China"s largest container port shows signs of acome-from-behind victory to Asia-Pacific rivals
Wu Eryu is a flight attendant for Shanghai Airlines Co. Ltd. Each time she boarded a plane over the last few years, she could see the Yangshan Dao isles and the progress of construction of the Yangshan Port.
On December 7 of last year, Wu and more than 2,500 other Shanghai residents visited the port, where they saw container cranes that are considered among the most advanced in the world. “I am proud that I have witnessed the construction of the Yangshan Port in the last three years,” Wu said. “I’ve seen the miracle on the isles and the rapid development of Shanghai.”
Three days after Wu’s visit, the Shanghai Yangshan Deep Water Port, China’s largest container port, began operation after a three-and-a-half-year construction period. In seven days, the port handled 55,000 20-foot equivalent units (TEUs) of containers, smoothly managing business typical of a three- or four-year-old counterpart.
A trump card
According to statistics from the Shanghai Port Administration Bureau, as of December 31, 2005, Shanghai had become the world’s largest cargo port, having processed 443 million tons of cargo in the year, overtaking Singapore.
Shanghai handled 18.09 million TEUs of containers last year, a 24.2-percent increase over the previous year, putting it in the third place by container volume worldwide after Singapore and Hong Kong.
At present, Shanghai has opened shipping routes around the globe, extending to Europe, the Americas, Australia, Japan and Southeast Asia. The number of voyages from the city amounts to 1,967 monthly, including 942 to international ports.
In the rankings of top 10 container ports in the world for 2004, Hong Kong, Singapore, Shanghai, Shenzhen, Pusan and Kaohsiung took the first six positions. The remaining spots were occupied by such traditional major European and American ports as Rotterdam, Los Angeles, Hamburg and Antwerp. This concentration in East Asia has intensified competition in the region.
According to internationally acknowledged standards, an international shipping center must have a container “hub” port with shipping lanes around the world. The position of a container hub port is exclusive. Once the position comes into being, the container hub port can make other ports in the region its feeder or lateral ports through its advantage in shipping lanes.
Industry experts predict that in the next five to 10 years, a new international shipping center will emerge in Northeast Asia.
Given this, if Shanghai cannot become a regional shipping center in a short time, it cannot cast off the position of a feeder or lateral port even though it has a sufficient supply of goods from the Yangtze Delta region of the Chinese mainland.
However, Busan in South Korea has announced the ambition of being the “hub” port of the Pacific-rim region, Kaohsiung in Taiwan wants to rise as the “Asia-Pacific regional shipping transportation center” and Kobe in Japan seeks to become Asia’s lead port. These ports have posed strong challenges to Shanghai’s pursuit of an international shipping center status.
Although Shanghai is at the estuary of the Yangtze River, China’s most important waterway, and has a sufficient supply for shipment, the average water depth of its main sea routes is only nine meters, so large container ships with a registered capacity of more than 5,000 TEUs cannot berth at its port. Hence, the Yangshan Deep Water Port has become a trump card for Shanghai to win the competition to be the international shipping center in the Asia-Pacific region.
The Yangshan Port is located in Shengsi County, Zhejiang Province, at the estuary of the Yangtze. It is 27.5 km from the Luchao Port in Shanghai’s Nanhui District, about 45 km from Pudong International Airport and 104 km from the international route in the East China Sea, being the nearest port to Shanghai with water more than 15 meters deep.
The port is designed to have an annual handling capacity of 15 million TEUs of containers in 2012, with more than 30 berths in operation. Due to its average water depth of 16 meters, it is able to accommodate large container liners all the year round.
According to Shen Jun, Vice Secretary General of the Shanghai Municipal Government, the location of the Yangshan Deep Water Port has four main advantages. First, the region’s geological conditions allow the formation of ideal deep water sea routes and the seabed has remained stable for over 100 years. Second, the safety of ships entering or leaving is guaranteed. A trial found that the port project will not harm the ecology of the region, and the natural barrier formed by nearby isles provides good conditions for ships to berth at the port. Third, local conditions are suitable for building long-distance cross-sea bridges. Finally, the port’s construction conforms to the world trend of developing offshore ports.
Shanghai proposed to build the Yangshan Deep Water Port to relevant departments of the Central Government in 1999, and on June 26, 2002, the first-phase project began construction.
In mid-December of last year, this first phase, consisting of a 1.6 km hydraulic dock with five berths, was completed and put into operation.
The first phase consists of three parts: the port area, Donghai Bridge and auxiliary facilities on the mainland.
The port area, with a coastline of 1,600 meters and a land area of 1.53 square km, is composed of five berths that can accommodate ships with capacity of 70,000-100,000 tons. It has an annual container handling capacity of more than 3 million TEUs.
Since the water depth remains around 15 meters all year long, the Yangshan Deep Water Port Area can accept not only the currently largest post-Panamax ships capable of carrying up to 8,500 TEUs, but also outsize liners with a 14.5-meter sea gauge and capacity of more than 10,000 TEUs that will be put into use later this year.
