BMI View: China will continue to be the most important market for global container shipping in 2015 and over the years to come. Although there are some risks to the export picture, we expect positive growth across the country's many major box ports, which dominate the global top 10 . China's economic growth in the coming decade will be much slower than in the last, as the savings rate declines, the economic liberalisation process slows and population growth falls. These dynamics will result in real GDP growth averaging 6.0% over the next decade as opposed to the 10.1% average seen over the past decade. Private consumption will be a major outperformer, averaging growth of 8.1% and rising in importance as a share of GDP. This is good news for the country's container shipping sector, which should see a boost in volumes as a resul t.
Headline Industry Data
2015 port of Shanghai tonnage throughput forecast to grow 2.8%, with container growth of 6.2% forecast for the year.
2015 port of Shenzhen container throughput forecast to enlarge by 2.5%, with average growth of 2.5% during our forecast period to 2019.
2015 real trade growth forecast at 7.0% - a very slight decrease from 2014's estimated 7.1%.
Key Industry Trends
KPT Enters MoU With Largest Seaport In Chi na: Pakistan's Karachi Port Trust (KPT) and the Chinese seaport of Guangdong Province have entered a memorandum of understanding (MoU) to enhance ports and shipping connectivity. 'It is another concrete step leading to the materialisation of China Pakistan Economic Corridor project,' said KPT Chairman Shafqat Jawed. The Guangdong Provincial Transportation Department and KPT aim to promote cooperation in port and shipping logistics, improve communications and boost relations between the two Asian nations. It is hoped that the MoU will enhance local logistics networks, reduce congestion and simplify cargo handling operations and infrastructure development projects. BMI notes that China has been investing heavily in seaports around the world, which is sometimes referred to as its 'String of Pearls' policy.
State Subsidies Help Shipping Firms : Three of the China's biggest domestic cargo freighters avoided the losses that plagued international competitors last year thanks to state subsidies. Boosted by grants from the Chinese government for scrapping old vessels, China Cosco, China Shipping Development and China Shipping Container Lines will report profits for 2014, despite the difficulties facing the global shipping sector. The three firms, backed by state-owned companies China Ocean Shipping Group and China Shipping, received at least CNP2.4bn (USD359mn) in subsidies over 2014, a five-fold increase compared to the previous year.
Direct Service Connecting China And Myanmar Industrial Port Opens : A direct shipping service connecting China to Myanmar Industrial Port commenced with the arrival of Chinese container ship Asiatic Wave at the terminal in the week ended February 8. The direct service marks the opening up of the Myanmar Industrial Port for international trade, according to the port's Chair Ko Ko Htoo.
Key Risks To Outlook
The risks presented to our China shipping forecasts are primarily to the downside, with a sharper-than-expected fall in the country's already-declining international trade volumes representing the most immediate threat. In particular, we believe monetary tightening could cause the country's need for materials, such as iron ore, to ease, leading to a decrease in the import of such commodities.
A key downside risk to our economic outlook remains another collapse in external demand, such as the one that occurred at the height of the global financial crisis. This would seriously undermine growth in trade-dependent industries and hasten a fall in the property market, potentially leading to an outright recession. Given the slowdown in the EU and Japan, a significant drop in performance from the US would make this scenario considerably more likely.
A hard-landing scenario is also a key risk in China, as falling property prices amid rising domestic debt levels could set the stage for a financial crisis. While we believe that this eventuality will be averted over the next few years owing to the government's considerable resources, such an outcome cannot be entirely ruled out. In this case, real GDP growth would slow dramatically.