Overcapacity Jeopardizes China Port Profits - Global Trade Magazine
  July 21st, 2016 | Written by

Overcapacity Jeopardizes China Port Profits

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  • Report: Negative growth for the Chinese ports of Hong Kong, Kaohsiung, and Dalian.
  • Ten out of the world's top 20 container ports and seven out of the top 10 will be in China by 2020.
  • Container throughput in China is on the decline.

China’s build-out of excessive steel production capacity has led to a global glut of the metal, falling market prices, and aggressive exporting by China, which, in turn, has led to allegations of dumping and retaliatory actions by authorities in the United States and the European Union.

But China is suffering from another kind of overcapacity, one it can presumably not export its way out of.

Economists have noted an overcapacity in China’s ports, one which will be more severe than that in steel in the near future.

A report from the Center for Forecasting Science at Chinese Academy of Sciences projected negative growth for the ports of Hong Kong, Kaohsiung, and Dalian.

Ten out of the world’s top 20 container ports and seven out of the top 10 will be in China by 2020, according to the the report. Meanwhile, container throughput in China is on the decline.

“Overcapacity in the port industry is a headache that we must deal with,” said Wang Shouyang, director of the forecasting center.

Prof. Kuang Haibo of Dalian Maritime University in northeast China, said 2016 could be a “turning point” for China’s ports as they slump from profits to losses.

“Too many city governments counted on new ports to boost local GDP data. That’s a bad idea,” Kuang said. He urged local policymakers to “keep their hands off ports” and “let the market do its job.”

In Kuang’s opinion, overcapacity and poor service are the major bottlenecks in China’s port industry. The slowdown in Dalian is typical of the industrial situation in northeastern China , he added.

Global rating agency Moody’s forecast that Chinese ports would continue to face pressure in throughput, “on the back of economic re-balancing and ongoing capacity additions.”

Despite an economic slowdown, China is likely to remain a major manufacturer and exporter, one observer noted. As such, the country’s port overcapacity is best characterized as “marginal.”

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