On January 13th, a cargo ship sailed on the Suez Canal in Ismailia Province, Egypt. Xinhua News Agency (photo by Ahmed Goma)
In 2023, the overall recovery of China’s economy will be positive, and the cargo throughput of major ports will also show a trend of recovery.
Specifically, among the ports that have released their annual data for 2023, over 8 major ports have achieved positive growth in cargo throughput. For example, the cargo throughput of Ningbo Zhoushan Port in 2023 is 1.324 billion tons, a year-on-year increase of 4.9%; The cargo throughput of Shanghai Port in 2023 is 564 million tons, a year-on-year increase of 10%, and the container throughput is 49.158 million TEUs. Especially in terms of container throughput growth, the container throughput of Qingdao Port and Beibu Gulf Port will increase by 11.9% and 14.4% respectively year-on-year in 2023.
According to data released by the Ministry of Transport, from January to November 2023, the total cargo throughput and foreign trade cargo throughput of ports in China were 15.51 billion tons and 4.62 billion tons, respectively, an increase of 8.4% and 9.6% year-on-year. In the context of increasing economic uncertainty both domestically and internationally, the growth of the port industry has not come easily.
Entering 2024, the port industry is facing new uncertainties. For example, as major shipping companies around the world announce the suspension of the Red Sea route, most of the capacity of the Suez Canal is affected.
The business manager of a Guangdong bulk trading enterprise told 21st Century Business Herald reporters that due to the impact of the Red Sea crisis, cargo ships had to divert around Cape of Good Hope, and the freight rates on European routes have basically increased by 2-3 times. The company’s shipments to the Middle East and Europe have been greatly affected, with the main problems being skyrocketing sea freight rates and a shortage of cabin space.
Wang Guowen, Director of the Institute of Logistics and Supply Chain Management at China (Shenzhen) Institute of Comprehensive Development, stated in an interview with 21st Century Business Herald that the fundamentals of the port industry will not change in 2024, new factors will emerge, and uncertainty is increasing. It is expected that the impact of the Red Sea crisis will continue for some time. The port industry is actively transforming, expanding into various formats such as logistics, trade, and finance, and seeking new growth points.
1、 The fundamental changes in the port industry in 2024 are not significant
At present, China has formed five major port clusters, including the Bohai Rim Port Cluster, the Yangtze River Delta Port Cluster, the Southeast Coastal Port Cluster, the Pearl River Delta Port Cluster, and the Southwest Coastal Port Cluster.
According to data released by the Ministry of Transport, the main ports in the five major port clusters have achieved positive growth in container throughput in the first 11 months of 2023. From January to November 2023, the top 10 ports in China in terms of container throughput are Shanghai Port, Ningbo Zhoushan Port, Shenzhen Port, Qingdao Port, Guangzhou Port, Tianjin Port, Xiamen Port, Suzhou Port, Beibu Gulf Port, and Rizhao Port.
At present, the Ministry of Transport has not yet released the port throughput data for the whole year of 2023. According to data released by port enterprises in various regions, 21st Century Business Herald reporters found that in 2023, major ports such as Ningbo Zhoushan Port, Tangshan Port, Shanghai Port, Qingdao Port, Guangzhou Port, Suzhou Port, Rizhao Port, Beibu Gulf Port, and Shenzhen Port all achieved positive growth in cargo throughput. Among them, Shanghai Port and Beibu Gulf Port have grown rapidly, reaching 10% and 10.81% respectively.
From the perspective of container throughput of major ports in 2023, Shanghai Port’s container throughput still leads, reaching 49.158 million TEUs, ranking first in the world for 14 consecutive years. Qingdao Port’s container throughput has exceeded 30 million TEUs, with a growth rate of 11.9%. In addition, the growth rate of container throughput at Beibu Gulf Port has also reached 14.4%, but currently the scale of container throughput at the port is relatively small.
The business performance of specific ports varies. In 2023, Shandong ports completed a throughput of 1.71 billion tons and a container volume of 41.32 million TEUs for the whole year, an increase of 5.6% and 10.8% respectively year-on-year, achieving a revenue of 155.04 billion yuan and a total profit exceeding 10 billion yuan for the first time.
On January 29th, according to Li Fengli, the general manager of Shandong Port, at a press conference of the Shandong Provincial Government, Shandong Port will accelerate the smooth flow of logistics channels in 2023, with 32 new routes added throughout the year, 9 inland ports opened, and 9 trains opened, bringing the total number to 345, 41, and 91 respectively. It is also comprehensively accelerating the construction of the Northeast Asia International Shipping Hub Center.
The incremental performance of ports along the southwest coast and the Yangtze River Delta coast is improving. According to statistics from the Zhejiang Port and Shipping Management Center, in 2023, Ningbo Zhoushan Port completed a cargo throughput of 1.324 billion tons, a year-on-year increase of 4.94%; Completed a container throughput of 35.301 million TEUs, a year-on-year increase of 5.85%. In terms of multimodal transportation such as sea rail, river sea, and sea river, the number of sea rail intermodal trains at Ningbo Zhoushan Port has increased to 25, and the business has radiated to 16 provinces, municipalities (autonomous regions), and 65 prefecture level cities.
On January 31st, Chongqing Port released an announcement regarding the expected increase in performance for the year 2023. It is expected to achieve a net profit attributable to shareholders (shareholders) of the listed company of approximately 623 million to 688 million yuan in 2023, an increase of 481 million to 545 million yuan compared to the same period last year, and a year-on-year increase of 336.98% to 381.98%. In addition to the impact of asset disposal, the performance growth of Chongqing Port mainly comes from actively exploring the market and optimizing logistics models.
