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US to tighten sanctions on Russia, Iran, North Korea - and make it tough for Trump to ease them
Jul 26, 2017 | The Straits Times
By Normal Ghosh
The US House of Representatives has voted 419-3 for increased sanctions on Russia, North Korea and Iran, at the same time ensuring that it would need Congressional approval to lift sanctions - a move analysts see as aimed at curtailing President Donald Trump's power to lift sanctions on Russia. -
Exports, upgrading power up expansion in first half
Jul 27, 2017 | China Daily
By Wang Yanfei
Export-oriented provinces and municipalities sustained high-speed growth in the first half, while regions relying on smokestack industries, though still lagging behind, have gradually gathered pace as economic structures improved. -
Does North Korea sanctions bill risk US-China relationship?
Jul 26, 2017 | CNN
By James Griffiths
The US may target Chinese companies as part of new North Korea sanctions, an administration official said this week, even as diplomats are working with Beijing at the UN to reach a new international agreement. -
For China’s Global Ambitions, Iran Is at the Center of Everything
Jul 27, 2017 | Financial Tribune
For millenniums, Iran has prospered as a trading hub linking East and West. Now, that role is set to expand in coming years as China unspools its “One Belt, One Road” project, which promises more than $1 trillion in infrastructure investment—bridges, rails, ports and energy—in over 60 countries across Europe, Asia and Africa. Iran, historically a crossroads, is strategically at the center of those plans. -
Ocean Alliance leads pack in Asia import gains on US trades
Jul 26, 2017 | Journal of Commerce
By Bill Mongelluzzo
Members of the Ocean Alliance have increased their share of Asia imports the most out of the three major vesselsharing agreements, while the niche carriers still managed to grow their share as well, thanks to new entrant SM Lines scooping up much of Hanjin Shipping’s business. -
Sri Lanka OKs controversial China Merchants Port deal
Jul 26, 2017 | Journal of Commerce
By Turloch Mooney
Hong Kong-listed red chip China Merchants Port Holdings (CMPort) reached an agreement with the government of Sri Lanka to acquire an 85 percent stake in Hambantota Port for $1.12 billion.
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US to tighten sanctions on Russia, Iran, North Korea - and make it tough for Trump to ease them
Jul 26, 2017 | The Straits Times
By Normal Ghosh
WASHINGTON - The US House of Representatives has voted 419-3 for increased sanctions on Russia, North Korea and Iran, at the same time ensuring that it would need Congressional approval to lift sanctions - a move analysts see as aimed at curtailing President Donald Trump's power to lift sanctions on Russia.
Ahead of the vote, Republican Representative Adam Kinzinger said Congress was "uncomfortable with any rapprochement with Moscow without getting some things for it".
"We're sending a message to Moscow," he said. "But if the President had any intention of trying to give Vladimir Putin what he wants on certain areas, I think he'll think twice about it."
A similar bill was earlier approved in the Senate, but the House version must go back to the Senate, where it is expected to be approved before the legislature breaks for the summer in a few weeks.
Some analysts say requiring Congressional approval to lift sanctions limits Mr Trump's latitude - but the State Department is in favour of latitude to enable constructive dialogue rather than be stuck with a rigid sanctions regime.
In this case, the Russian cloud over the President appears to have influenced Congress.
"The bill we just passed with overwhelming bipartisan support is one of the most expansive sanctions packages in history," House Speaker Paul Ryan said in a statement. "It tightens the screws on our most dangerous adversaries in order to keep Americans safe."
Dr Jeffrey Mankoff, a Russia scholar at the Center for Strategic and International Studies and former adviser on Russia to the State Department, said: "It is not unusual that Congress wants to tie a president's hands, but it is highly unusual that the president's own party is tying his hands." He told the Los Angeles Times: "It tells me that there is a lot of suspicion about Trump, his family and ties to Russia."
State Department spokesman Heather Nauert told reporters the legislation was in effect still in draft form pending approval by the Senate.
