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As credit dries up, China's small firms face shrinking profits, bankruptcies
Jun 30, 2017 | Reuters
By Yawen Chen; Thomas Peter
The struggles of China's small and medium-sized firms have grown so acute that many are expected to become unprofitable or even go belly-up this year, boding ill for an economy running short on strong growth drivers. -
U.S. targets Chinese bank, company, two individuals over North Korea
Jun 30, 2017 | Reuters
By Joel Schectman; David Brunnstrom
The United States imposed sanctions on two Chinese citizens and a shipping company on Thursday for helping North Korea's nuclear and missile programs and accused a Chinese bank of laundering money for Pyongyang. -
US risks angering China as it blacklists bank over dealings with North Korea and sells weapons to Taiwan
Jul 1, 2017 | The Independent
The Trump administration has hardened its approach to China, blacklisting a small Chinese bank over dealings with North Korea while approving more than a billion dollars in military sales to Taiwan. -
Liaoning to set up integrated port operating platform
Jun 28, 2017 | TradeWinds
By Bob Rust
China Cosco Shipping raising its stake in the stock-listed Port of Qingdao has opened up new revelations about the state-controlled companies that make up the shipping sector of China Inc. -
Qinhuangdao Port projects profit surge in first half
| Seatrade Maritime News
By Lee Hong Laing
Hong Kong-listed Qinhuangdao Port Co has projected a surge in net profit for its first half ended 30 June 2017 in view of the improving market conditions. -
US, China relations begin to cool as Trump's honeymoon with Xi ends
Jul 4, 2017 | CNN
By Ben Westcott ; Zachary Cohen
US President Donald Trump's administration has seemingly thrown its China policy into reverse -
China Plans Arctic Belt and Road Initiatives
Jul 3, 2017 | The Maritime Executive
By Mia Bennett
China formally incorporated the Arctic into its plans for maritime cooperation under the Belt and Road Initiative, also sometimes called One Belt, One Road. -
Maritime Industry Needs Better Data Sharing and Collaboration, But Change Is Coming
Jun 21, 2017 | World Maritime News
The maritime industry and broader ocean supply chain are suffering from major and costly inefficiencies due to ineffective data sharing and poor cross-industry collaboration. -
Traffic Growth in Ports to Remain Muted
Jun 23, 2017 | World Maritime News
Traffic growth in the ports sector is likely to remain well below historical levels for the foreseeable future, due to fundamental structural changes in the industry and global trade. -
More Chinese port consolidation on tap for 2017
Jun 20, 2017 | Journal of Comerce
By Turloch Mooney
Port sector consolidation in China is expected to accelerate this year as Beijing moves ahead with plans to reform state-owned enterprises as part of the overall restructuring of the country’s economy. -
Container lines building pricing power
Jul 3, 2017 | Journal of Commerce
By Greg Knowler
Container shipping is fast becoming a carriers’ market and with the extra pricing power gained by industry consolidation and the better supply-demand fundamentals, there is little likelihood of carriers returning to the profitability-destroying rate wars of early 2016.
Port mentions
Company Mentions
City/Province Mentions
Competitor Mentions
US- China Relations
Industry News
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As credit dries up, China's small firms face shrinking profits, bankruptcies
Jun 30, 2017 | Reuters
By Yawen Chen; Thomas Peter
The struggles of China's small and medium-sized firms have grown so acute that many are expected to become unprofitable or even go belly-up this year, boding ill for an economy running short on strong growth drivers.
The companies - which account for over 60 percent of China's $11 trillion gross domestic product - have entered the most challenging funding environment in years as Beijing cracks down on easy credit to contain a dangerous debt build-up.
Many of the firms - mostly in the industrial, transport, wholesale, retail, catering and accommodation sectors - are already grappling with soaring costs, fierce competition and thinning profits.
The strains faced by small and medium-sized enterprises (SMEs) are expected to grow more visible as Beijing deflates a real estate bubble and eases infrastructure spending to dial back its fiscal stimulus.
"Many SMEs probably won't make it this year," said Wang Cong, manager of a struggling mid-sized logistics company in the eastern city of Zibo.
"Banks have started pulling the plug, just as competition has become a lot more intense."
Central bank data shows broad M2 money supply grew 9.6 percent in May from a year earlier, the slowest since at least January 1996, when Reuters data on the series began.
Cumulatively, combined trust loans, entrusted loans and undiscounted banker's acceptances - sources of funding for shadow banking activities that largely involve SMEs - fell to 28.9 billion yuan ($4.25 billion) in May from 177 billion yuan in April.
The lack of funds is taking a toll. Business activity in the SME sector weakened for the third straight month in June to hit the lowest in 16 months, a Standard Chartered survey tracking more than 600 Chinese SMEs found.
The market pressures have led to an increase in unemployment, and weaker demand is expected to keep weighing on the labor market this year, the survey noted.
"Our profit has thinned to the point where I don't think any more drop could be sustainable," said Yu Zhihao, who runs a wood wholesale business in China's northeastern port city of Tianjin and has seen his gross margins contract by a quarter in the past year.
