Friday, March 30, 2007
A VERY SOLID FOUNDATION FROM WHICH TO GROW
By Robert Wright
Friday, March 30, 2007, FT
The white-carpeted, formal room where Chen Xuyuan speaks to visitors, on Xiao Yangshan island, is a busy place. Mr Chen, president of Shanghai International Port Group, plays host to a constant stream of dignitaries from elsewhere in China eager to see the container port Mr Chen's company has built on the rocky island, linked to the mainland by a 32.5km bridge. It is one of the most audacious engineering feats even in a part of China which excels at them.
However, Mr Chen makes it clear that he wants to extend SIPG's reputation and turn the company into an important international container terminal operator. The strategy came to wider attention last year, when SIPG unexpectedly took a 40 per cent stake in a new container terminal constructed by Danish-owned APM Terminals, part of the AP M?ller-Maersk Group, at Zeebrugge in Belgium. The investment was the company's first outside China.
The Zeebrugge investment was the first step in pursuing the goal – set for the company by the Shanghai municipal government, which owns 70 per cent of SIPG – of turning itself into a big international terminal operator. “If we want to become a global terminal operator, it's not enough,” Mr Chen says of the Zeebrugge investment. “But the goal isn't something we'll achieve in a short period of time.”
SIPG's pursuit of international expansion will take it down the same route as three of the existing four biggest international container terminal operators – Hong Kong's Hutchison Ports, Singapore's PSA and Dubai's DP World. All started from a base in one of the world's busiest container ports and used them to build up reserves of finance and expertise which were used to buy or build assets elsewhere.
Two of the big operators – PSA and DP World – are owned by arms of their state. Mr Chen says he sees no immediate prospect of the municipal government's reducing its stake. The holder of the remaining 30 per cent is the listed China Merchants Group. Mr Chen accepts SIPG shares features with other big port operators. But it also has unique characteristics, especially its position as the port serving the lower Yangtze River, which passes through some of China's fastest-growing, most dynamic areas, he says.
As a result, Shanghai's business is a mix between serving its immediate hinterland and trans-shipping containers to travel by truck, rail or barge elsewhere in the Yangtze Delta. The group's facilities in Shanghai, including Xiao Yangshan, last year handled 21.7m twenty-foot equivalent units (TEUs) of containers, making it the world's third-busiest container port after Hong Kong and Singapore.
“We are a kind of hinterland-based trans-shipment port because we're based on the Yangtze River Delta,” Mr Chen says. “The annual foreign trade volume in this region is $550bn. This has provided a very solid foundation for the group to grow.”
How the next stage of international growth will unfold remains unclear, including whether it will involve APM Terminals, which is known to want to build a strong relationship with SIPG.
“We think there are all kinds of possibilities,” Mr Chen says. “It could be another co-operation with APM Terminals. It could be a co-operation with another party – for example, a local government that's prepared to co-operate with us.”
The Asia-Pacific region is the most promising location for further expansion but Mr Chen also says he wants to build up a network of terminals all over the world. He rules out only the US, which is effectively closed to many foreign port operators after a political outcry last year over the purchase by DP World of the US port assets of Britain's P&O forced the Arab company to sell.
“Sometimes wishes are wishes and not reality,” Mr Chen says. “We know the American port market is a very good market, so just according to our wishes we might want to go to America to invest in ports. But in reality the American government might place a lot of restrictions and conditions on our doing so.”
As well as buying overeas assets, Mr Chen says SIPG needs to strengthen its internal management and improve the regulatory environment in Shanghai.
“We need to improve our competitiveness in international markets, not only to compete with neighbouring ports but also with all the other ports in the world,” Mr Chen says. “That's what we think internationalisation really means.”