But she added: "The Secretary (of State Mr Rex Tillerson) has been firm about sanctions on Russia. We've talked a lot about the issues facing Ukraine, we expect and fully intend sanctions to remain in place until Russia stops the provocative actions that caused sanctions to be placed in the first place."
On Tuesday (July 25), Ms Susan Thornton, acting assistant secretary of the State Department's East Asian bureau, told a Senate Foreign Affairs subcommittee the Treasury Department was preparing to target more Chinese entities involved in supporting the North Korean regime.
"The Chinese are now very clear that we're going to go after Chinese entities if need be," Ms Thornton said. But she added:"Ratcheting up sanctions pressure is not like a cobra strike. It's definitely a slow squeeze, a slow tightening of the screws."
In June, the Treasury department barred the Chinese Bank of Dandong from US financial markets - a move seen as signalling the US's willingness to broaden sanctions to hurt other entities doing business with North Korea.
At the same hearing, Dr Bruce Klingner, Senior Research Fellow for Northeast Asia at The Heritage Foundation, said: "Successive US administrations have talked tough about imposing pressure on the North Korean regime but instead engaged in timid incrementalism in imposing sanctions and defending US law."
"The most sensible policy is to increase pressure in response to Pyongyang's repeated defiance of the international community while ensuring the US has sufficient defences for itself and its allies and leaving the door open for diplomatic efforts."
http://www.straitstimes.com/world/united-states/us-to-tighten-sanctions-on-russia-iran-north-korea-and-make-it-tough-for-trump
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Exports, upgrading power up expansion in first half
Jul 27, 2017 | China Daily
By Wang Yanfei
Export-oriented provinces and municipalities sustained high-speed growth in the first half, while regions relying on smokestack industries, though still lagging behind, have gradually gathered pace as economic structures improved.
Chongqing registered 10.5 percent year-on-year growth in the first six months, top among 25 of the 31 provinces, autonomous regions and municipalities to have released official economic data as of Wednesday.
The southwestern metropolis' growth was 3.6 percentage points higher than the nation's overall figure of 6.9 percent for the first half of this year.
In terms of economic output, Guangdong province ranked top with a total of 4.2 trillion yuan ($617 billion) in gross domestic output in the first half.
These two regions are in the driving seat thanks to their diverse business structures which rely little on traditional industries, said Gao Huiqing, head of the development research department of the State Information Center.
A recovery in global demand has also helped the two export-oriented regions to enjoy sustained rapid growth, he said.
Michael Enright, an economics professor at the University of Hong Kong, said Chongqing's high-speed growth is related to central government's support such as the Belt and the Road Initiative and policies attracting foreign investors.
"Foreign investment helps Chongqing stand out among other inland cities," said Enright, citing the example of how it became the largest laptop manufacturing base in Asia in only around 10 years, as a large amount of foreign investment has poured in.
He said he expected that Chongqing and other cities with free trade zones, such as Shanghai and Tianjin, will continue to witness sustained growth, because the government will boost the domestic economy through further opening up and attracting foreign investment.
In contrast, regions which relied on traditional industries still lagged behind.
Northeastern Liaoning province only witnessed 2.1 percent year-on-year growth in the first half, while other old industrial bases, such as Heilongjiang province and the Inner Mongolia autonomous region, were among the six provinces and regions that have yet to release data.
Li Luoli, deputy head of the China Development Institute, a Shenzhen-based think tank, said these areas need to speed up the pace of finding new growth engines.
"The toughest time of economic transition may have passed, but there are many challenges that have yet to be resolved," he said, referring to issues such as the relocation of laid-off workers.
He said it would take a considerable period to see a new generation of industries takes shape.
"Some major coal and steel producers have achieved progress in economic transition," said Zhao Chenxin, head of the economic operation bureau of the National Development and Reform Commission, citing the example of a company located in Shanxi province, China's major coal producer.
