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Project Dory Monitoring 30 August 2017
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China's war on smog shakes up ports; Tianjin loses, rivals benefit
Aug 30, 2017 | Reuters
By Josephine Mason and Meng Meng
China’s war on smog is shaking up the country’s busiest ports, which handle billions of tonnes of cargo a year, forcing Tianjin to overhaul its business as northern rivals snare a greater share of vast coal and iron ore shipments, results show. -
China’s Missile Sanctions Are Taking a Heavy Toll on Both Koreas
Aug 30, 2017 | Bloomberg
By James Mayger and Jiyeun Lee
With geopolitical tensions rising in North Asia, China has tightened the economic screws on both Koreas -- on the North for firing missiles, and on the South for deploying a shield to stop them. -
US-China relations could see a 'real deterioration' after North Korea's missile launch
Aug 29, 2017 | Business Insider
By Elena Holodny
US-China relations could deteriorate significantly following North Korea's latest missile launch, in which the country fireda missile over Japan early Tuesday morning local time. -
China rules out unilateral sanctions to punish North Korea for latest missile launch
Aug 30, 2017 | South China Morning Post
By Stuart Lau
Foreign minister says Beijing will not act on its own but will continue to seek agreement with other UN Security Council members -
Container Shipping: A Mega Problem Looming
Aug 30, 2017 | Maritime Executive
New alliances, structural change and positive economic trends have transformed the container shipping market over the past year, driving growth and pushing business performance figures from deep red into black. However, despite long-term rates that are, in some cases, up 120 percent year on year, the future remains uncertain due to a looming shadow on the horizon, according to market intelligence company Xeneta. -
Higher Asia-Europe spot rates still trail historical levels
Aug 30, 2017 | Journal of Commerce
By Greg Knowler
Spot market rates in the first half that in some weeks were more than double those recorded in the same time frame last year do not provide an accurate picture of container shipping profitability with rates remaining low from a historical perspective, say industry executives.
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China's war on smog shakes up ports; Tianjin loses, rivals benefit
Aug 30, 2017 | Reuters
By Josephine Mason and Meng Meng
BEIJING (Reuters) - China’s war on smog is shaking up the country’s busiest ports, which handle billions of tonnes of cargo a year, forcing Tianjin to overhaul its business as northern rivals snare a greater share of vast coal and iron ore shipments, results show.
Tianjin Port Development Holdings Ltd said late on Tuesday it would move to expand its containerized volumes following a big drop in coal and steel cargoes after a ban earlier this year on using trucks at the port to transport coal, part of Beijing’s battle with pollution.
Its coal handling in the first half fell by 24 percent and steel throughput was down by 27 percent, while the handling of metal ores also decreased. Non-containerized business accounted for only 12 percent of interim revenue.
Tianjin, China’s second-largest port by cargo volume, is the key hub for trading 100 million tonnes a year of seaborne coal and domestic coal from Inner Mongolia.
Coal delivered to the port must now be handled by rail for long-distance transportation, which hurt the port’s non-containerized cargo business, it said.
That has forced traders and shippers to divert cargoes to Tianjin’s competitors, like Tangshan Port Group Co Ltd 100 km to the north, and Qinhuangdao Port Co Ltd, both in Hebei province, according to an analysis of results released in recent weeks by five major ports operating in the Bohai Rim region.
The analysis includes Bohai Rim ports of Tangshan, Rizhao Port Co, Qinghuangdao Group, which includes Caofeidian, Huanghua and Qinghuangdao Port, as well as Qingdao Port International Co Ltd.
The analysis is the first collection of data illustrating the impact of the March transportation ban and how the measures are disrupting the flow of coal and other crucial commodities in China.
Beijing has said it may extend the transport measure to ports in the heavily industrialized Hebei province.CONTAINED
Tianjin was the only port to report lower throughput and volumes of coal and metal ores, in the first half of the year.
Total cargo throughput in the first half was 218.2 million tonnes, down 7.3 percent year-on-year mainly due to the decrease in volumes of non-containerized cargo, the port’s main revenue driver, it said.
Given the challenges of more stringent environmental and safety policies and competition from nearby ports, Tianjin said it will accelerate efforts to develop its container business, expand its logistics business and build a one-stop logistics service among other measures.
Qinghuangdao appears to be the main beneficiary, reporting an increase of as much as quarter in its coal and metal ore cargoes to more than 175 million tonnes. It was the biggest rise among the five ports.