It is an example of the determination to succeed which has characterised much of SIPG's recent development – as is the bustling Yangshan Port, on a site which only five years ago housed only a fishing village. Against that backdrop, few in the world maritime industry are likely to dismiss Mr Chen's latest plans. ¶ 10:55 AM
Friday, March 30, 2007, FT
The white-carpeted, formal room where Chen Xuyuan speaks to visitors, on Xiao Yangshan island, is a busy place. Mr Chen, president of Shanghai International Port Group, plays host to a constant stream of dignitaries from elsewhere in China eager to see the container port Mr Chen's company has built on the rocky island, linked to the mainland by a 32.5km bridge. It is one of the most audacious engineering feats even in a part of China which excels at them.
However, Mr Chen makes it clear that he wants to extend SIPG's reputation and turn the company into an important international container terminal operator. The strategy came to wider attention last year, when SIPG unexpectedly took a 40 per cent stake in a new container terminal constructed by Danish-owned APM Terminals, part of the AP M?ller-Maersk Group, at Zeebrugge in Belgium. The investment was the company's first outside China.
The Zeebrugge investment was the first step in pursuing the goal – set for the company by the Shanghai municipal government, which owns 70 per cent of SIPG – of turning itself into a big international terminal operator. “If we want to become a global terminal operator, it's not enough,” Mr Chen says of the Zeebrugge investment. “But the goal isn't something we'll achieve in a short period of time.”
SIPG's pursuit of international expansion will take it down the same route as three of the existing four biggest international container terminal operators – Hong Kong's Hutchison Ports, Singapore's PSA and Dubai's DP World. All started from a base in one of the world's busiest container ports and used them to build up reserves of finance and expertise which were used to buy or build assets elsewhere.
Two of the big operators – PSA and DP World – are owned by arms of their state. Mr Chen says he sees no immediate prospect of the municipal government's reducing its stake. The holder of the remaining 30 per cent is the listed China Merchants Group. Mr Chen accepts SIPG shares features with other big port operators. But it also has unique characteristics, especially its position as the port serving the lower Yangtze River, which passes through some of China's fastest-growing, most dynamic areas, he says.
As a result, Shanghai's business is a mix between serving its immediate hinterland and trans-shipping containers to travel by truck, rail or barge elsewhere in the Yangtze Delta. The group's facilities in Shanghai, including Xiao Yangshan, last year handled 21.7m twenty-foot equivalent units (TEUs) of containers, making it the world's third-busiest container port after Hong Kong and Singapore.
“We are a kind of hinterland-based trans-shipment port because we're based on the Yangtze River Delta,” Mr Chen says. “The annual foreign trade volume in this region is $550bn. This has provided a very solid foundation for the group to grow.”
How the next stage of international growth will unfold remains unclear, including whether it will involve APM Terminals, which is known to want to build a strong relationship with SIPG.
“We think there are all kinds of possibilities,” Mr Chen says. “It could be another co-operation with APM Terminals. It could be a co-operation with another party – for example, a local government that's prepared to co-operate with us.”
The Asia-Pacific region is the most promising location for further expansion but Mr Chen also says he wants to build up a network of terminals all over the world. He rules out only the US, which is effectively closed to many foreign port operators after a political outcry last year over the purchase by DP World of the US port assets of Britain's P&O forced the Arab company to sell.
“Sometimes wishes are wishes and not reality,” Mr Chen says. “We know the American port market is a very good market, so just according to our wishes we might want to go to America to invest in ports. But in reality the American government might place a lot of restrictions and conditions on our doing so.”
As well as buying overeas assets, Mr Chen says SIPG needs to strengthen its internal management and improve the regulatory environment in Shanghai.
“We need to improve our competitiveness in international markets, not only to compete with neighbouring ports but also with all the other ports in the world,” Mr Chen says. “That's what we think internationalisation really means.”
It is an example of the determination to succeed which has characterised much of SIPG's recent development – as is the bustling Yangshan Port, on a site which only five years ago housed only a fishing village. Against that backdrop, few in the world maritime industry are likely to dismiss Mr Chen's latest plans. ¶ 10:55 AM