The earnings of Shanxi Yangmei Group improved as it developed new production technology and expanded business such as coal transportation and storage, he said.
Shanxi province witnessed better-than-expected growth in the first six months with 6.9 percent year-on-year growth, according to Zhang Xiaodong, deputy head of the province's statistics bureau.
http://www.chinadaily.com.cn/bizchina/2017-07/27/content_30262077.htm
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Does North Korea sanctions bill risk US-China relationship?
Jul 26, 2017 | CNN
By James Griffiths
(CNN)- The US may target Chinese companies as part of new North Korea sanctions, an administration official said this week, even as diplomats are working with Beijing at the UN to reach a new international agreement. Speaking to a US Senate Foreign Affairs subcommittee Tuesday, Susan Thornton, acting assistant secretary of the State Department's East Asia bureau, said "the Chinese are now very clear that we're going to go after Chinese entities if need be."
Thornton's testimony came as the House of Representatives was voting on a sweeping bill with new sanctions targeting Russia, Iran and North Korea. Her comments show the delicate balancing act US President Donald Trump's administration is walking on North Korea, where China is both a key ally for bringing pressure to bear on Pyongyang, but also a major potential target for sanctions designed to limit North Korean trade and imports.
Getting China on side
Washington has looked to China for progress on North Korea, even as Pyongyang ramped up missile and nuclear testing since Trump's election. This month, North Korea claimed it had tested a nuclear capable intercontinental ballistic missile, after which US Secretary of State Rex Tillerson said "global action is required to stop a global threat." Beijing -- as both North Korea's primary ally and a UN Security Council member -- is the most important player in any proposed global action. But a perceived failure by Beijing within the US to halt such testing has caused relations with Washington to cool.
Last month, Trump tweeted that he wished "we would have a little more help with respect to North Korea from China, but that doesn't seem to be working out." Washington also approved new sanctions on a Chinese bank with illicit financial ties to North Korea, a move that angered Beijing."We strongly urge the US to immediately correct its wrongful actions to avoid affecting bilateral cooperation on relevant issues," said Chinese Foreign Ministry spokesman Lu Kang at the time.
Speaking to reporters Tuesday, the US ambassador to the UN Nikki Haley said progress was being made with China on new international sanctions targeting North Korea.
"We're constantly in touch with China ... things are moving but it's still too early to tell how far they'll move," she told reporters."The true test will be what (the Chinese) have worked out with Russia (and whether) Russia comes and tries to pull out of that."Tong Zhao, an analyst at the Carnegie Tsinghua Center for Global Policy, said that while China has long been supportive of sanctions, confusion about the ultimate policies both countries are pursuing remains.
"The US strategy only makes sense to China if the ultimate US objective is to directly threaten the stability of the North Korean regime through a comprehensive economic embargo," he said. "China has big concerns about that approach, but on the other hand US officials have also repeatedly said they are not trying to threaten the regime." Apparent contradiction between statements and action causes confusion, Zhao said. He added the two countries "need to stop focusing on debating the specific tactics" and instead focus on overall strategy and goals with regard to North Korea.
Can sanctions succeed?
Even as Washington attempts to thread the needle on North Korean sanctions, some analysts argue they won't have much effect. "If Kim and his generals have to tighten their belts, the nuclear and missile programs are about the last things they will cut," John Delury, an expert at the Yonsei University Graduate School of International Studies in Seoul, wrote for CNN Opinion in December.
"On the contrary, in the absence of diplomatic talks and under intensified pressure, Pyongyang is likely to double-down on its nuclear deterrent, which it sees as its best guarantee of national security and regime survival."
Thornton echoed Delury's comments Tuesday, even as she called for greater implementation of sanctions against North Korea. "North Korea has no intention of abandoning its nuclear program in the current environment," she said. "North Korea will not give up its weapons in exchange for talks, even with economic concessions that provide sorely needed assistance to the North Korean people."