“Growth in coal cargo volumes was supported by the improving economy, increasing power output and consumption. Due to the environmental crackdown, more coal transportation was diverted to Qinghuangdao,” the port said.
Even as Tianjin’s neighbors benefited, Tangshan warned it is facing increasing competition from all its rivals and noted that the environmental crackdown could hurt overall coal volumes for the entire port industry.
https://www.reuters.com/article/us-india-monsoon-idUSKCN1BA0GH
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China’s Missile Sanctions Are Taking a Heavy Toll on Both Koreas
Aug 30, 2017 | Bloomberg
By James Mayger and Jiyeun Lee
South Korea’s corporate heavyweights are also being hurt
With geopolitical tensions rising in North Asia, China has tightened the economic screws on both Koreas -- on the North for firing missiles, and on the South for deploying a shield to stop them.
In dollar terms, South Korea looks worse off, taking a $4.7 billion hit from the drop in tourism alone. Adding in falling sales of South Korean cars, cosmetics and other goods in China, the dispute will cut 0.3 percentage point from growth this year, according to the central bank in Seoul.
North Korea has taken a massive blow, with China now refusing to buy coal, iron ore and lead, which accounted for more than 50 percent of the nation’s exports. While the amount of money involved is far less in the case of North Korea, the relative impact is huge on its much smaller economy.China Bans Package Tours
One way Beijing expressed its unhappiness with the Thaad missile shield was by imposing a ban in March of package tours of Chinese visitors to South Korea. That’s translated into 2.3 million fewer Chinese tourists in the five months through July, versus the same period last year.
Based on the 2016 average spending of $2,060 per visitor from China, that’s cost South Korea $4.7 billion.Hyundai, Kia Car Sales Slump in China
Sales of Korean vehicles in China have slumped this year as consumer sentiment mirrored that of the government over the missile shield.
Due to complicated pricing structures and different prices for various models, it’s difficult to estimate the revenue impact on the two companies, but it’s clearly large.Lotte Shopping Battered
Lotte Shopping Co. has been one of the worst affected South Korean companies. The company owned a golf course where the military has installed the missile shield and has been subject to retaliation China because it transferred the land to South Korea’s government.North Korean Exports Blocked
About 90 percent of North Korea’s documented trade was with China in 2016. In February, China announced it had banned purchases from North Korea of coal and iron ore for the rest of the year.China Customs General Administration
Until the ban, coal had comprised about half of all North Korea’s exports to China. And new restrictions from next month will increase the amount of banned products. Bloomberg calculation based on China Customs General Administration data
The total cut in North Korean exports to China was $380 million in March-July this year, compared to the same period in 2016. While that’s small versus South Korea in dollar terms, it is a very significant cut for the regime in Pyongyang.
https://www.bloomberg.com/news/articles/2017-08-29/kim-says-latest-missile-test-was-prelude-to-containing-guam
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US-China relations could see a 'real deterioration' after North Korea's missile launch
Aug 29, 2017 | Business Insider
By Elena Holodny
US-China relations could deteriorate significantly following North Korea's latest missile launch, in which the country fireda missile over Japan early Tuesday morning local time.
Analysts argue that it's possible the US could ramp up economic pressure against North Korea's neighbor, China, which would then further strain relations between the two powers.
"After significant delay, I'd expect a real deterioration in US-China relations as we head into fall," Ian Bremmer, the president of Eurasia Group, told Business Insider over email.
"Because the military options won't be recommended by [Defense Secretary James] Mattis and the generals, near term [US President Donald] Trump's clearest options are to up the pressure on China — something he's been intent on doing anyway," Bremmer added.
Trump has long maintained strong rhetoric against China and its trade practices. During his campaign, he vowed to label the country a currency manipulator on his first day in office, although he ultimately did not do so.
It's likely that Trump pulled back on calling China a currency manipulator at the time given the delicate situation with North Korea, which he himself implied in an interview with The Economist published in May (emphasis ours):
"Now, with that in mind, [Chinese president Xi Jinping] representing China and he wants what’s best for China. But so far, you know, he’s been, he’s been very good. But, so they talk about why haven’t you called him a currency manipulator? Now think of this. I say, 'Jinping. Please help us, let’s make a deal. Help us with North Korea, and by the way we’re announcing tomorrow that you’re a currency manipulator, OK?' They never say that, you know the fake media, they never put them together, they always say, he didn’t call him a currency [manipulator], number one. Number two, they’re actually not a currency [manipulator]. You know, since I’ve been talking about currency manipulation with respect to them and other countries, they stopped."
