China Ports: Overcapacity on the horizon?
February 24, 2009 by SwizStick
Filed under China, Seafreight
China has been on a seemingly non-ending construction boom in regards to its terminals and ports. As their economy has expanded at dizzying heights over the past decade and Chinese imports grew in volume and importance to the U.S. and European retail markets, demand for new and expanding port cargo capacity has been met with fast and furious expansion. However, with the recent economic downturn and significant drops in export volumes to the U.S. and Europe, China is now faced with the prospect of excess port capacity, a picture that only a few years ago would have seem implausible.
According to “China Container Ports Review 2009,” the excess supply of terminal capacity in China’s container ports is estimated to reach 35million TEU (twenty-equivalent units) by 2010. Of the top 12 container ports, the potential over-capacity is expected to be most severe in Xiamen and Dalian where total capacity in 2010 is 114 percent and 100 percent respectively of the demand in 2008.
“Both the Bohai Rim and the Pearl River Delta/Southeast coastal region could see a significant overcapacity challenge in 2010 as the excess capacity projected is three times more than the actual growth seen in the 2000-2008 period,” said analysts. “With growth slowing considerably for 2009, it is unlikely that demand would grow sufficiently to absorb the excess capacity within the next two years.”
While this is certainly bad news for the short and near-long term, once things pick up again China will be well equipped to deal with the subsequent growth in cargo. One of the advantages China has over some of its lower-cost production rivals (such as Vietnam) is a well developed system of coastal ports and terminal. China has vastly improved their ocean cargo infrastructure at a coastal level that gives them a competitive advantage over others. While they may want to put the breaks on expanding existing port facilities or delaying construction of new ones, they should feel comfortable about their capabilities when the world starts buying again.
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