The Donghai Cross-Sea Bridge extends approximately 32.5 km from the Luchao Port on the mainland to Xiaochengzishan isle in Shengsi County. It is a six-lane expanse, with emergency stations, and is designed for a driving speed of 80 km per hour. The bridge constitutes an important component of the first phase of the Yangshan Deep Water Port Project, to serve the port area in container collection and transportation.
The main channel of 5,000 deadweight tons (DWT) has a navigation clearance of 40 meters and clear width of 400 meters. There is one auxiliary span of 1,000 DWT with navigation clearance of 25 meters and clear width of 140 meters, and two auxiliary spans of 500 DWT, with navigation clearance of 17.5 meters and clear width of 120 meters and 160 meters, respectively. The life expectancy of the bridge is 100 years.
The auxiliary facilities of the first-phase project are around the terminus of the Donghai Bridge. Its main function is to provide logistics services for the Yangshan Deep Water Port Area, including water supply, power supply, warehousing and communications.
According to a report on the project, the total investment for the first phase is 14.31 billion yuan ($1.79 billion), including 7.2 billion yuan ($900 million) for the port area (including the sea-route and auxiliary facilities) and 7.11 billion yuan ($890 million) for the Donghai Bridge.
Follow-up projects
While the first phase of the Yangshan Deep Water Port Project was under construction, the second phase began.
The second phase, which has been going on for about two years, includes four berths, a 1,400-meter-long port coastline and a 0.7-square-km land area. It will be completed at the end of this year. In addition, the third and fourth phases of the Yangshan Deep Water Port Project have also begun with the building of roads.
A second cross-sea bridge is also part of the plan. Construction of the span, whose length is expected to surpass that of the current one, is scheduled to begin after 2015.
While the Shanghai International Port (Group) Co. Ltd. and its subsidiaries hold all stakes in the first phase of the Yangshan Deep Water Port Project, the second phase has brought in foreign investment and will be under joint operation and management after it is completed.
On December 19, 2005, a contract signing ceremony was held in Shanghai. Hong Kong-based Hutchison Whampoa Ltd., AP Moeller-Maersk Group, China Ocean Shipping (Group) Co., China Shipping (Group) Co. and Shanghai International Port (Group) Co. agreed to jointly finance the second phase of the Yangshan Port.
The five companies formed a joint venture, in which Hutchison Whampoa and AP Moeller-Maersk Group separately hold 32 percent stakes. Shanghai International Port (Group) Co. shares 16 percent, and China Ocean Shipping (Group) Co. and China Shipping (Group) Co. each own 10 percent. The registered capital of the joint venture is 4 billion yuan ($500 million).
This is not AP Moeller-Maersk Group’s first investment in Shanghai. A company that has invested in more than 40 port facilities around the world, it also affords 49 percent of the fourth phase of the Waigaoqiao Port in Shanghai.
Hong Kong mogul Li Ka-shing, President of Hutchison Whampoa, said, “The construction of the Yangshan Deep Water Port has laid a solid base for Shanghai to rise as an international shipping center and a container deep water hub port. It will facilitate the prosperity of the Yangtze Delta.”
Statistics indicate that about 80 percent of world trade is done through ocean shipping, while the proportion for China’s foreign trade is more than 90 percent.
In February 2004, COSCO Container Lines Co. Ltd. (COSCON), China’s largest container shipping company, placed an order with Greece Shipping Co. for five ships with a capacity of 8,500 TEUs. These ships are being made by South Korea’s Hyundai Heavy Industries Co. and will be delivered to COSCON from February to August of this year. They will be used by COSCON on loan for 10 years.
The move coincided with the opening of the Yangshan Deep Water Port. It is reported that COSCON will gradually put more than 10 8,000-TEU ships into operation after the first phase of the port project is completed, and ships with more than 9,000-TEU capacity are also in its plan. At present, COSCON owns 117 container ships, with a total capacity of 253,000 TEUs.
According to COSCON, because of sea-gauge limits, its ships sailing between Shanghai and other eastern coastal ports of China and ports along the U.S. western coastline lose 800-1,000 TEUs of payload every month, representing a loss of 12,000 TEUs every year or $12 million in income. However, the company said it expects that the Yangshan Deep Water Port will bring it fairly good economic benefits.
Many international shipping companies had called, for a long time, for Shanghai to build a deep-water port with a 15-meter depth to allow outsize ships to enter. According to a survey of 14 major international shipping companies by Orient Overseas Container Line Ltd., 11 agree that Yangshan is China’s ideal location for a container deep-water port and many of them are prepared to relocate their transfer business centers to the Yangshan Deep Water Port.
In order to gain advantages in the competition with Busan, Yokohama, Hong Kong and Singapore, Shanghai has also put the plan of the 7.2-square-km Yangshan Bonded Port Area into practice.
This is the first bonded port area in China, combining a bonded zone, export processing zone and bonded logistics park. In addition, the port area will develop such operations as international freight transfers, delivery, warehousing, transit trade and export processing. As a result, it will have functions of a free port and a free trade area.
The construction of the bonded port area makes the aim of turning Shanghai into an international shipping center more real and practical. According to insiders, Shanghai is applying to the Central Government for free-port status for more policy incentives.