Washington, she added, would also not consider talks at this time, despite calls for just this from Beijing and Seoul. "We will not negotiate our way to talks," Thornton said. That has led some to advocate for a military option, with Trump's CIA director Mike Pompeo last week appearing to indicate support for regime change in Pyongyang -- something Thornton said the State Department was not pursuing.
http://edition.cnn.com/2017/07/26/politics/us-china-north-korea-sanctions/index.html
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For China’s Global Ambitions, Iran Is at the Center of Everything
Jul 27, 2017 | Financial Tribune
When Zuao Ru Lin, a Beijing entrepreneur, first heard about business opportunities in eastern Iran, he was skeptical. But then he bought a map and began to envision the region without any borders, as one enormous market.
Excerpts follow:
“Many countries are close by, even Europe,” Lin, 49, said while driving his white BMW over the highway connecting Tehran to the eastern Iranian city of Mashhad recently. “Iran is at the center of everything.”
For millenniums, Iran has prospered as a trading hub linking East and West. Now, that role is set to expand in coming years as China unspools its “One Belt, One Road” project, which promises more than $1 trillion in infrastructure investment—bridges, rails, ports and energy—in over 60 countries across Europe, Asia and Africa. Iran, historically a crossroads, is strategically at the center of those plans.
Like pieces of a sprawling geopolitical puzzle, components of China’s infrastructure network are being put in place. In eastern Iran, Chinese workers are busily modernizing one of the country’s major rail routes, standardizing gauge sizes, improving the track bed and rebuilding bridges, with the ultimate goal of connecting Tehran to Turkmenistan and Afghanistan.
Much the same is happening in western Iran, where railroad crews are working to link the capital to Turkey and, eventually, to Europe. Other rail projects will connect Tehran and Mashhad with deepwater ports in the country’s south.
Once dependent on Beijing during the years of international isolation imposed by the West for its nuclear program, Iran is now critical to China’s ability to realize its grandiose ambitions. Other routes to western markets are longer and lead through Russia, potentially a competitor of China.
“It is not as if their project is canceled, if we don’t participate,” said Asghar Fakhrieh-Kashan, the Iranian deputy minister of roads and urban development. “But if they want to save time and money, they will choose the shortest route.”
He added with a smile: “There are also political advantages to Iran, compared to Russia. They are highly interested in working with us.”
Others worry that with the large-scale Chinese investment and China’s growing presence in the Iranian economy, Tehran will become more dependent than ever on China, already its biggest trading partner.
China is also an important market for Iranian oil, and because of remaining unilateral American sanctions that intimidate global banks, it is the only source of the large amounts of capital Iran needs to finance critical infrastructure projects. But that, apparently, is a risk the leadership is prepared to take.
Together Moving Ahead
“China is dominating Iran,” said Mehdi Taqavi, an economics professor at Allameh Tabataba’i University in Tehran, adding that the “Iranian authorities do not see any drawbacks to being dependent on China. Together, we are moving ahead.”
It is not just roads and rail lines that Iran is getting from China. Iran is also becoming an increasingly popular destination for Chinese entrepreneurs like Lin. With a few words of Persian, as well as low-interest loans and tax breaks from the Chinese and Iranian governments, he has built a small empire since moving to Iran in 2002. His eight factories make a wide variety of goods that find markets in Iran and in neighboring countries.
“You can say that I was even more visionary than some of our politicians,” Lin said with a laugh.
Since 2013, when the “One Belt, One Road” plan was started, he has had dozens of visitors from China and multiple meetings with the Chinese ambassador in Tehran.
“I was a pioneer and they want to hear my experiences,” he said.
Lin established his factories along what will be a key part of the trade route—a 575-mile electrified rail line linking Tehran and Mashhad. When completed and attached to the wider network, the new line will enable Lin to export his goods as far as northern Europe, Poland and Russia, at much less cost than today.
“I am expecting a 50% increase in revenue,” Lin said. “Of course, Iran’s economy will also grow. China will expand. Its power will grow.”