More recently, however, the Trump administration has taken steps towards putting economic pressure on China and its companies. In mid-August, US initiated an investigation into China's thefts of US intellectual property (IP) using Section 301 of the Trade Act of 1974. And a few days later, the US announced sanctions on Chinese and Russian companies and individuals for supporting North Korean Weapons programs.
The president also reiterated his desire for tariffs on China during "a small Oval Office meeting, venting at senior staff for sometimes resisting his hawkish trade agenda," Axios reported Monday.
North Korea's latest missile launch could also shake up the dynamics in the White House. Bremmer told BI, "North Korea's escalation gives Trump leverage against Gary Cohn and the other White House advisors trying to keep a steadier relationship with Beijing."
http://www.businessinsider.com/north-korea-missile-launch-china-us-relations-2017-8
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China rules out unilateral sanctions to punish North Korea for latest missile launch
Aug 30, 2017 | South China Morning Post
By Stuart Lau
Foreign minister says Beijing will not act on its own but will continue to seek agreement with other UN Security Council members
Foreign Minister Wang Yi dismissed the idea on Wednesday as the United Nations Security Council, in an emergency meeting, issued a statement condemning North Korea’s launch of a missile over Japan’s airspace.
However, the council stopped short of any new sanctions or other specific measures to rein in Pyongyang.
“Any unilateral sanction ... is not in line with international laws, and is not supported by China,” Wang said in a news briefing.
He was responding to a question about whether China would stop all natural resource imports from Pyongyang as North Korea continues its military build-up.
Wang added that China had been working with the four other permanent Security Council members – the US, Britain, France and Russia – to start discussions on the issue.
Speaking on the sidelines of a press briefing ahead of next week’s BRICS summit in Xiamen, he added that there would be a “necessary reaction” based on an agreed resolution.
The meeting – which will be attended by representatives from leading emerging market economies Russia, India, Brazil and South Africa – will include discussions on “key regional issues”, the foreign minister said.
China, which accounts for 90 per cent of North Korea’s foreign trade, has been accused of continuing to import raw materials from the Pyongyang government.
Last month, US President Donald Trump tweeted that “Trade between China and North Korea grew almost 40 per cent in the first quarter. So much for China working with us – but we had to give it a try!”
China meanwhile views recent US activities – such as the installation of the THAAD missile defence system in South Korea – as provocative.
Pyongyang’s latest launch on Tuesday saw a missile passing over the northern Japanese island of Hokkaido.
The missile, believed to be a relatively untested Hwasong-12, is the same type North Korean leader Kim Jong-un recently threatened to use against Guam, a US overseas territory that hosts a key military base and lies about 3,000km to the south of North Korea.
http://www.scmp.com/news/china/diplomacy-defence/article/2108896/china-rules-out-unilateral-sanctions-punish-north-korea
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Container Shipping: A Mega Problem Looming
Aug 30, 2017 | Maritime Executive
New alliances, structural change and positive economic trends have transformed the container shipping market over the past year, driving growth and pushing business performance figures from deep red into black. However, despite long-term rates that are, in some cases, up 120 percent year on year, the future remains uncertain due to a looming shadow on the horizon, according to market intelligence company Xeneta.
2016 saw the collapse of Hanjin and the top 20 market players posting combined net losses of $5 billion, but 2017 is shaping up to be a bumper year, says Xeneta CEO Patrik Berglund.
“Maersk’s recent 2017 second quarter financial report provides an interesting snapshot of the industry,” he says. “Higher freight rates propelled revenues upwards by 8.4 percent to almost $10 billion for the quarter. Meanwhile, reports suggest that Hapag-Lloyd will triple its earnings this year.
Rates have jumped since their historical lows last year. For the Chinese main port to Northern Europe route last May, the three-month rolling average for long-term rates for a 40-foot container stood at $655. This May it was $1,438, and now it is $1,618. “Meanwhile we see U.S. containerized ports are busier than ever, handling a projected 1.75 million TEU this month (Global Port Tracker) alone, the most on record. This comes despite the uncertainty caused by President Trump’s ‘America First’ doctrine and his withdrawal from initiatives like the Trans-Pacific Partnership. U.S. container imports actually seem to be growing.”
Strong consumer demand, the restructuring of industry alliances – 90 percent of all container ship traffic is now accounted for by three major alliances (THE Alliance, OCEAN and 2M) – and Hanjin’s demise all help push up utilization and rates, Berglund says, but there remains uncertainty. The industry may be unwittingly planning to sabotage its own success.
