Pearl River Delta terminals bank on intermodal traffic, coastal shipping to fill capacity.
By Eric Johnson
In 2007, American Shipper examined the container shipping landscape of the Pearl River Delta (PRD), as the Nansha deepwater port complex added a new dimension to the world’s largest manufacturing region.
Four years later, it’s clear container terminals in the region operate in a hyper-competitive environment that some analysts believe holds too much capacity for forecast demand.
But the terminal complexes in the PRD have designs on
expanding their reach to tap into new sources of cargo, either through the development of intermodal networks or a heavier reliance on Chinese domestic volume.
If one envisions the chain of ports on the Pearl River Delta as an arc, Yantian International Container Terminal (YICT) sits on the far eastern side of the arc, and the Nansha complex sits on the far west.
The two complexes have a combined capacity of more than 21 million TEUs annually and act as bookends for the range of mid-sized and smaller terminals and river ports found in between.
Yet they are as different as night and day. The more established Yantian facility, with existing capacity for about 14 million TEUs, is almost exclusively an origin and destination port, reliant on export and (to a lesser extent) import volumes to drive nearly half of all volume coming through the Port of Shenzhen.
The burgeoning Nansha facility, part of the Guanzhou Port, is only five years old, but has grown unstintingly in that time. Nansha’s volume is driven by a mix of feeders from a network of ports in the delta, massive domestic coastal volumes, and growing big-ship services from the world’s top lines.
Earlier this year, Maersk Line made waves when it pulled a dozen services from the Port of Hong Kong and moved them to Nansha. The move will bring major international volume increases to Nansha, and further legitimize the port as a key Chinese export gateway.
Between its two terminals, Nansha has 34 quay cranes on 10 berths, including:
- Nansha Container Terminal, which is operated by a joint venture between China Shipping and the Guangzhou Port Group (GPG) and has capacity for 3 million TEUs annually.
- Guangzhou Oceangate Container Terminal, which is operated by a consortium of APM Terminals, Cosco Pacific, and GPG, and has a yearly capacity for 4.2 million TEUs.
The port is already operating past its design capacity, having handled 8 million TEUs in 2010, and a third phase of development, to be run by a China Merchants/APM Terminals/GPG consortium, is due to be completed in 2015. It will have six more berths, providing capacity for another 4 million TEUs.
Yantian, meanwhile, is in a different situation. It has current capacity for 13 million to 14 million TEUs, which far exceeds the record 10.1 million TEUs it handled in 2010. A new phase, known as the East Port development, is currently being built on reclaimed land, but won’t be fully developed until demand necessitates.
When and whether that demand eventually comes will depend a great deal on how much cargo Yantian can successfully draw from China’s interior. There’s plenty of potential in that regard – Yantian only handled about 150,000 TEUs of intermodal cargo in 2010, barely 1 percent of its volume.
There’s a new emphasis at Yantian on intermodal connections to inland points, in part due to China’s construction of dedicated high-speed passenger rail lines that have freed up capacity on existing tracks for more container rail services.
YICT, operated by Hutchison Port Holdings, owns a 23-kilometer track that connects to China’s national rail network.
“Theoretically, that connects us to anywhere in China, but no cargo will likely be pulled from north of the Yangtze,” Peter Yum, senior manager for strategic marketing at YICT, told American Shipper during an October visit to the port.
Containers can move to Yantian in 53 hours from Chongqing, and in 33 hours from Wuhan. Those cities are China’s major inland hubs – the Chicagos of China, if you will. Both are also situated on the Yangtze River, so container shippers in those locales typically rely on river barge services to connect to Shanghai in eastern China. Or they rely on trucks.
An efficient intermodal connection could bring Yantian into the picture, but it won’t necessarily boost its volumes immediately. The cargo coming from these inland points is often high-value, but low-volume tech products, meaning it doesn’t translate into huge intermodal volume numbers for Yantian, even if the value of the goods is high.
On the other side of the delta, Nansha is similarly planning for more intermodal volume. A link from Nansha to the national rail network is expected to be complete in 2013. While the link will open doors to inland cargo, it could also present a situation that Yantian doesn’t face – a threat to its domestic coastal volumes.
More than two-thirds of Nansha’s 2010 volume was from domestic volume, either from feeders or from ships plying the coastal route from southern to northern China. That represents 5.4 million TEUs of domestic throughput, a staggering total that’s represents nearly 90 percent of the California Port of Long Beach’s total volume in 2010.