“Life is good in Iran,” he said. “The future is good.”
Iranians who spotted Lin driving between his factories waved and smiled. Having mastered a few basic phrases in Persian over the years, he said “hi” and “goodbye” to some of his 2,000 employees. “Iranians are hard workers,” he said.
Even when the boss was out of earshot, workers in his factories said that they were very happy with the Chinese.
“They pay every month on time and only hire people instead of fire,” Amir Dalilian, a guard, said. “If more will come, our economy will flourish.”
When completed, the proposed rail link will stretch nearly 2,000 miles, from Urumqi, the capital of China’s western region of Xinjiang, to Tehran. If all goes according to plan, it will connect Kazakhstan, Kyrgyzstan, Uzbekistan and Turkmenistan, China’s state-owned paper, China Daily, wrote.
Track sizes need to be adjusted and new connections made, as well as upgrades to the newest trains.
In a 2016 test, China and Iran drove a train from the port of Shanghai in eastern China to Tehran in just 12 days, a journey that takes 30 days by sea. In Iran, they used the existing track between Tehran and Mashhad, powered by a slower diesel-powered train. When the new line is opened in 2021, it is expected to accommodate electric trains at speeds of up to 125 miles an hour.
More Than Transportation
Fakhrieh-Kashan, an English speaker who oversees negotiation of most of the larger international state business deals, said the Chinese initiative would do much more than just provide a channel for transporting goods.
“Think infrastructure, city planning, cultural exchanges, commercial agreements, investments and tourism,” he said. “You can pick any project; they are all under this umbrella.”
Business ties between Iran and China have been growing since the United States and its European allies at the time started pressuring Iran over its nuclear program around 2007. China remains the largest buyer of Iranian crude, even after western sanctions were lifted in 2016, allowing Iran to again sell oil in European markets.
Chinese state companies are active all over the country, building highways, digging mines and making steel. Tehran’s shops are flooded with Chinese products and its streets clogged with Chinese cars.
Iran’s leaders hope that the country’s participation in the plan will enable them to piggyback on China’s large economic ambitions.
“The Chinese plan is designed in such a way that it will establish Chinese hegemony across half of the world,” Fakhrieh-Kashan said. “While Iran will put its own interests first, we are creating corridors at the requests of the Chinese. It will give us huge access to new markets.”
https://financialtribune.com/articles/economy-domestic-economy/69101/for-china-s-global-ambitions-iran-is-at-the-center-of
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Ocean Alliance leads pack in Asia import gains on US trades
Jul 26, 2017 | Journal of Commerce
By Bill Mongelluzzo
Members of the Ocean Alliance have increased their share of Asia imports the most out of the three major vesselsharing agreements, while the niche carriers still managed to grow their share as well, thanks to new entrant SM Lines scooping up much of Hanjin Shipping’s business.
In the three months following the April 1 launch of the new alliances, members of the Ocean Alliance increased their market share 5.5 percentage points to 43 percent compared with the same period a year ago, according to an analysis of data from PIERS, a sister product of JOC.com. In the same period, members of THE Alliance increased their total share 1.81 percentage points to 27.4 percent, and members of the the 2M along with partner Hyundai Merchant Marine (HMM) increased their total share 2.57 percentage points, to 22 percent.
The five niche container lines moving Asian imports increased their total share 1 percentage point to 6.4 percent in the same ApriltoJune period. Individually, Zim Integrated Container Services lost 0.14 percent percentage points to 2 percent; Pacific International Lines (PIL) increased its share 0.56 percentage points to 1.5 percent; Wan Hai Lines’ share was nearly flat 1 percent; and Matson Navigation Co. increased its share 0.07 percentage points to 0.72 percent. SM Lines, which entered the trade this year, had a 1.09 percent share of total US imports from Asia.
