb of Hutchison's  Yantian complex and several other ambitious projects at secondary ports.

'I don't think this signals a shift in policy. Approval processes usually go in cycles in China. Dachan is probably in the 11th five-year plan,' said a veteran China port executive. '[Mainland planning authorities] want to encourage an open market by encouraging different players. This will balance Yantian.'

Phase one is expected to be complete by the end of 2008 and have the capacity to handle 2.5 million teu (20-foot equivalent units) a year. Vessels calling at the port will benefit from a revamped Tonggu Channel, which Shenzhen authorities began dredging in December at a reported cost of $1.9 billion plus maintenance expenses.

Phase two is scheduled  to have four deep-sea berths, phase  four will have six while phase  three is planned to have five berths catering to river and intra-Asia trade routes, which typically use smaller vessels or barges.

Dachan's approval comes as Hong Kong operators scramble for business amid almost no comparative volume growth at the world's biggest port in the first quarter.

'The future looks more and more crowded. It appears to be a bit of a high-stakes gamble,' said Michael Chan, head of transport research at the Bank of China (International). 'Dachan may not have a significant impact until late 2008 but overall capacity may come back to haunt people.'

Another veteran of the Hong Kong port scene said he expected operators' margins, which have been declining since the turn of the century, to come under further pressure.

'There eventually has to be a price war,' he said. 'Not right away but it will happen, probably within the next five years.'

According to a recent report by Citigroup analyst Charles de Trenck, Hong Kong's main terminals, where there are three idle berths, have as much as nine million teu in spare capacity, or six years' worth at last year's growth rate. Growth rates, however, have slowed since then.

State-owned Shanghai International Port Group,  in which Hong Kong-listed China Merchants Holdings (International) holds a 30 per cent stake, yesterday agreed to pay 370 million yuan for a majority stake in the port of Wuhan.

Berth control

The Dachan Bay project is expected to comprise 20 berths

Fifteen berths  will be set aside for deep-sea trade

Dachan Bay will be developed in four phases



State planners give go-ahead for first phase at Dachan Bay