AXS: Overcapacity crisis to hit China in 2010

AXS: Overcapacity crisis to hit China in 2010 China's ports could suffer from extreme overcapacity this year and next, according to a new report from AXS-Alphaliner.
      The report, China Container Ports Review 2009, suggests that the excess supply of terminal capacity in China’s container ports could reach 35 million TEUs by 2010. The ports in the Pearl River Delta and Bohai Bay regions would be especially hard hit, as most major ports in China have expansion plans on the books despite declining demand.
      “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,' the report said. 'With growth slowing considerably for 2009, it is unlikely that demand would grow sufficiently to absorb the excess capacity within the next two years.”
      The ports most likely to see overcapacity are those in Xiamen (in southeastern China) and Dalian (on the Bohai Bay), where total capacity in 2010 is forecast to be 114 percent and 100 percent of 2008 demand, respectively.
      The report paints a bleak picture for terminal operators who have invested heavily in Chinese ports, as dropping export levels affect throughput and profitability per container as individual terminals offer cost incentives to lure volume.
      'The top 10 operators control about 58 percent of the total throughput in the country,' the report said. 'The four largest operators — Hutchison Port Holdings, Shanghai International Port Group, China Merchants Holdings International and COSCO Pacific — have significant exposure to the falling demand across all regions.   
      The reduced volumes and tariff erosion would have an adverse impact on the operators, with many terminals facing the prospect of negative growth.'