Shanghai Daily News

The opening of Shanghai's Yangshan Deep-Water Port has prompted new expansion and construction at surrounding ports, because of fears the Yangshan mega-port will have a negative impact on their profits.

When Yangshan port's first phase opened on December 10, the Ningbo and Zhoushan port authorities of Zhejiang Province announced plans to merge and become a single entity in order to face the increasing competition for cargo.

The alliance between the two ports, renamed the Ningbo-Zhoushan Port, was announced in late December.

The joint enterprise is managed by a single committee and operations will be integrated over a period of time, said the governor of Zhejiang Province, Lu Zushan.

The Zhejiang provincial government has set ambitious goals for the facility. The combined ports are expected to achieve throughput of more than 4,500 million tons by 2010 and handle 10 million TEUs (20-foot equivalent units) of container freight.

By 2020, the joint entity is expected to handle 6,500 million tons of cargo and 22 million TEUs annually.

"The port area will be the world's biggest after the integration," said Li Xinhua, vice director of the Ningbo Bureau of Foreign Trade and Economic Cooperation. "It has huge development potential and will seek cooperation with Shanghai's Yangshan port."

Li Linghong, director of the Ningbo Port Authority, said, "The Yangshan port can play an integral role by bringing more opportunities to both ports. We are not going to compete with Yangshan port, but cooperate and complement each other."

Ningbo's deeper ports could be used to help Yangshan, which operates only on certain days.

Typhoons and other storms may limit Yangshan's operations to 270 days a year, compared to Ningbo's 350 days, authorities said.

Meanwhile, Ningbo Port plans to invest 10 billion yuan (US$1.25 billion) to build 12 container berths at Zhoushan's Jintang Island, according to Wang Xinnian, vice president of the Ningbo Ports Group.

The first phase of the project at Dapukou, which is located at the Southwest corner of Jintang Island, will include five berths, said Wang. Construction will start in 2008.

The second phase, which includes seven berths, will be completed on the opposite side of Jintang Island, he added.

Orient Overseas Container Line, owned by former Hong Kong chief, Tung Chee-hwa and China Shipping Group, is expected to be a joint venture partner in the project, Wang said.

Ningbo's Beilun Port, which enjoys water depth of 18.2 meters, is also undergoing expansion with investment from Hutchison Whampoa and others.

Ningbo handled more than 5 million TEUs of freight last year, up 25 percent from 2004.

Nantong Port of Jiangsu Province also plans to invest 1 billion yuan this year to build seven berths and expects to handle 100 million tons cargo in 2006, up from the 83.3 million tons last year, said Luo Yimin, Nantong Party Secretary.

It's also expected to handle 350,000 20-foot containers this year, up from 301,000 containers last year, he said.

In five years, Nantong is expected to handle 200 million tons of cargo and 800,000 TEUs of containers annually.

It will have 58 berths for ships sized above 10,000 dead weight tonnage and 35 berths for those above 50,000 DWTs, Luo said.

Ningbo and Nantong are among 15 cities in the Yantze River Delta that are striving to expand port capacity to tap the rising demand and compete with Shanghai, which is fashioning itself to become Northeast Asia's primary shipping hub and an international shipping center by 2020.

The Ministry of Communications have already designated various assignments to the ports to avoid competition and strengthen cooperation under a macro plan.

With a water depth of 15.5 meters, Shanghai's huge Yangshan port is designed to allow very large container ships to transfer goods at the port.

Ningbo Port has resigned its role as a major container port, and now positioned itself as a port for bulk cargo like crude oil, ores and coal.

Other ports, like Nanjing Port in Jiangsu Province, have positioned themselves as feeding ports to Shanghai and sub-hubs to transfer international freight from Shanghai to inner China along the Yangtze River.

Despite the spirit of cooperation, industry officials said container businesses will still be a major focus for battle given these bring far greater profits. With one 10,000-ton berth every five kilometers along the shoreline in the area, competition is unavoidable, they said.

Li Limou, an official with the China International Freight Forwarders Association, said he's concerned about oversupply of port resources in the Yangtze River Delta region.

"Although demand is growing for more berths thanks to China's thriving trade, overheated port expansion could cause a waste of resources and malicious competition," he said.

Industry sources also suggested a glut of port resources could cause decreases in fees and hurt the ports.

Li Xinhua with the Ningbo Foreign Trade Authority said that as the demand is growing, there won't be any immediate problems. "Companies will choose for themselves," he said. "If cost is a bigger concern than timing, Ningbo will be a better choice."

Xu Peixing, director of the Shanghai Port Administrative Bureau, said the rapid development of ports in neighboring cities will help boost Shanghai Port's competitiveness.

"Shanghai and the other 15 cities in the Yangtze River Delta region will further cooperate in port operations and logistics development," he said.

The second phase of the Yangshan Port has already attracted overseas investors like Hutchison Whampoa and A.P. Moeller-Maersk's terminal operator.

With an investment of US$830 million, the second phase of the Yangshan port is expected to add annual capacity of 2 million TEUs when it becomes operational at the end of this year. The first phase of Yangshan port has capacity to handle 3 million TEUs a year.

The port will have 50 berths by 2010, and capacity to handle 15 million 20-foot containers.