HONG KONG — They know it’s coming, so they’re building it.
The looming end of the quota system is expected to bring a boom in Chinese exports of textiles and apparel, and the nation’s ports are investing heavily to increase their capacity in anticipation of that surge.
Shipping and port executives said they are confident that China’s five major ports, including Hong Kong, will be prepared to handle the higher export volume next year. But they said they’re urging apparel companies not to hold off on shipping goods until after Jan. 1, which could lead to severe congestion. That’s the day the 147 nations of the World Trade Organization are set to drop their quotas on textiles and apparel.
Even with the quotas in place, Chinese shipments of those goods to the U.S. have been skyrocketing — they posted a 22.2 percent increase to $12.79 billion for the 12 months ended in June, more than offsetting Hong Kong’s 1.3 percent decline to $3.87 billion.
When the quotas are lifted, importers will no longer have to pay for the cost of quota charges, which can represent anywhere from 10 percent to half of a garment’s cost. That’s made the holding off of shipments until after Jan. 1 a real temptation.
January is historically a busy shipping season because it sits between the Christmas holiday in the West and the Chinese New Year, said Elena Tosana, who is based in Shanghai as Italy trade lane manager for Schenker, a German logistics and forwarding company that has had offices in China for 25 years.
All the main carriers — air and ship — are adjusting their availability of empty containers, Tosana said, but there will be congestion in January, she added. “We are sure of that.”
Tosana has been recommending that clients not trust the odds that shipments scheduled for a Jan. 1 departure will arrive at their destinations on time. Even if it costs more because of the added quota charge, she suggests they should still ship their urgent items early.
Kim Khoo, executive director at Linmark Group, a Hong Kong sourcing company that also handles shipping coordination for its clients, is giving similar advice.
Related Articles
You May Also Like
There are two groups of customers, Khoo said: The first group wants to plan early and have their inventory early for fear of a mad rush; the second group is willing to “wait and see what will happen with Christmas sales.”
But Khoo is advising customers it is likely that people will be rushing, and the recommendation is to ship early: “It’s better to be early than late,” Khoo added.
For the longer term, observers said they are confident that China’s ports can cope with the expected upsurge in orders.
“Major ports — Shenzhen, Hong Kong, Shanghai, Ningbo, Zhejiang — are all planning to expand aggressively,” said Ashley Cheung, an equity analyst at South China Research, based in Hong Kong, who deals with clients such as Cosco Pacific and China Shipping. “We’re just afraid that they’re building too fast.”
Shanghai now has the third-largest port in the world after Hong Kong and Singapore, which are first and second, respectively. In 2003, Shanghai Port’s worldwide volume hit 11.3 million 20-foot containers, known as TEUs, with 25 berths. Shanghai Customs estimated the city will ship 25 million TEUs by 2020, a nearly 55 percent jump.
To meet that projection, the port is conducting a major expansion program. The construction of Wai Gao Qiao Phase 5 will be complete in October, increasing Shanghai Port’s capacity by more than 2 million TEUs, said Helen Huang, deputy general manager of the corporate affairs department for the Shanghai International Port Group Co., a state-owned enterprise that owns and operates the port.
The river port is also adding deep-water berths on the island of Yang Shan. By the end of 2005 that island will be home to five deep-water berths on the China Eastern Sea. They will help accommodate larger cargo ships, which are set to be introduced this year. These ships are expected to hold 8,000 TEUs each, about twice the volume of the ships that currently call at Shanghai.
The island is almost 19 miles from the port and will be linked by a bridge, one of the longest such structures in the world. The first five berths at Yang Shan, budgeted at 12 billion yuan, or $1.45 billion, are the first phase of a 20-year project that anticipates 50 deep-water berths at its completion.
The Shanghai International Port Group has also formed joint ventures with local companies along the Yangtze River, where Shanghai Port is located. These ventures have invested in port terminals, warehouses and logistics facilities in smaller cities along the river, such as Chongqing, Wuhan, Nanjing and Changsha. So far, 10 to 12 investments have been made, Huang said.
Shanghai Port can receive more cargo through these river ports, bypassing the need to transport cargo by land for long distances to Shanghai Port, she said, adding that customers will save money because water transport is generally cheaper than land transport.
But it isn’t just Shanghai that is pumping up its shipping capacity. All the ports in China are growing at a similar rate, Huang said. As a result, “I don’t think there is a big problem in handling an increase of cargo, but we are still facing capacity constraints” in Shanghai, she said. “We’re building ports very fast, but the economy is growing even faster.”
In Hong Kong, total volume handled last year was about 20.4 million TEUs. By the end of this year, Terminal 9 will be completed there, giving the world’s largest port a total of 24 container terminals that can each handle 800,000 TEUs.
“With this figure, we should be able to handle any possible expected growth,” said Henry Lee, executive director at the Hong Kong Container Terminal Operators Association.