FINANCING COSTS
For state-owned enterprises, growth in financing costs on average accelerated to 5.5 percent in May from 0.5 percent in February, said Jonas Short, who heads the Beijing office at investment bank Sun Hung Kai Financial (SHKF).
For smaller businesses lacking strong collateral, funding is even more expensive - if they can find it.
"It's pretty clear, financial expenses have skyrocketed since the decision to increase interbank rates over the New Year," said Short.
The waning fortunes of China's SMEs come ahead of a reshuffle in the country's political leadership team late this year. SMEs employ four-fifths of the workforce and are crucial to the stability craved by Beijing.
Many SMEs appear reluctant to expand production even as the government has introduced various favorable measures such as tax cuts to support their development, said Zhang Shaoping, analyst with the government-affiliated China Association of Small- and Medium-sized Enterprises.
"My feeling is the second quarter would definitely be tougher for SMEs compared to the first quarter," Zhang said.
Banks' willingness to lend to SMEs fell below the no-change mark of 50 for the first time on record in June, the Standard Chartered survey found, indicating banks are more hesitant to extend credit to SMEs.
That reflects analysts' views that even though the central bank will likely provide sufficient credit to avoid a liquidity crunch, banks may still prefer lending to bigger rather than smaller companies.
Hangzhou Zugeng Import & Export Co, a medium-sized fruit import company based in Shanghai, was among those SMEs to fold as banks held back support.
One former employee said she had heard the company's banks had been unnerved by a rise in corporate loan delinquencies and had stopped providing funds to companies facing tough operating conditions.
A former company representative confirmed the firm had closed when contacted by phone but declined any further comment.
Some 1.21 million privately or individually-owned business went out of business during the first quarter of the year, a jump of almost a third compared to a year earlier, data from the State Administration for Industry & Commerce (SAIC) showed.
"The market is going through a quicker process of survival of the fittest," Yu Fachang, a SAIC official said.
For those who have not shuttered, some resort to more price cuts to stay competitive.
Zhao Yinyue, manager of Tianjin-based freight forwarder Jinluan Logistics said orders for imported wood have slumped since May as investment in real estate and infrastructure dried up.
"We are biting the bullet and holding on," said Zhao.
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U.S. targets Chinese bank, company, two individuals over North Korea
Jun 30, 2017 | Reuters
By Joel Schectman; David Brunnstrom
The United States imposed sanctions on two Chinese citizens and a shipping company on Thursday for helping North Korea's nuclear and missile programs and accused a Chinese bank of laundering money for Pyongyang.
U.S. Treasury Secretary Steve Mnuchin said the actions were designed to cut off funds that North Korea uses to build its weapons programs in defiance of U.N. Security Council and unilateral sanctions.
"We will follow the money and cut off the money," he told a news conference.
A Treasury statement identified the bank as the Bank of Dandong and the firm as Dalian Global Unity Shipping Co Ltd. It identified the two individuals as Sun Wei and Li Hong Ri.
The sanctions imposed on the two Chinese citizens and the shipping company blacklists them from doing business with U.S.-tied companies and people.
Bank of Dandong did not respond immediately to a request for comment. A staff member at Dalian Global Unity would not comment on the sanctions and subsequent calls to the firm's office in Dalian went unanswered.
Mnuchin said U.S. officials were continuing to look at other companies that may be helping North Korea and may roll out additional sanctions.
U.S. foreign policy experts say Chinese companies have long had a key role in financing Pyongyang. However, Mnuchin said the action was not being taken to send China a message. "This wasn't aimed at China. We continue to work with them," he said.
Asked about the U.S. sanctions on Friday, Chinese Foreign Ministry Spokesman Lu Kang said that China consistently opposes unilateral sanctions imposed outside the U.N. framework.
"We strongly urge the United States to immediately correct its relevant wrong moves to avoid affecting bilateral cooperation on the relevant issue," he said, without elaborating.
China's ambassador to the United States, Cui Tiankai, said China opposed the United States using domestic laws to impose "long-arm jurisdiction" on Chinese companies or individuals, the official Xinhua news agency reported on Friday.
"If a Chinese company or individual has acted in a way that violates United Nations Security Council resolutions, then China will investigate and handle the issue in accordance with Chinese law," he told an event in Washington on Thursday evening.
GROWING FRUSTRATION
U.S. officials told Reuters this week that President Donald Trump was growing increasingly frustrated with China over its inaction on North Korea and bilateral trade issues, and was now considering possible trade actions against Beijing.
A senior White House official told reporters on Wednesday China was "falling far short of what it could bring to bear on North Korea in terms of pressure."
The U.S. move came as Trump was due to meet South Korean President Moon Jae-in at the White House on Thursday to discuss steps to push North Korea to abandon its weapons programs, which have become an increasing threat to the United States.
It also came after the United States sanctioned a Chinese industrial machinery wholesaler, Dandong Hongxiang Industrial Development Co, in September for its ties to North Korea's nuclear program, the first time Washington had taken such a step against a Chinese firm.
