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COSCO Pacific has announced that it is "transforming" its business strategy "from container terminals to diversified terminals" as a hedge against a possible downturn in the box trade.
The company, which owns terminals from China to Europe, will also move from an investment-based business model to a "controlling rights model", said the company press release.
"The business cycle of container shipping activities is subject to fluctuations in the world economy, trade friction and changes in US demand," Cosco Pacific deputy managing director Kelvin Wong told Malaysia's Business Times, adding that bulk cargo moves in a different cycle.
The company also said there would be an "emphasis on the China market to the global market with a primary focus on China". There are also plans to reduce assets in container leasing and move into managing container logistics. "As a [container] owner, the risk is high," said Mr Wong. "Owning a terminal over a period of time, it still has value, if only its land. But owning a container - it will be scrap in 15 years."
Cosco Pacific said it will increasingly take majority stakes in the ports and terminals along the China coast, focusing on Hainan, Fuzhou and Jiangdu in Yangzhou.
To this end, Cosco Pacific will form a joint venture with Hainan Harbour & Shipping Holding Co., Ltd, the biggest state-owned port and shipping enterprise in Hainan with Cosco taking the majority stake.
The first phase of the port development plan calls for a total of 19 berths including two container berths, seven multi-purpose berths and 10 ferry terminal berths, with its annual handling capacity of 450,000 TEUs, 4.2 million tonnes and 1.1 million vehicles respectively.
Cosco Pacific will acquire 30 per cent in Fuzhou Port Group. With its container terminals, coal and iron ore docks, Fuzhou is the 11th largest port in China. Fuzhou Port Group owns and operates 49 berths in the port areas of Minjiang, Jiangyin and Luoyuan Bay.
In 2006, the Fuzhou Port Group handled 43 million tonnes of cargo, representing a 34.4 per cent year-on-year growth over 2005 and a 50 per cent market share of Fuzhou port. Meanwhile, the group handled all its container throughput in Fuzhou port, which was increased by 25 per cent to one million TEU.
In Yangzhou, Cosco Pacific already holds 55.59 per cent of Yangzhou Yuan Yang International Port Co., Ltd and will now invest in and operate two berths plus the exclusive rights for further investment in other new berths at nearly Jiangdu port. Total land area of the port investment will be 1.33 million square metres.
In 2006, Yangzhou was ranked as the second largest port handling substantial portion of the import of lumber in China, with a total throughput of 2.5 million cubic metres. Jiangdu port experienced a rapid throughput growth by handling 1.2 million tonnes of cargos in 2006, and with a throughput forecast of 5.2 million tonnes by 2010.
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