China Merchants Holdings (International), a leading mainland port operator, plans to invest directly along with others in the four billion yuan second-phase development of Dachan Bay container port in western Shenzhen in a deal to be finalised by the end of the year.

China Merchants chairman Fu Yuning, who forecast 15 per cent compound annual growth for mainland container throughput until 2010, announced the move on the sidelines of an industry conference in Hong Kong yesterday. He declined to give further details.

The investment aimed to alleviate any negative impact the new facility would have on the company's existing ports in western Shenzhen, analysts said.

Dachan Bay is a greenfield port with potential for better logistics facilities than other western Shenzhen terminals and could put great pressure on ports in Shekou, Mawan and Chiwan, in which China Merchants has majority stakes.

China Merchants, which invested indirectly in the seven billion yuan first phase of Dachan Bay through subsidiary Modern Terminals, is pursuing a strategy of gaining control of as many of its port projects as possible as the country's booming economy drives demand for capacity.

China Merchants has a 27 per cent stake in Modern Terminals, which has a 65 per cent interest in phase one of the Dachan Bay port.

Phase two would have three to four shareholders but Modern Terminals might not be one of them, a source said.

"The Shenzhen government has to balance the interest of different parties, so it's not easy for China Merchants to get a stake of more than 40 per cent," an analyst said. "It will be pretty good for them to get 30 per cent."

Mr Fu said mainland container throughput could reach 150 million teu (20-foot equivalent units) by 2010. "As most mainland ports are operating at more than 25 per cent over their designed capacities, new facilities have been quickly utilised amid new demand, particularly in the Yangtze River Delta," he said.In the Pearl River Delta, growth would be the greatest at Nansha and Dachan ports, drawing volumes away from Hong Kong and Shenzhen, said Charles de Trenck, the head of regional transport research at Citigroup.

The utilisation rate of terminals in the delta would drop to below 70 per cent per cent from next year from 73 per cent, he said in a report.

Mr de Trenck said volume growth in the delta would fall to 9 per cent a year in the long term from 14 per cent, although capacity growth would hold up at 10 per cent to 15 per cent until 2010.

Meanwhile, Mr Fu said Shanghai Port had room to raise rates as its pricing was more competitive than ports further south.

The massive investment committed by SIPG to Shanghai's deepwater Yangshan Port also justified the rate rise, he said.

China Merchants has majority stakes in terminals in western Shenzhen, Ningbo, Qingdao and Zhangzhou. It has a 26 per cent stake in SIPG.