The dominant presence of the Ocean Alliance in the eastbound Pacific does not surprise David Bennett, president Americas at Globe Express Services. “Look at their sailing schedules from China, their overall capacity, their service integrity their transit times,” he said.
On the other hand, Bennett said the niche carriers contribute to a balanced environment in the Pacific by tailoring their services to their customer base, maintaining good service levels, and pricing competitively. “There’s always a place for niche carriers that have quality service,” he said.
Two significant mergers now under way — consolidation of the three Japanese lines into one and the Cosco Shipping Holdings’ acquisition of OOCL — will likely have a positive impact on their respective alliances when the mergers take full effect next year, said Lars Jensen, CEO and partner in SeaIntel. The consolidation of the Japanese lines means it will require only three lines to agree upon network modifications within THE Alliance, rather than five at present, and three carriers in the Ocean Alliance rather than four today, he said.
“This increases the agility in decisionmaking, not that it will become smooth sailing as the carriers will clearly have different opinions, but the fewer the parties who need to agree and compromise, the faster it goes and the fewer individual ‘quirks’ will be there to reduce the overall efficiency of the networks,” Jensen said. The Korean carriers could be a wildcard in the Pacific in the coming year.
HMM attempted to become a full member of the 2M Alliance with Maersk Line and Mediterranean Shipping Co., but the two large European carriers would agree only to a slotsharing arrangement. SM Lines did not respond to questions, although the Korean carrier that emerged after the bankruptcy of Hanjin Shipping has not publicly expressed interest in joining an alliance. Jensen noted that compared with the large alliance lines, the Korean carriers “are both small indeed,” and as such their potential contribution to an alliance is likewise small.
“They would therefore not have much negotiating leverage in any talks relating to adoption into an alliance as things stand now,” he said. Although the niche carriers did not grow as quickly in the second quarter as the alliance carriers, some of the independent lines do have plans to increase the size of their vessels in the coming year. The niche carriers say they plan to grow by offering specialized services within their niches, rather than by competing headon with the alliance carriers on vessel size or number of services.
The niche carriers will build upon what they do best, which is to better utilize their equipment, achieve higher slot utilization, and seek out healthy export rates with a focus on profitability. “We’re not driven by market share. We’re driven by profitability,” said George Goldman, president of Zim USA. While the megacarriers seek scale and scope globally, Zim develops scale and scope within its existing service areas, Goldman said.
By definition, niche carriers are unique, even compared to each other, because each line develops a business plan built around its asset base, the trade lanes in which it operates, and most importantly, the value it provides to its customers in particular niches. Presumably, the value proposition is such that each line’s customers are willing to pay a premium rate for a service that fits its needs better than what the larger carriers offer. However, when competing headon with the large alliance members, the niche carriers sometimes have to price below the market rates in order to secure business.
Jensen said it is all about the service that is provided to beneficial cargo owners (BCOs), but that raises the question of what “service” means to individual customers. Larsen said service to some BCOs means faster transit time and greater reliability in a particular lane. Some BCOs seek faster delivery of containers once the vessel arrives in port.
Others look for a seamless handoff of the container to inland carriers. Other BCOs want personalized service from their carrier representatives, and the ability to pick up the phone and call the representative when something goes wrong, he said. When it comes to service levels, Matson bills itself as a leader at sea and on land. Matson, which is primarily a carrier in the US domestic (Jones Act) trades, has one service each week from China to its dedicated terminal Long Beach that it operates with SSA Marine. This arrangement enables Matson to address several of the service attributes that Jensen mentioned. Matson spokesperson Keoni Wagner said the China service provides an industrybest 10day ocean transit from Shanghai to Long Beach (compared with 12 or 13 days for most carriers), a high reliability of nextday availability of all containers on chassis at a neardock yard, and a seamless handoff to inland transportation providers managed by Matson Logistics. Those services come at a cost to Matson.