China's Foreign Ministry said in the same month Hongxiang was under investigation for "illegal behavior" and "economic crimes" following the provisions of U.N. resolution 2270, which imposed tighter sanctions on North Korea in March.
Mnuchin said the United States would discuss efforts to choke off funding for North Korea's nuclear and missile programs with China and other countries at next week's Group of 20 summit in Germany.
The U.S. Treasury Department said in an online notice published on Thursday the Bank of Dandong had served as a gateway for North Korea to access the U.S. financial system. Authorities said 17 percent of Dandong's customer transactions in the bank's U.S. accounts had ties to North Korea.
Anthony Ruggiero, a former senior Treasury official in the Office of Terrorist Financing and Financial Crimes, said the action against Bank of Dandong was the first time U.S. authorities had sought to punish a Chinese bank accused of helping North Korea.
It would immediately cause Western firms to cut off any transactions with Bank of Dandong, he said. It may also cause financial institutions in Western Europe and the United States to further scrutinize whether their Chinese business could have links to North Korea.
"The designation will make reputable Western banks ask questions about larger financial institutions in China," said Ruggiero, who is now a senior fellow at the non-profit Foundation for Defense of Democracies.
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Jul 1, 2017 | The Independent
The Trump administration has hardened its approach to China, blacklisting a small Chinese bank over dealings with North Korea while approving more than a billion dollars in military sales to Taiwan.
The twin moves, both expected to infuriate Beijing, came just days after President Donald Trump appeared to lose faith in his strategy of enlisting Chinese help on North Korea, arguing in a cryptic tweet that it had “not worked out.” Still, the US insisted it still wanted to work with China, North Korea's biggest trading partner, to combat the nuclear threat.
“We are in no way targeting China with these actions,” Treasury Secretary Steve Mnuchin said at the White House, referring to sanctions the US slapped on the Bank of Dandong, accused of illicit dealings with the North.
It was unlikely China would see it that way, especially given the one-two punch with the sales to Taiwan, the self-governing territory that Beijing considers to be part of China. And Mr Trump has a history of linking the Taiwan conflict to his broader hopes for cooperation with China.
Shortly after being elected president, Trump stunned Beijing when he broke with decades of US policy by accepting a phone call from Taiwan's president. Two months later, after being sworn in, Trump reversed course and told Chinese President Xi Jinping he would honour the “One China” policy that recognises only Beijing, clearing the way for him to seek Xi's help on North Korea. He later held a summit with Mr Xi at one of his estates.
However, China's ambassador to Washington, Cui Tiankai said: “And all these actions — sanctions against Chinese companies and especially arms sales to Taiwan — will certainly undermine the mutual confidence between the two sides and runs counter to the spirit of the Mar-a-Lago summit.”
The dual announcements came as Mr Trump was opening his first visit with South Korea's new leader, President Moon Jae-in, who has long advocated outreach to North Korea. Mr Moon's predecessor had staunchly backed Mr Trump's harder line.
Mr Trump has also been leaning on Mr Xi to help stop the North's development of nuclear weapons before they can threaten the U.S. homeland, with a focus on getting China to fully enforce international sanctions intended to starve Pyongyang of revenue. But last week, Trump tweeted that he appreciated Xi's efforts to help with North Korea but said it hadn't been successful.
“At least I know China tried!” Mr Trump wrote.
The military sales, worth a total of about $1.4 billion, are the first such deal with Taiwan since Mr Trump took office. A grouping of seven transactions, they include technical support for early warning radar, anti-radiation missiles, torpedoes and components for SM-2 missiles, the US said. They consist mostly of upgrades to convert existing systems from analog to digital.
The administration said the approvals did not violate the Taiwan Relations Act that governs US contacts with the island, and, indeed, the US is legally obligated to sell weapons to Taiwan for its self-defence. State Department spokeswoman Heather Nauert said it illustrated US support “for Taiwan's ability to maintain a sufficient self-defence policy.”
“There's no change, I should point out, to our One-China policy,” Ms Nauert said.
Under the policy, the US recognises Beijing as the sole government of China but maintains strong unofficial ties with Taiwan and remains the island's main supplier of defence equipment.
Meanwhile, the Treasury Department proposed to sever the Bank of Dandong entirely from the US financial system, pending a 60-day review. The sanctions bar Americans from doing business with the bank, which is based in a northeastern Chinese city on the North Korean border that serves as a gateway for trade with the isolated nation.
Mr Mnuchin said the bank had facilitated millions of dollars of transactions for companies involved in North Korea's weapons of mass destruction and ballistic missile programmes.
The US also slapped sanctions on Dalian Global Unity Shipping Co. and on two Chinese people that it said facilitated illegal activities by North Korea. The Treasury Department accused the shipping company of transporting 700,000 tons of freight annually, including coal and steel products, between China and North Korea.
Anthony Ruggiero, a sanctions expert and former Treasury Department official, described it as a small Chinese bank “sitting at the heart” of trade between North Korea and China.
“This is a strong message to Chinese leaders that the Trump administration will act against North Korea's sanctions evasion in China,” said Mr Ruggiero, a senior fellow at the Washington-based Foundation for Defense of Democracies.