“We remain optimistic with regards to the remainder of 2017, but the longer term becomes more complex,” he argues, pointing to the increase in mega-ship capacity.
“A staggering 78 new mega-ships are due to come online for the Asia-Europe trades over the next two years, pushing capacity up by over 23 percent,” Berglund says. “Mega-ships make obvious sense in terms of economy of scale and optimizing transport costs, but when you have this much of a capacity injection it requires a huge demand increase… and, well, where will that come from?
“Mega-ships of 18,000 TEUs need to command utilization rates of at least 91 percent to achieve cost savings. Even in the high volume Asia-Europe trades that is difficult and may necessitate lower than average rates for some volume, which, inevitably, will hit overall rate development.
“Each of the key alliance partners is playing catch up with one another, trying to reap the mega-ship benefits. In doing so they’re going to flood the market with new capacity and risk reversing current positive trends. This is a potential mega-problem in waiting.”
Berglund says that all stakeholders in the container shipping supply chain need to pay close attention to the market to stay ahead of developments and get the best rates for their assets, services and cargoes.
“This sector, just like the global political scene, can be highly unpredictable ” Berglund says, “and the only way to counter that is by accessing the very best inside intelligence.”
http://www.maritime-executive.com/editorials/container-shipping-a-mega-problem-looming
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Higher Asia-Europe spot rates still trail historical levels
Aug 30, 2017 | Journal of Commerce
By Greg Knowler
Spot market rates in the first half that in some weeks were more than double those recorded in the same time frame last year do not provide an accurate picture of container shipping profitability with rates remaining low from a historical perspective, say industry executives.
The latest reading of Shanghai Shipping Exchange’s SCFI shows spot rates from China to North Europe are currently 25 percent higher than at the same week last year at $923 per TEU, but JOC.com’s Market Data Hub, which tracks the SCFI weekly rate movements, shows that the percentage difference has been far higher, especially during the first half.
The improved spot rates have helped carriers report improved interim earnings, not least of those Maersk Line that posted a net profit of $339 million in the first six months of the year. However, Maersk Line chief commercial officer Vincent Clerc told JOC.com that compared with two years ago, spot rates remained at very weak levels.
“The rates this year are competitive and higher than last year, yes, but historically they are still low,” he said.
This was supported by analysis from BIMCO. In a report from the world’s largest shipping association, chief shipping analyst Peter Sand noted that the rise of spot rates was magnified beyond their actual performance. While some container spot freight rates were up more than 100 percent from the very low levels of 2016, the rates may still be at a loss-making level, the report stated. As a result, BIMCO said spot rates were not the best indicator of market profitability.
Instead, the BIMCO report said the broad-scoped China Containerized Freight Index (CCFI) offered an alternative indication. The CCFI composite hit an all-time low at 632.36 on April 29, 2016. By August 11, 2017, it was back at 856.5 and comparing the year-to-date growth, the CCFI was up by 20.7 percent versus the same period last year.
By contrast, the spot rate from Shanghai to Northern Europe was up 64 percent in the year-to-date compared with 2016. The spot rates for containers bound for the US have gone up by 45 to 50 percent over the same period.
Xeneta CEO Patrik Berglund said rates have jumped since their historical lows last year and this had propelled earnings at global carriers, with 2017 shaping up as a bumper year.
“For the Chinese main ports to Northern Europe route last May [2016], the three-month rolling average for long-term rates for a 40-foot container stood at $655. This May it was $1,438, an increase of 120 percent, and the same average is now up at $1,618,” he said.
“Meanwhile, we see US containerized ports are busier than ever, handling a projected 1.75 million TEU this month alone; the most on record.”
Strong consumer demand, the restructuring of industry alliances — 90 percent of all container ship traffic is now accounted for by THE Alliance, Ocean Alliance, and 2M — and Hanjin’s demise all helped push up utilization and rates, Berglund said.
“We remain optimistic with regards to the remainder of 2017, but the longer term becomes more complex,” he said, highlighting the huge amount of megaship capacity that will flow into the market over the next two years.
As the alliances try to manage the capacity injection, most of it heading for the Asia-Europe trade, they are expected to cancel services and blank an increasing number of sailings, according to analysis by SeaIntel.https://www.joc.com/maritime-news/rate-comparison-lows-2016-poor-indicator-carrier-profitability_20170829.html
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