Issue: Oct 2005


Maersk to buy into Shanghai port



Danish shipping giant A.P. Moeller-Maersk will take a share of the second phase of a $12 billion port in Shanghai, as it bets on the longevity of China's shipping boom.

by Lucy Hornby SHANGHAI (Reuters)

The investment underscores the growing importance of China, the world's third-largest trading nation, to a global shipping industry where capacity could soon outpace demand.

Shanghai, China's richest city and industrial heart, hopes the deep-water port -- due to start up late this month -- will cement its position as one of the world's three busiest ports by enabling today's largest ships to berth.

"We will be a partner in the new terminal," said Knud Pontoppidan, executive vice president of the shipping firm.

"I cannot say exactly what the share is. What I am talking about is a substantial part of the terminal," he told Reuters on the sidelines of a shipping forum in Shanghai.

China's economy has grown faster than 9 percent annually for the past nine quarters -- spurring billions of dollars in port investments along the wealthy east coast to smooth imports of raw materials and exports of textiles, toys and electronics.

Maersk planned to move some of its shipping line services to the Yangshan port when the first phase of the container terminal project -- wholly owned by domestic investors -- starts up this month, other Maersk executives said.

State media have said the entire project -- which includes support infrastructure -- would cover three phases and eventually include 52 berths and a 32 km (20 mile) bridge.

Hong Kong newspapers reported that Shanghai had awarded the second phase of its multi-billion dollar container port project to a consortium of members including Hutchison Whampoa <0013.HK>, COSCO Pacific <1199.HK> and Maersk's port unit, APM Terminals.

The remaining two partners are Shanghai International Port Group (SIPG) -- 30 percent owned by China Merchants Holdings (International) <0144.HK> -- and a joint venture between Wharf (Holdings) Ltd.'s <0004.HK> Modern Terminals and the parent of China Shipping Container Lines <2866.HK> , China Shipping Group.

The second phase of the Yangshan port would reportedly cost about $830 million, though expenditure had not been finalized, and start up around the end of 2006.

BOOMING TRADE

Booming trade with China has boosted returns for the shipping industry since the second half of 2002. But new ships -- many built in Chinese yards -- have begun to crash the party.

Container freight rates are the latest to fall, after oil tanker and bulk cargo freight rates slumped from December's record highs. That prospect has pressured shipping stocks and led some operators to warn of lower profits.

Maersk is the world's leading container line, with about 17 percent of the global container market, taking into account a $3 billion takeover this year of Dutch rival P&O Nedlloyd.

"I think we have very strong fundamentals. Naturally (the shipping industry) is coming from a very, very high level of freight rates. They might reduce a bit but they will still be in the high end," Pontoppidan said.

The container trade would continue to grow at about 10 percent a year, he added.

Analysts have said global container liner capacity would grow by 14 to 16 percent a year from 2005 to 2007, outpacing demand. Pontoppidan said that trade patterns and port congestion would keep some of that new capacity from pressuring rates.

The dominant factor was still Chinese growth, he said.

"Today every fourth container comes out of China, and in a few years' time, every third container will come out of China. So basically, yes, we're very optimistic about the future."


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