The military sales will go forward unless Congress formally objects in the next 30 days. Legislators have generally been strongly supportive of such sales, and House Foreign Affairs Committee Chairman, Republican Ed Royce, called it “long overdue.”
The last US arms sales to Taiwan, worth $1.8 billion, were announced in December 2015. They included two decommissioned U.S. Navy frigates, anti-tank missiles, amphibious assault vehicles and Stinger surface-to-air missiles.
China objected strongly to that sale, but it did not notably set back US-China relations and military ties, as has happened after past arms sales to Taiwan. However, relations across the Taiwan Strait have nonetheless deteriorated in recent years.
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Liaoning to set up integrated port operating platform
Jun 28, 2017 | TradeWinds
By Bob Rust
China Cosco Shipping raising its stake in the stock-listed Port of Qingdao has opened up new revelations about the state-controlled companies that make up the shipping sector of China Inc.
New disclosures show that by 2019, the state shipowner could be spending almost $100m per year on port services at Qingdao alone, where it sits on both sides of the table, having recently raised a previous 2% shareholding to 20%.
Meanwhile, the ports arms of both Cosco and China Merchants Group (CMG) are firming their grip on China’s ports operations, which are slowly being integrated.
The disclosures by Hong Kong-listed Qingdao Port International Co come in the context of China’s ongoing China’s ongoing unification of municipal port authorities into province-wide monopolies. This began with the 2015 announcement that Zhejiang’s five big port authorities would be merged under a Zhejiang Port Investment Operation Group, with neighbouring Jiangsu province tipped to follow.
That project may have slowed since then because of local resistance or its challenging scope, and China has never merged its state-owned enterprises very quickly.
Still, the formation of provincial port monopolies troubles some industry players, who fear it will undermine free-market competition among China’s non-proprietary ports to the detriment of customers — especially those that are not also owners.
However, China’s rival state-owned shipowners Cosco Shipping and CMG are seeking to participate in the project by taking strategic shares in the new provincial groups, dividing the map of China between them.
In northern China, CMG recently announced its operational and investment role in the provincial port authority being established in Liaoning province, which includes Jinzhou, Yingkou and Dalian. CMG’s port operations arm already holds a 21% stake in Dalian.
Liaoning’s integration is due to be complete by 2019, while across the Bohai Sea in still-to-be-integrated Shandong province, local ports such as Rizhao are under government pressure to reform, and, at Shandong’s biggest port, Cosco has just closed on its investment at Qingdao.
Besides being a new dominant shareholder, Cosco is already a dominant customer for port services at Qingdao, and it intends to continue raising its spend there now it is one of the owners.
Figures released to the Hong Kong Stock Exchange show that in 2015 and 2016 respectively, Cosco spent CNY 380m ($58.5m as of year-end 2015) and CNY 430m on stevedoring, towage, logistics, power and other services and goods provided by the Qingdao port. The full-year figure for 2017 is expected to hit CNY 540m under a proposed annual cap, part of a general framework agreement on goods and services, which is determined by extrapolating from current growth rates, and assumes stable cost levels. For the coming two years, the caps are set at CNY 590m and CNY 660m.
The sharp leap between 2016 and 2017 comes because the earlier figures are actual historical transaction volumes, while the later figures are a projected maximum.
Comparing like with like, the Port of Qingdao seems to be expecting annual growth about 13% in its volume of business with its new shareholder.
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Qinhuangdao Port projects profit surge in first half
| Seatrade Maritime News
By Lee Hong Laing
Hong Kong-listed Qinhuangdao Port Co has projected a surge in net profit for its first half ended 30 June 2017 in view of the improving market conditions.
The Chinese port said in a regulatory filing to the stock exchange that its net profit attributable to shareholders of the parent for the first six months is expected to increase no less than 260% compared to the previous corresponding period, which registered a profit of RMB137m ($20.3m).
Qinhuangdao Port attributed the better financial performance to improvement of the macro market environment, as well as the effective measures taken by the group to attract customers and stabilise the supply of cargoes leading to growing throughput volume.
Meanwhile, Qinhuangdao Port last week inked an agreement to sell its majority stake in its container terminal operator subsidiary to its joint venture firm with Tianjin Port Group.
