China mounted its own infrastructure investment strategy to help counter some of the effects of the global economic downturn, and the positive effects are already being felt along the Yangtze River.
Accelerating investment in transport infrastructure in China’s interior has halted the recent sharp declines in cargo throughput at ports along the Yangtze River, according the latest official figures.
In January 2009, the major ports along the Yangtze trunkline reported a year-on-year cargo throughput increase of 5.7% to 80 million tons, the first monthly rise since last August. Container throughput increased 19.6% to 550,000 twenty-foot-equivalent units (TEUs), compared with 8% in November and 14% in December.
“This is impressive growth in the current climate,” said Ms Zhang Tingting, co-author of the investment guide Yangtze Transport 2008: Accessing China’s Interior. “Both the January 2009 general cargo and container throughput growth levels are on a par with the same month last year, when the global economy was in much better shape.”
According to statistics released by the Yangtze River Administration under the Chinese Ministry of Transport, cargo throughput reached 1.15 billion tons in 2008, up 9.2% year-on-year. However, there was a marked downturn in activity towards the end of the year due to the impact of the worldwide economic downturn. Throughput increased by 14% during the first nine months, followed by zero growth in September, and falls of 17% in October, 21% in November and 30% in December.
Higher levels of government spending to construct railways, roads, bridges and metros are driving the demand for imported iron ore and construction steel, two of the major commodities shipped on the Yangtze. According to the recently revised blueprint for the national rail network approved by the State Council at the end of October, planned new lines for the period up to 2020 will more than double from 16,000 km to 41,000 km. In 2009 and 2010, work will start on 20,000 km of the new lines, including the Chongqing-Guizhou and Guizhou-Guangzhou lines, two major routes that connect the interior to the south coast.
Projects to improve shipping conditions on the Yangtze are also making the river a more viable mode of freight transport, according to Mr Tang Guanjun, newly appointed director of the Yangtze River Administration. “Huge investments in developing the Yangtze in recent years, involving dredging the waterway and modernizing the ports, have made Yangtze shipping the backbone of the transport network for industries along the riverbank and beyond,” he said.
Detailed January commodity figures are not yet available, but according to major iron ore-handling ports such as Zhenjiang, iron ore volumes are picking up as steel producers add to their stockpiles to take advantage of iron ore prices that have more than halved since their July 2008 peak. Reconstruction efforts in the aftermath of the Sichuan earthquake last May, sometimes involving the creation of entire new towns, continue to drive demand for building materials such as sand, stone and cement.
The single largest commodity shipped on the Yangtze, iron ore, accounted for more than 20% of the total cargo throughput in 2008, increasing 4.7% year-on-year to 210 million tons. Iron ore throughput grew 22% in the first half of the year, before slowing in the third quarter and falling by 17% in October, 28% in November and 38% in December. Coal and building materials, the second and third largest commodities shipped on the Yangtze, followed a similar pattern. Throughput of all the leading three commodities combined reached 557million tons last year, accounting for nearly 55% of the general cargo total.
Similarly, container throughput during the first nine months grew by nearly 31% but the pace slowed to 20% in October, 8% in November and 14% in December. Over the whole year, throughput increased 25% to 6.92 million TEUs, compared with 38% in 2007.
These slowdowns in the container sector are less pronounced than in the export-driven ports along the coast. Throughput at China’s two largest ports, Shanghai and Shenzhen, fell by 6% and 15.7%, respectively, in December, the sharpest falls on record. “To a certain extent, we are less affected by the rapid shrinking of foreign trade than in the coastal ports because of continued robust domestic trade,” said Mr Gu Qiangsheng, executive deputy general manager of Wuhan Port Group. He believes, however, that it will take until May or June for government efforts to stimulate consumer demand to be translated into sustained and strong cargo growth.
Mr Huang Qiang, Communist Party Secretary of the Yangtze River Administration, agrees that there could be “a few more difficult months before we can be certain that we have come out of the woods in terms of throughput. But we are confident that business will improve markedly in the second half of 2009 and annualized cargo growth will be in the region of 9%.”
Analysts point to encouraging China car sales figures in January and expect that this may, in turn, boost demand for high-end steel and therefore iron ore, too. In Beijing, for example, more than 60,000 passenger cars were sold last month, up 17% year-on-year, according to Chinese Central Television. A new government initiative, setting aside Rmb5bn ($731 million) between March and December 2009 to subsidize farmers to upgrade to low-emission vans and passenger vehicles, is another reason for analysts to predict double digit iron ore throughput growth in the second half of this year.
Mr Huang emphasized that the greatly accelerated speed of investment in rail, road and waterway projects along the Yangtze corridor will transform transport infrastructure and reduce supply chain costs for shippers which, in turn, will boost Yangtze cargo traffic in the long run.
Yangtze Business Services Ltd is a publisher and event organizer that specializes in Yangtze transportation issues. David Lammie can be reached at dl@YangtzeBusinessServices.com