Shenzhen Port has also found more leverage in terms of incremental port business. In March 2023, Shenzhen Port Logistics Group was established to integrate the original logistics sector of Shenzhen Port and promote the centralized development of logistics business. The operating revenue in 2023 reached 2.848 billion yuan, a year-on-year increase of 89%.
In Wang Guowen’s view, China’s major ports have achieved positive growth in throughput in 2023, which is not an easy growth trend in the overall global economic downturn. But we also need to pay attention to the structural issues behind the port throughput figures, such as changes in the proportion of domestic and foreign trade in ports, changes in multimodal transport, etc. These structural data have not fully improved, indicating that the rapid growth of the port industry in the traditional loading and unloading business sector is still difficult.
For traditional port loading and unloading operations, the current foreign trade development environment is still not optimistic. According to customs statistics, the total import and export value of China in 2023 is 41.76 trillion yuan, a year-on-year increase of 0.2%. At present, the uncertainty of international environmental changes in 2024 is increasing, and it is expected that the complexity and severity of foreign trade development will still exist.
In 2024, the shipbuilding orders scheduled in previous years will be completed one after another, and it is expected that there will be a large-scale deployment of sea freight capacity and an expansion of sea freight supply. At the same time, there are no signs of large-scale recovery in foreign trade imports and exports, and the significant growth trend in domestic trade is not obvious. It can be foreseen that the overall fundamentals of the sea freight market will not change much in 2024, and it is expected that there will be no significant increase in sea freight demand, which means that the shipping market may experience a situation of oversupply, “said Wang Guowen.
At the same time, carbon reduction requirements also have an impact on the development of the global shipping industry. Starting from January 2024, shipping companies operating within the European Union will be required to pay for all carbon emissions. The percentage of emissions to be paid between 2024 and 2026 will be 40%, 70%, and 100%, respectively. Carbon tax will bring significant cost pressure to shipping companies, “said Wang Guowen.
2、 Red Sea crisis raises transportation costs for Asia Europe routes
Another influencing factor for the shipping industry in 2024 is the duration of the Red Sea crisis.
According to the weekly report of China’s export container transportation market on January 26th, the Asia Europe shipping route still faces the test of geopolitical situation. Major shipping companies choose to detour, which avoids canal tolls and high insurance costs. The price difference between the detour route and the cost of passing through the canal route is gradually narrowing, and the shipping market is gradually being digested by the impact of the Red Sea situation.
Wang Guowen believes that before the Red Sea crisis, container shipping prices rose sharply in 2021 due to the global supply chain congestion during the pandemic, and then experienced a significant decline, with freight rates dropping to lower levels than before the pandemic. Although the current Red Sea crisis has caused a global shortage of transportation capacity and led to an increase in freight rates for some routes, freight rates have not yet reached the heights seen during the pandemic.
But the factors involved in the Red Sea crisis are very complex, such as the spiraling increase in war risk insurance costs for crossing the Red Sea waterway, which has also raised transportation costs, “said Wang Guowen.
Therefore, in the face of high insurance premiums, shipping companies may find it more cost-effective to detour through Africa than to bear the combined costs of Suez Canal transit fees and insurance premiums.
Overall, the impact of the Red Sea situation is mainly due to channel congestion and increased costs, as well as the accompanying unexpected risks, with relatively limited impact on the global supply chain on a large scale. In order to avoid the Red Sea, some shipping companies may choose to detour around the Cape of Good Hope in Africa, which will increase the distance and average sailing days of related routes.
The business manager of the bulk trading company interviewed above stated that due to the impact of the Red Sea crisis, freight rates on European routes have increased the most, basically by 2-3 times. The main reason is that ships that originally traveled directly to Europe through the Red Sea had to detour around the Cape of Good Hope, resulting in an increase in voyage and fuel costs. Meanwhile, a large number of cargo ships have bypassed Cape of Good Hope, resulting in severe congestion in the port.
This situation has a significant impact on our company’s shipments to the Middle East and Europe. One is the skyrocketing sea freight costs, and the other is the difficulty in booking shipping space. We will also choose alternative solutions, such as using the China Europe special train for transportation and communicating with customers for FOB shipping. The freight and booking will be determined by the customers themselves. ”The business manager mentioned above stated.
Will the Red Sea crisis have a significant impact on commodity transportation, and what effects may it have on port enterprises?
According to data from the United Nations Conference on Trade and Development (UNCTAD), the Suez Canal is an important transportation hub for international shipping, carrying 12% to 15% of global maritime trade. As of January 26th, the transit volume of container ships on this channel has decreased by 67% compared to a year ago, with liquefied natural gas carriers being the most affected.
According to analysis by CITIC Futures, the suspension of the Red Sea route by cargo ships and their diversion to the route passing through the southernmost point of Africa, Cape of Good Hope, will increase the sailing time from the Far East to Northwest Europe by about 9 days, an increase of about 18 days per voyage, and a decrease in ship turnover efficiency by about 19%.
However, for port enterprises, especially those mainly engaged in bulk commodity transportation, the impact is relatively small, and it has a certain impact on port enterprises mainly engaged in container transportation.
Zhao Wei, Chief Economist of Guojin Securities, stated that in 2023, container ships, dry bulk carriers, and oil tankers will account for 42.2%, 19.1%, and 23.3% of the total weight of ships passing through the Suez Canal. This means an increase in operating costs for the diversion of a large number of container ships and oil tankers.
In Wang Guowen’s view, there are many uncertain factors that will affect the maritime market in 2024. For port enterprises, whether they actively or passively expand their business chain, transform into incremental businesses such as port supply chain and finance, optimize their revenue and profit structure, it is possible to strengthen their internal competitiveness in the highly changing market environment and international situation. (Liu Ningxin, Intern Xu Yixuan)
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