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US, China relations begin to cool as Trump's honeymoon with Xi ends
Jul 4, 2017 | CNN
By Ben Westcott ; Zachary Cohen
In a flurry of announcements likely to antagonize Beijing, US President Donald Trump's administration has seemingly thrown its China policy into reverse, cooling relations between the two super powers.In less than one week, the US has finalized a $1.4 billion arms sale to Taiwan, labeled China one of the world's worst human traffickers and imposed sanctions on a Chinese bank for doing business with North Korea.Trump and Chinese President Xi Jinping had previously enjoyed an unusually cordial relationship since their first February meeting in Florida, with the US president describing Xi as a "terrific person" with whom he had a "very good relationship."In exchange for Xi's agreement to help restrain North Korea, the Trump administration loosened or withdrew US pressure in other areas, including the South China Sea and Trump's previous campaign pledge to label China a currency manipulator.But on June 21, Trump sent a tweet saying Chinese efforts to restrain North Korea had "not worked out," while adding he greatly appreciated that they had "tried.""It's a very firm indication that the honeymoon after the Mar-a-Lago summit is over and that tweet in particular ... that was a clear signal that there was going to be a change and cooling in temperature of China and US ties," Euan Graham, International Security Program director at Sydney's Lowy Institute, told CNN.Sanctions placed on Chinese bankOn Thursday, the Trump administration announced plans to go ahead with a $1.4 billion arms sale to Taiwan originally signed by the Obama administration. The unexpected timing of the deal -- which comes while Xi is in Hong Kong commemorating the 20th anniversary of the city's return to China -- surprised many analysts.The agreement, which was always likely to have gone ahead, appeared to have been at least temporarily shelved, as Trump looked to build closer ties with China. It's sudden reemergence will likely have angered Beijing, which considers Taiwan a rogue province and part of mainland China.The sale came the same day as new sanctions were announced on China's Bank of Dandong, which the US accuses of supporting illegal North Korean financial activity. On Tuesday, a new US government report labeled China as one of the world's worst offenders in human trafficking."From the beginning, President Trump has tied all these US-China issues together expecting cooperation from China on North Korea for cooperation from the US on these other issues," said Anthony Ruggiero, a North Korea expert and senior fellow at the Defense for Democracy.Ruggiero said the decision to sanction Dandong was "long overdue," adding pressure could be put on China through their need for US currency."China is now in a position where it must defend a bank the US said is a money laundering concern. The Chinese leadership will wonder if the Trump administration will sanction a medium-sized Chinese bank next," he said.''
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China Plans Arctic Belt and Road Initiatives
Jul 3, 2017 | The Maritime Executive
By Mia Bennett
When China convened its Belt and Road Forum in Beijing in May, most of the attention focused on the initiative’s plans for transportation infrastructure across the Eurasian landmass and the Indian Ocean. Since then, however, China formally incorporated the Arctic into its plans for maritime cooperation under the Belt and Road Initiative, also sometimes called One Belt, One Road.
The Vision for Maritime Cooperation under the Belt and Road Initiative, released on June 20 by China’s National Development and Reform Commission and the State Oceanic Administration, explains that a “blue economic passage” is “envisioned leading up to Europe via the Arctic Ocean.”
This “blue economic passage” would be along Russia’s Northern Sea Route, the Arctic shipping lane that hugs the country’s north coast. Over email, Dr Marc Lanteigne, a Senior Lecturer in Security Studies at Massey University in New Zealand and a China expert, explained, “This paper is the first official confirmation that the Arctic Ocean is among the ‘blue economic passages’ Beijing is seeking to develop.”
The other two routes included in the vision consist of the China-Indian Ocean-Africa-Mediterranean Sea blue economic passage and the China-Oceania-South Pacific blue economic passage. (Maybe the latter explains Fiji’s somewhat perplexing attendance at the Belt and Road Forum and its unceremonious closure of its representative office in Taiwan last month.)
The policy document largely focuses on China’s achievements and plans along the first route, where the government has assisted with the development of ports and industrial parks in places like Myanmar, Malaysia, Pakistan and Greece. While fewer fine-scale geographic details are provided about the Arctic, the document notes:
“Participating in Arctic affairs. China is willing to work with all parties in conducting scientific surveys of navigational routes, setting up land-based monitoring stations, carrying out research on climatic and environmental changes in the Arctic, as well as providing navigational forecasting services.
“China supports efforts by countries bordering the Arctic in improving marine transportation conditions, and encourages Chinese enterprises to take part in the commercial use of the Arctic route. China is willing to carry out surveys on potential resources in the Arctic region in collaboration with relevant countries, and to strengthen cooperation in clean energy with Arctic countries.
“Chinese enterprises are encouraged to join in sustainable exploration of Arctic resources in a responsible way. China will actively participate in the events organized by Arctic-related international organizations.”
Interestingly, the document does not review China’s accomplishments to date in the Arctic or, more specifically, along the Northern Sea Route. Yet for years already, the Chinese government and affiliated companies and organizations have been eyeing its development.
In 2013, Chinese state-owned shipping company COSCO sent the first-ever container ship through the Northern Sea Route. Last year, five COSCO vessels sailed through the icy route, a company record. In 2015, Chinese banks lent $12 billion to the Yamal liquefied natural gas project, which lies in the middle of the Northern Sea Route.
China’s Silk Road Fund, an investment vehicle created by the government to finance Belt and Road Initiative projects, has a 9.9 percent stake in the Yamal project as well. So why did it take so long for China to officially incorporate the Arctic into its Belt and Road Initiative?
Lanteigne noted that China was reluctant to do so for two reasons. First, unlike Japan or South Korea, China has not released an official Arctic policy and is still in the process of collecting data before doing so.