It contracts with Shippers Transport Express to truck most inbound containers immediately upon discharge to the neardock yard. The yard is open from 6:30 a.m. to 2 a.m. local time the following morning. That enables BCOs to take delivery of their containers, on wheels, without having to wait in line at the marine terminal. Yet Matson also profits from this arrangement. The transPacific is notorious for being a headhaul trade with weak backhaul rates.
Carriers charge $1,500 to $2,000 per 40foot container on the eastbound leg from Asia, only to give any profits away on the commoditydriven westbound leg, with rates below $500 for many commodities and about $200 or less for the lowestrated commodities. Matson’s weekly China service has headhaul moves in both directions. Vessels steam westbound to Hawaii, a protected Jones Act trade, continue on to China and return with ships filled with imports from China. Given its rapid ocean transit and overnight delivery times in Long Beach, Matson markets its service as premium, and charges accordingly. Singaporebased PIL also profits on its exports, but not to the major load centers in China and North Asia.
Ernie Kuo, senior vice president of PIL USA Agency Services, noted that PIL, with its own vessels or through slotsharing arrangements with other lines, offers service in 80 loops globally. Its network includes a number of destinations, such as in the South Pacific, Southeast Asia, and Africa that are not served directly by the megacarriers. Some of the loops link nicely with its US ocean and intermodal offerings.
PIL builds off of the eight eastbound transPacific services, as well as its intermodal inland connections, to offer opportunities for US shippers that export to locations throughout its network. These arrangements may produce only a halfdozen or so export shipments per BCO, but they build goodwill and business relationships with BCOs that grow with time. Also, since many of those trade lanes offer little if any direct carrier competition, they tend to be “higherrevenue destinations” for PIL, Kuo said. Zim competes directly with alliance carriers in the major US trade lanes, but it picks its gateways strategically based on equipment repositioning opportunities, relationships with railroads, and opportunities for offering valueadded services.
For example, Zim does not take on the megacarriers in Los AngelesLong Beach, even though Southern California is “ground zero” on the West Coast, Goldman said. Rather, Zim calls in Vancouver where it has a working relationship with Canadian National Railway. Zim has always had a strong presence in the Canadian market, and CN’s intermodal service to Chicago, Memphis, and New Orleans give Zim deep penetration in the US interior, he said.
Zim does not have its own terminal in Los AngelesLong Beach, which can be a disadvantage, Goldman said. Also, Zim right now does not see an opportunity to differentiate itself in a gateway served by the largest carriers with the biggest ships in the US trades. Zim’s transPacific services to the East Coast transit the Panama and Suez canals.
Its Savannah calls not only serve the fastestgrowing region of the United State, the Southeast, but the Suez routing also gives Zim opportunities to serve the midSouth via intermodal rail provided by CSX Transportation, Goldman said. Also, Zim’s North American services link up efficiently with export opportunities to other parts of the world where it is strong, such as the Mediterranean and Caribbean. Similarly, as Zim looks for growth opportunities, the Gulf becomes a consideration, he said, because Zim is well established in the Caribbean.
A Gulf service would mesh well with its existing Caribbean services, and would produce more turns for Zim’s containers. “It’s all about profitability and sustainability,” Goldman said. The reality is that not every carrier can do or wants to do what Zim does. Zim strategically chooses routes that provide opportunities for higherrevenue cargo and valueadded services based on profit rather than high volume for the sake of volume, he said. Niche carriers say it is not impossible, but it is difficult, to achieve their goals through participation in an alliance.
That reality has kept Wan Hai out of alliances so far. “We are currently not interested in joining an alliance as our current service structures allow us to focus on our current customers appropriately,” said Randy Chen, vice president. For niche carriers, “nimble” and “flexible” are important advantages, and membership in an alliance can limit flexibility. At PIL, “the chain of command to the top is quick,” Kuo said.
