Northern Challenges

A J Keyes assesses the position of North China containerports against a background of economic uncertainty and reviews the performance and development strategies of the key players

Collectively, the ports in the North China region are seeing stability in container volumes handled, with 52.6 million TEU for 2019, 51.1 million TEU in 2020 and 52.9 million TEU for 2021. This nevertheless represents a declining share of the total China container port market, which was 22.8 per cent in 2019, but dropped to 21.8 per cent in 2020 and then a larger decline to 18.7 per cent for 2021, as Figure 1 shows.

While this situation would be acceptable in most developed ports, this represents a real slowdown in the context of China and reflects growing economic uncertainty in the Chinese heavy industry sector. Heavy industry in China is primarily located in the north of the country with Central and Southern ports increasingly focusing on supporting consumer goods and manufacturing hubs.

The 2021 northern container port volume is concerning because there was some volume growth (albeit much lower than compared to other ports in the country and China overall) and underlines the real issue in the north – the continued decline of Dalian.

This is shown in Figure 2, which clearly highlights the continued improvements in total container throughput at Qingdao and Tianjin, but the decreases at Dalian.

According to one local forwarder, who did not wish to be named, the reality is that the North China region has been losing “around one million TEU of cargo year-on-year up to 2021, but the south/central area has generated increases of up to four million TEU per annum.”

LOCKDOWNS – LIMITED IMPACT

Port lockdowns have been, and continue to be, commonplace throughout China during 2022 as Beijing maintains its Zero Tolerance policy in conjunction with COVID-19. Numerous examples exist, notably the recent two-month lockdown of Shanghai port (and city) and similar examples in Shenzhen (which stopped all cargo supplying Hong Kong) and Yantian.

In the North China region Tianjin has seen recent lockdowns, including in the Heping district in late May 2022, while production challenges for both Toyota Motor Corp. and Volkswagen AG have continued, plus the Omicron variant reportedly became more prevalent in Beijing, resulting in further restrictions.

Yet based on available data for 2022, there has been little negative impact on North China ports. For example, in the January to end of April 2022 period, Qingdao handled 8.04 million TEU which represents a 7.1 per cent increase over the same period in 2021, while Tianjin is up by 2.9 per cent (to 6.45 million TEU) and, surprisingly, Dalian also saw a strong improvement of 12.8 per cent to 1.24 million TEU.

These volumes through Dalian are, of course, significantly lower than those that the port has handled in the past, but may be the first steps in stopping the decline. During 2021, Dalian Port (PDA) Company Limited successfully merged with Yingkou Port Liability Co., Ltd. via a joint agreement between China Merchants Group and the People’s Government of Liaoning Province.

It was reported at the time of the merger that a key objective is: “to increase the resource allocation efficiency and market competitiveness…”

DALIAN STRATEGY

If container traffic increases continue during 2022, in line with the first four months, then the merger and its associated goals may indeed be having a positive effect. Moreover, with constant lockdowns occurring more frequently in the Central/South areas, such as Shanghai, and continuing to negatively impact production of industries there, then the north may gain market share because it has been subject to much less turmoil caused by COVID-19 policies.

Indeed, the continued lockdowns enforced by Beijing on Shanghai continue to impact the supply chain networks supporting the port and, therefore, foreign trade activity. China’s insistence on its zero-COVID-19 policy continuing

8 Tianjin is

now engaged in the phase II development of its new zero carbon terminal

China’s heavy industry is subject to economic uncertainty which may ‘‘ progressively pose challenges for its northern containerports

must prompt some manufacturers to either relocate to areas in the country where the pandemic impact is less, or more likely, to other countries.

Due to a loss of volumes, there is plenty of spare capacity in Dalian and so no substantial investment or expansion in the port is expected.

Back in 2019 the port used US$490 million earmarked for infrastructure to pay off debts rather than expand its oil business and improve facilities. There seems to be no change in strategy here in the short-to-medium term, at least.

QINGDAO TRANSPORT HUB

In May 2022, a total of 21 “transportation” development and infrastructure projects were confirmed by the local Qingdao government. The announcement explains that nine are involving public roads, four are for rail, five linked to ports and two connected to transportation hub development.

The desire to develop Qingdao as a hub location for the wider region remains a core aim of the regional government, with improved connectivity to Beijing, Tianjin and Hebei province in North China, but also to the Yangtze River Delta in the South, the Yellow River to the west as well as with South Korea to its east. “By the end of 2024, the city will put three new railway routes into operation and by 2025, open nine,” confirmed Zhang Jun, General Manager, Qingdao Railway Group.

On this basis, the port remains core to the city of Qingdao’s desire to accelerate itself towards what local officials confirm is “an international transport hub.”

CLEAN TIANJIN

Recent focus in Tianjin has been on Cosco Shipping Port’s (CSP) new zero-carbon terminal which the company states makes the facility self-sufficient and only using clean energy for operations. Both wind and solar power are used, with Phase I of the project completed in January 2022 and Phase II now underway.

CSP has confirmed that it is developing its Tianjin Container Terminal (TCT) as an “international shipping hub” through what is described as “optimising operational efficiencies….and promoting synergies of the hub-and-spoke transshipment network in the Bohai Rim region.”

8 Figure 1: Development of Container Volumes at North China Ports from 2019 to end of April 2022, in ‘000 TEU Source: Dataand.com, with base data from Ministry of Transport of the People’s Republic of China

8 Figure 2: Development of Container Volumes at Ports in North China from 2019 to end of April 2022, in ‘000 TEU Source: Dataand.com, with base data from Ministry of Transport of the People’s Republic of China

The TCT facility was developed in its current form after its 2019 merger with the Tianjin Five Continents International Container Terminal and Tianjin Orient Container Terminals, which has served to give CSP a strong competitive position at the port.

The merger was designed to optimise the allocation of resources, enhance the unified management of the terminals, lower operational costs and increase the overall competitiveness of TCT.

Bulkers also bedevilled by berthing delays

While container ships gain a lot of headlines for their queuing to access to ports in China, bulk vessels bringing grain and coal – key basic commodities that China cannot produce enough of for its needs – are also suff ering similar challenges.

Throughout much of Q2 2022, there have been scores of non-container ships waiting along the coast of China, including those wishing to access ports in the north of the country. For example, at regular periods in this quarter there have been more than 220 bulk vessels waiting to access Shanghai, while Ningbo-Zhoushan had more than 130 ships waiting. By comparison, on a collective basis, the northern ports of Rizhao, Dongjiakou and Qingdao saw a total of about 120, at worst.

It’s not just lockdowns causing this, other issues cited are lack of personnel to process paperwork and insufficient trucks available to move imported raw materials, like copper and iron ore, from the port to processing mills, thereby leaving the product stranded at the port of entry, according to reports from Bloomberg.

As a result, ships have been diverted to northern ports more on a more frequent basis, especially Qingdao and Tianjin, simply because trucking is more readily available.

Of course, port substitution is difficult for high volume bulks which are primarily reliant on rail for onward distribution. This is another manifestation of the combination of Covid and political factors impacting on Chinese ports.