Second, Lanteigne offered, “Once China began to deepen its Arctic diplomacy, along with references to the country as a ‘near-Arctic state’, there were concerns among other Arctic actors, especially the United States, that Beijing far northern interests were primarily motivated by regional resources and that China was seeking to challenge the political status quo in the region. Chinese policymakers have been seeking to dispel those concerns by placing greater emphasis on scientific diplomacy and advocating bilateral partnerships in the study of the affects of local climate change.”
He drew attention to Beijing’s careful framing of its investments in the Arctic, from Norway to Russia to Greenland, as joint ventures. This practice fits in line with the Belt and Road Initiative’s larger narrative of, in the words of Chinese President Xi Jinping last month, embodying “the spirit of peace and cooperation, openness and inclusiveness, mutual learning and mutual benefit.”
In Russia, this discourse has won over officials at the highest level. Moscow supports China’s Belt and Road Initiative and generally condones the country’s involvement in the Arctic. At the Belt and Road Forum, President Vladimir Putin and his foreign minister Sergey Lavrov were two of the most prominent attendees.
In a speech there, Putin expressed his support for China’s transcontinental infrastructure plans. He proclaimed, “By proposing China’s One Belt, One Road initiative, President Xi Jinping has demonstrated an example of a creative approach toward fostering integration in energy, infrastructure, transport, industry, and humanitarian collaboration.”
Russia is partly keen for Chinese investment in its infrastructure because capital from the West has dried up. Russian diplomat Gleb Ivashentsov, who has served as Russian ambassador to Myanmar and South Korea, stated in an interview, “If we talk about Moscow’s turn to the East, it is fully justified. The Asian region is the engine of economic development, whereas Europe is marking time. In Asia, we can take both technology and investment. From the West, we see only sanctions and nothing more.”
Yet some in Russia view China’s plans more suspiciously. Writing in The Maritime News of Russia, Anatoly Korovin, Captain-Coordinator of Petropavlovsk-Kamchatsky’s Maritime Rescue Center, warns that the Chinese government does not believe that Russia should exercise full control over shipping along the Northern Sea Route. Korovin argued, “The greatest threat to the security interests of the Russian Federation is an attempt by some countries (notably Denmark, the USA, Japan and China) to achieve recognition of the Northern Sea Route as an international transport routes with freedom of navigation.”
At the same time, he suggested the possibility that China may be interested in creating a joint venture to manage the Northern Sea Route, which could bring with investment in maritime infrastructure. Such plans were not fleshed out by the recently-released policy document released, but this may be the direction Beijing seeks to advance in the coming years.
In Beijing, in May, Putin expressed in his speech, “Greater Eurasia is not an abstract geopolitical arrangement, but, without exaggeration, a truly civilization-wide project looking toward the future.”
Putin’s distinction between an “abstract geopolitical arrangement” and a “civilizational-wide project” is interesting. The allure of his earlier pet project, the Eurasian Economic Union (EEU), is fading as Eurasian countries are increasingly drawn east rather than west. The EEU counts Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia as its members, while the Belt and Road Initiative reportedly involves some 64 countries besides China. And where the EEU could in fact be called an “abstract geopolitical arrangement,” the Belt and Road Initiative is a project that is being realized, albeit in fits and starts. Beijing’s efforts to build ports, railroads, highways, and corridors are stacking up incrementally in many directions, including now in the north.
In many ways, the Russian government is pinning its hopes for national economic development on the Arctic. If Chinese capital can make these visions a reality by turning the frigid Northern Sea Route into a “blue economic corridor,” this may benefit both Moscow and Beijing – so long as they agree to disagree on the status of the shipping lane under international law.
With the formal inclusion of the Arctic into China’s Belt and Road Initiative, it’s clear that Beijing is becoming more comfortable with being forthcoming about its interests in Arctic shipping and resources rather than solely emphasizing science and climate change. Lanteigne believes, “It’s likely that future Chinese projects in the Arctic will be increasingly economic in nature, especially as more of the Arctic Ocean becomes accessible.” Moscow will be watching with a healthy dose of anticipation and suspicion.
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Maritime Industry Needs Better Data Sharing and Collaboration, But Change Is Coming
Jun 21, 2017 | World Maritime News
The maritime industry and broader ocean supply chain are suffering from major and costly inefficiencies due to ineffective data sharing and poor cross-industry collaboration, a new report and industry survey released by the Business Performance Innovation (BPI) Network in coordination with Navis and XVELA, both part of Cargotec, shows.
However, the shipping industry is in the midst of a significant transformation to increase efficiency, visibility and customer services, according to the study.
The study, entitled “Competitive Gain in the Ocean Supply Chain: Innovation That’s Driving Maritime Operational Transformation,“ is based on a global survey of more than 200 executives and professionals from terminal operators, carriers, logistics providers, vessel owners, port authorities, shippers, consignees and other members of the global ocean supply chain.
The findings indicate that importers, exporters, shipowners and other stakeholders suffer from poor visibility and predictability around shipments and are losing money due to a lack of partner synchronization and insufficient data insight.
However, there is recognition, particularly among industry leaders interviewed, that digitization and mindset shifts are afoot, and will be a boon to all players in the industry.
