Posted: 28 June 2009 1457 hrs

Yangshan deep water port in Hangzhou Bay, south east of Shanghai.

SHANGHAI: The scene where Shanghai's river meets the sea is a snapshot of China's battle against the financial crisis - as well as the site of the port the country hopes can set the stage for the next boom.

Empty container ships - victims of China's export collapse - line the river banks in Shanghai's port.

Meanwhile, bulk carriers laden with raw materials - a bet on demand rebounding - wait at sea because ports cannot unload them fast enough.

"Just look at the Huangpu River," a shipping company dispatcher said, referring to the waterway that cuts through Shanghai. "There used to be a few ships anchored on the river but now you can see anchored ships everywhere."

"Charter rates are so low now we would rather anchor the ships and save the cost of crew and fuel," the dispatcher for state-run Shanghai Puhai Shipping Co. said on condition of anonymity because he was not allowed to speak to reporters.

World shipping prices in the past week were down about 68 per cent from a historic peak in May last year, according to the Baltic Exchange Dry Index, which gauges international dry bulk good shipping prices.

Low shipping rates combined with weak commodity prices sparked a Chinese buying spree of iron ore and other commodities that has led to jams of bulk carrier traffic at Chinese ports.

But that has not offset volume lost due to seven straight months of plummeting exports, which were down 26.4 per cent year-on-year in May.

The volume handled at Shanghai's port was down 15 per cent in the first five months of 2009 after nearly a decade of 20 per cent annual growth, Shanghai International Port Group Vice President Huang Xin said this past week.

"This is the first time Shanghai's shipping container business declined since it went into full-scale operation (20 years ago), it shows how deeply the financial crisis has affected the real economy," Huang told a maritime conference in Shanghai.

Chinese shipbuilders fared even worse, with orders plunging 96 per cent to 1.18 million deadweight tons in the first five months of the year compared to the same period last year, according to government figures.

"This will be the worst year ever for the container port industry in terms of volume decline," Truong Bui, a consultant at Drewery Maritime Services said. "China's container traffic will not recover until 2011."

Despite the plunge in shipping demand, Shanghai - already the world's busiest port by total cargo volume - is charging ahead with plans initiated during boom times to more than double its capacity.

China's cabinet set ambitions for Shanghai even higher in April, declaring it would move up the value chain and become a full-service world-class shipping centre by 2020.

But building the infrastructure will be easier than developing the service side of that equation, Xu Jianqun, Shanghai's Construction and Transport Commission Secretary General, warned.

"We lack the related 'software' in terms of ship financing, reinsurance for ships and arbitration," Xu told the same conference. "This leaves Shanghai lagging behind other developed port cities in the world."

The centrepiece of its expansion will be the Yangshan Deepwater Port, which connects to the mainland via a 32.5-kilometre (20-mile) bridge.

Shanghai also plans to build the world's biggest shipbuilding yard on its northern Changxing island and put in place rail lines to better link the port to industrial powerhouse regions, Xu said.

On the services side, the Bank of Communications, part-owned by HSBC and China's fifth-largest bank, announced last month plans to create a ship financing division.

Some argue the need for the extra capacity is debatable but Torben Skaanild, chief executive of the Baltic and International Maritime Council, said Shanghai's moves come as the shipping industry faces a historic shift.

"The timing is probably absolutely perfect. There has been a shift in ship-owning towards the East and Asia," Skaanild said. "But there will be stiff competition because Hong Kong, Singapore, Japan and Korea are not going to let Shanghai stand alone."

- AFP/yb

From; see the source article here.

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