To an entrepreneurial carrier, that means being able to react promptly to even a small opportunity because small beginnings often lead to bigger dividends as the business relationship grows. Citing one example, if a BCO inquires about a booking that PIL cannot service, PIL will recommend another carrier that can offer the service the BCO is looking for. At a later date, the same BCO may return with business that fits into PIL’s service offerings, he said. Being a niche carrier does not mean being a small line with small ships. PIL, for example, is a top12 carrier in terms of global container volume, and it is involved in a newbuild program that will deliver 12 ships with capacities of 11,800 TEU.
The new vessels will be deployed on the highvolume trade lanes where PIL has slotsharing arrangements with Cosco Shipping Holdings and Wan Hai. The key to making big ships profitable is to properly manage allocations, Kuo said. Another reality about niche services is that they have a limited capacity for growth. Matson learned that lesson seven years ago when, pleased with the success of its weekly China service, it started a second one. That service operated from September 2010 to August 2011 before Matson discontinued it.
http://www.joc.com/maritime-news/container-lines/ocean-alliance-leads-pack-asia-import-gains-us-trades_20170726.html
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Sri Lanka OKs controversial China Merchants Port deal
Jul 26, 2017 | Journal of Commerce
By Turloch Mooney
Hong Kong-listed red chip China Merchants Port Holdings (CMPort) reached an agreement with the government of Sri Lanka to acquire an 85 percent stake in Hambantota Port for $1.12 billion. The agreement announced in Hong Kong on Monday gives CMPort the rights to develop, manage, and operate the port and a surrounding land area of 11.5 square kilometers (4.4 square miles) on the southern coast of the South Asian country for 99 years. In its filing to the Hong Kong Stock Exchange, CMPort said the strategic location of the port within 10 nautical miles of the main AsiatoEurope shipping route would enable the development of a “comprehensive deepwater port”.
“The Hambantota Port project is a project to develop a major industrial and service port with an attached industrial zone,” it said. CMPort said it would leverage the expertise of parent China Merchants Group for additional development on the large land area such as “city” residential and commercial facilities. The company has already entered a cooperation framework agreement with China Harbour Engineering Company to explore joint developments in the port area.
“Hambantota Port has great potential for future expansion, with its hinterland covering the South Asian region, and as a maritime hub in the region,” the announcement said.
CMPort, which also owns and operates Colombo International Container Terminal (CICT), said the agreement would give it the capability to realize synergies between the two major ports in Sri Lanka. Under the terms of the concession, CMPort will pay $974 million to Sri Lanka Ports Authority (SLPA) to purchase 85 percent of the Hambantota International Port Group (HIPG) and a 58 percent stake in Hambantota International Port Services Company. An additional $146 million will be held in a bank account in Sri Lanka for spending on the port within one year of the final payment for the purchase of the HIPG stake.
The government and SLPA guaranteed that for a period of 15 years, no fresh tenders will be issued giving other port and terminal developers rights to develop facilities within a 100 kilometer radius of the port.
The port development is expected to consist of three phases, with the first two consisting of 10 berths on a total quay length of nearly 3,500 meters (11,482 feet) and alongside depth of 17 meters to handle containers, bulk and general cargo, liquid bulk, and rollon, rolloff cargo. Finalization of the deal was delayed after local groups, including port workers, villagers, and Buddhist monks, objected to the creation of what some described as effectively a “Chinese colony”.
Opposition politicians said the original deal was poorly planned and questioned why there was no international tender for the project. In December 2016 port workers objecting to the deal forcibly held the giant Japanese car carrier Hyperion Highway and its crew for five days. After the incident, the Japanese company handed the government a bill for $400,000 for damages. Hambantota is located about 250 kilometers southeast of the port of Colombo.
China Exim Bank provided a loan of more than $1 billion for the port project, which is being constructed by China Communications Construction Company. Sri Lankan Minister of Development Strategies and International Trade Malik Samarawickrama said the deal was needed because the port’s ongoing maintenance expenses together with debt installments and interest payments were eating up about onethird of the total annual revenue of the SLPA and adding too much to the national debt of the country.
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