“Everyone benefits from collaboration and data sharing. It starts with the customers and moves to the carriers, then the terminal operators, vendors, freight systems, truck companies, and keeps going down the line. Closer collaboration is a compelling value proposition for each supply chain partner,” Andreas Mrozek, Global Head Marine & Terminal Operations for the Hamburg Süd Group, said.
Ninety percent of survey participants said real-time data access and information sharing was important to increasing the efficiency and performance of the shipping industry. Some 82 percent said the industry needs to improve supply chain visibility, according to the survey.
The push for improvements will likely come from a combination of forces, according to industry executives. Shippers will push for better operational visibility, alliances will demand better ways for their carrier members to share information to improve efficiencies and customer service and terminals and port authorities will be under pressure to increase utilization and optimize existing infrastructures.
On average, surveyed executives estimated that each of a wide range of ocean supply chain processes could be improved by as much as 66 percent and no less than 55 percent if the industry updated its IT systems and improved its ability to share data with other members of the supply chain.
“Our study underscores the critical need for the shipping industry to improve collaboration and visibility through the adoption of new technology-driven models and processes,” Dave Murray, Head of Thought Leadership for the BPI Network, explained.
“Perhaps partly because the industry has been preoccupied and constrained by its economic challenges—but also because many of its members are just plain resistant to change—the industry has been far too slow to enter the digital age,” Murray added.
According to respondents, the areas most in need of improvement are carrier to terminal coordination, supply chain visibility and information sharing, terminal operations, cargo flow visibility and predictability, and coordination across carrier alliances.
“The findings of the study are consistent with what we are hearing in the field from some of the biggest carriers and terminals in the world – namely that coordination, collaboration, and visibility across the supply chain need to improve through a common cloud platform and network,” Guy Rey-Herme, XVELA CEO and President, noted.
The report indicates that industry resistance to change, coupled with the industry’s aging and inflexible IT systems, are key impediments to improving visibility and collaboration. Some 54 percent of respondents said the industry being “slow to change” was one the biggest roadblocks to improving collaboration, while 49 percent cited the cost and complexity of legacy systems.
At the same time, many in the industry believe that change is coming. Some 46 percent of respondents said their companies were either investing significantly in new technologies or significantly increasing those investments.
“We are seeing accelerating technology innovation and upgrades as terminals and carriers alike embrace the age of digitization,” Benoit de la Tour, President of Navis and Head of the Software Business at Kalmar, pointed out.
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Traffic Growth in Ports to Remain Muted
Jun 23, 2017 | World Maritime News
Traffic growth in the ports sector is likely to remain well below historical levels for the foreseeable future, due to fundamental structural changes in the industry and global trade, according to Fitch Ratings.
Global port traffic growth has slowed in recent years due to a mix of mostly structural factors, including a maturing container shipping industry, the growth of China’s internal market and shifting global supply chains. Together, these factors are expected to result in sector growth that is much closer to global GDP growth, compared to the two decades before the financial crisis, when the growth rate in container throughput was a multiple of GDP.
Competition is more intensive in ports than in other areas of infrastructure, particularly for containers because they are standardised and can easily be transported to their final destination from any port. As markets shrink, a long-term lower-growth environment increases the potential for periods of intense competition.
“Major ports will be better positioned to weather any downturns, while small and mid-sized ports would face greater risks from a race to the bottom in prices,” Fitch Ratings said.
The ratings agency added that accelerating consolidation in the container shipping sector “could also further erode the pricing power of smaller ports.”
Furthermore, a recent increase in protectionist and anti-globalisation rhetoric, particularly in the US, represents a risk for the ports sector.
“While this has not yet translated into higher tariffs or non-tariff barriers, and our base case is that disputes will be resolved within the existing World Trade Organization framework, our analysis suggests broader protectionist measures would have a significant impact,” Fitch Ratings concluded.