It’s a testament to the internal power of China’s economy. Tianjin, the closest major port to Beijing and three days sailing time from the Pearl River Delta, is the biggest single destination port for Nansha cargo (the second biggest is Yingkou). Southbound, the chief commodities are coal and grain, while finished goods primarily move northbound on the domestic trade.
On an American Shipper visit to Nansha, Sun Bangcheng, section chief in the department of operations and business at GPG, said he didn’t think a more complete intermodal rail network would hurt the port’s domestic coastal volumes.
“Waterway costs are cheaper than rail, and rail cannot transport the volume of customers,” Sun said.
With ships as large as 6,000 TEUs calling Nansha on purely domestic routes, and 4,000-TEU domestic ships “typical,” he may well be right. Besides, the intermodal network would reach into largely untapped inland regions like Chongqing and Chengdu, not the northeast provinces that are currently driving coastal volumes.
Aside from benefiting from a shuttle barge network of 20 feeder ports in the western Pearl River Delta, Nansha runs block train services to the inland cities of Kunming and Changsha, two other growing landlocked destinations.
Nansha officials say the port has some cost benefits for shippers and carriers. It significantly cuts trucking and barge costs for shippers in the west PRD – by $120 to $140 per box from west Pearl River Delta cities like Guangzhou, Foshan and Shunde. Those cost savings can aid carriers offering door-to-door services for shippers. Carriers also benefit from lower pilotage fees into Nansha than to Hong Kong or Shenzhen.
Rumors have persisted throughout the year that Nansha has offered attractive terms to lines in a bid to attract them to the growing port. Sun said the port is not overly focused on reaching a 50-50 balance in international/domestic volume, but the Maersk migration of big-ship Asia-Europe services won’t hurt in that regard.
Yantian, on the other hand, has less scope to grow with big-ship services because its proposition has always been to target major export loops to North America and Europe. Only 5 percent of its volume comes from transshipment.
“We position ourselves as a key port for the megaships,” Yum said, adding that Yantian can do 200 container moves per hour, or more, on a consistent basis. “We have 74 quay cranes for 15 berths, so there is high quay crane density.”
Twenty-seven of the 74 cranes are tandem lift – most of those are in the newest phase of the port, a straight line of dock designed to handle the biggest ships calling at Yantian.
The port has 42 in-gates and 34 out-gates, handling about 20,000 trucks per day. It has stacking capacity of 400,000 TEUs (a number that can stretch higher through capacity at off-dock depots). It handles 35 U.S.-based services, 39 Europe-based services, five to the Middle East, and four each to South America and Africa. Yantian also handles 13 intra-Asia services, up from two only five years ago.
Yantian officials do worry about over-competition among ports in South China. Aside from Hong Kong, there are the three other terminal complexes that make up the Port of Shenzhen – the China Merchants-operated Chiwan and Shekou container terminals, and the Modern Terminals-operated Da Chan Bay.
“After Maersk moved vessels to Nansha, we worry about other carriers doing it,” Yum said.
Shekou and Chiwan, operated by China Merchants, handled 10 million TEUs between them in 2010, but have capacity for as much as 20 percent more. Both terminals have nine berths, with Chiwan expanding its berth length by 10 percent by the first quarter of 2012 (essentially adding another berth).
Both facilities are tied to their own intermodal network, with eight cities (Shaoguan, Zhuzhou, Liling, Changsha ,Wuhan, Hengyang, Kunming, and Nanchang) currently connected and two more (Chongqing and Chengdu) planned to be added in 2012. To accommodate more intermodal volume, the amount of warehouse space abutting the terminal complexes is due to be expanded by more than 25 percent in the next two years, to roughly 670,000 square meters.
Meanwhile, Da Chan Bay, the other complex that makes up the Port of Shenzhen, adds another 2 million to 2.5 million TEUs of capacity (though it handled less than 1 million TEUs in 2010).
Overall, the PRD terminals in mainland China are about 80 percent full, a pretty healthy rate in terms of optimal container terminal efficiency. That, however, discounts the effect that the still massive Port of Hong Kong has on capacity, and with expansions on the books in Yantian and Nansha, the intermodal volume will have to come.
“I think intermodal will play a significant role, but not for another 10 to 15 years,” Jonathan Beard, managing director of port consultant GHK (Hong Kong), told American Shipper.
But officials at Nansha, where volume has been growing the fastest of all terminals in the region, seem unruffled by the prospect of port overcapacity in the Pearl River Delta. Sun pointed to congestion this year in Hong Kong, not to mention the fact that Nansha is technically operating more than 10 percent past its current design capacity.
“Domestic throughput is increasing quickly, and export trade is also still increasing,” he said. “Eight million TEUs in Nansha, that shows capacity is not enough.”