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More Chinese port consolidation on tap for 2017
Jun 20, 2017 | Journal of Comerce
By Turloch Mooney
Port sector consolidation in China is expected to accelerate this year as Beijing moves ahead with plans to reform state-owned enterprises as part of the overall restructuring of the country’s economy. After a series of high-profile mergers of state-owned shipping and logistics companies, more attention is being paid to rationalizing the country’s fragmented ports base to improve efficiency, make gains from economies of scale, and cut out excessive competition and duplication of provincial port resources. The process started in earnest last year with China Merchants Holdings International (CMHI)'s acquisition of a 21 percent stake in the Dalian Port Company. “CMHI can further enhance the domestic port network, while simultaneously help facilitate the business growth and efficiency improvement of Dalian port through its advanced management capabilities,” CMHI chairman, Li Jianhong said at the time the deal was announced. Dalian port is now set to be positioned at the center of a new integrated port group covering coastal facilities in the northeastern Liaoning province
On June 10, the parent company of China Merchants Port Holdings (CMPort) signed a wide-ranging cooperative agreement with the Liaoning provincial government and the city government of Shenyang. Central to the agreement, which covers cooperation in a wide range of areas from financial services to the health sector, is a commitment to integrate the port operations of Liaoning province, including the key ports of Dalian, Yingkou, and Jinzhou. “China Merchants and Liaoning Province will play their respective advantages to strengthen all-round strategic cooperation in port logistics. China Merchants and Shenyang City will work together to promote the Liaoning Free Trade Zone, build Shenyang port, and promote the development of modern logistics industry,” said a statement issued at group level. A China Merchants spokesperson told JOC.com that the details of the arrangement have not yet been agreed. An ownership structure for the new port group is expected to be in place by the end of 2017 and the consolidation to be fully completed by the end of 2018. In addition to improving the competitiveness of the state-owned ports, the deal is part of efforts to revitalize the ailing economy in the northeast and help drive the development of the planned China-Japan-South Korea Free Trade Zone. Dalian port was China’s seventh-busiest container port in 2016, handling 9.58 million TEU. Year-over-year volumes were up by 2 percent to 3 million TEU in the first quarter. In addition to container operations, the port’s facilities include a 450,000 tonne crude oil terminal, the largest of its kind in the world, and a 400,000 tonne iron ore terminal. Its automobile terminal handles 100 percent of foreigntraded vehicles in northeast China. Yingkou port was China’s ninth-busiest container port last year, handling just more than 6 million TEU. Historically known as Manchuria, the full northeast region of China consists of the three provinces of Jilin, Heilongjiang, and Liaoning. Because of its abundant coal reserves, it was one of the earliest regions in China to industrialize. However, its heavy industry-based economy has stagnated in recent years and the government has struggled with efforts to revitalize it. Major industries include steel production, petroleum refining, shipbuilding, and aircraft and automotive manufacturing. The port consolidation drive is evident in other parts of the country as well. In April, CMPDS, the Shenzhen-based subsidiary of CMPort, spent HK$6 billion ($780 million) on the purchase of a 60 percent stake in the Shantou Port Group (SPG) from the state-owned assets and supervision administration of the Shantou city government. The investment gives China Merchants control of the port assets of Shantou located in the southern Guangdong province and consisting of five port zones and 22 berths. CMPort has investments and operations in Hong Kong, Shenzhen, Shanghai, Ningbo, Qingdao, Tianjin, Xiamen, and Taiwan, as well as multiple investments overseas. The Hong Kong-listed red chip handled 32.36 million TEU at its China and international facilities in the first quarter of the year, a figure 9.1 percent up on the same period in 2016, and expects global throughput to break the 100 million TEU barrier this year.
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Container lines building pricing power
Jul 3, 2017 | Journal of Commerce
By Greg Knowler
Container shipping is fast becoming a carriers’ market and with the extra pricing power gained by industry consolidation and the better supply-demand fundamentals, there is little likelihood of carriers returning to the profitability-destroying rate wars of early 2016. Maritime analyst Drewry said headhaul trades that were most important to carrier revenues were staging a broad recovery from the rock-bottom rate levels of last year and was expecting this to continue for the second half. Carriers were also able to secure higher trans-Pacific service contracts for the 2017–18 season, with prices around $1,200 per FEU to the West Coast, compared with about $800 to $900 per FEU in the prior season. “Due to the higher 2016 second-half rates the comparisons will get tougher as the year goes on, which will put an end to the very high year-over-year increases, but even if they plateau or start decreasing in the fourth-quarter 2017 they will still be higher than in 2016 as a whole,” Drewry said in its Container Insight Weekly. Interestingly, Asia-Europe spot rates on the Shanghai Shipping Exchange’s SCFI at the end of June were 16 percent lower than at the same point of 2016. On July 1 last year, the spot rate from Shanghai to North Europe spiked by almost 45 percent then plunged 30 percent in what would be a six-month period of extreme volatility. The weekly rate movements are tracked at JOC.com’s Market Data Hub. In Drewry’s analysis of rates across the first half of the year, it found that its Global Freight Rate Index across a wide spectrum of trades was 36 percent higher after six months of 2017 versus the same period in 2016. However, Drewry did note that last year was exceptionally poor for carriers trying to secure compensatory rates, and when compared with the first half of 2015, spot rates for the first six months of 2017 were still 4 percent lower. The analyst looked at representative spot rates within specific trades to gauge where the recovery has been the strongest. It found that on the East-West headhaul markets, the rate recovery has been most prolific in the westbound Asia to Europe corridor. The Asia-Europe westbound Index was up by 61 percent year-over-year after six months of 2017 and even performed better against the same months in 2015, being higher by around 12 percent. Eastbound trans-Pacific rates saw slightly more muted growth this year at 33 percent, which was insufficient to better the first half of 2015 average. It was a similar story in the backhaul direction with rates from Europe to Asia significantly outperforming the other trades. Eastbound Europe-Asia rates were given a boost earlier this year during a temporary space shortage caused by stronger demand and alliance reorganization. As predicted, backhaul rates are gradually softening on this trade and Drewry expects a further weakening in July. “This year is one of huge correction after a disastrous 2016 for rates, buoyed at the same time by better supply and demand fundamentals,” the analyst said. “While there is still some ground to be made up to get above pre- 2015 levels there is no doubt that the pendulum is swinging quite fast towards a carriers’ market.”
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