Caixin
Jul 12, 2019 07:43 PM
BUSINESS & TECH

Shipping Sector Consolidation Continues With Shandong Port Takeover

Weihai port is seen on July 5, 2018. Photo: IC Photo
Weihai port is seen on July 5, 2018. Photo: IC Photo

Shandong province’s biggest port is set to gobble up a smaller rival, as the country’s shipping industry continues a recent consolidation drive amid a wider push to streamline the country’s bloated state-owned sector.

The local state-owned enterprise overseer in the Shandong city of Weihai has given the green light to Qingdao Port Group Co. Ltd. taking a 100% stake in Weihai Port Group Co. Ltd., according to a filing (link in Chinese) by a Qingdao Port subsidiary to the Shanghai Stock Exchange on Tuesday.

Even before this takeover, Qingdao Port Group was the largest port operator in Shandong by freight volume and the fifth-largest nationwide. Last year, its annual freight volume was 486 million tons. Weihai Port Group transported 45 million tons of freight in the same period.

The move is in line with a central government drive for provinces to consolidate state-owned shipping and logistics companies to reduce competition and promote economies of scale.

That campaign in turn mirrors a broader state-owned enterprise reform movement that has been underway since 2015. Beijing has been trying to consolidate the bloated state sector to pare down leverage and increase global competitiveness.

The Ministry of Transportation released a statement in August 2017, calling on provincial-level authorities to learn from Zhejiang province, where all regional port operators were merged in 2015 and now operate under a single platform.

At least five other regions, including Hebei, Jiangsu, Liaoning and Anhui provinces and the Guangxi Zhuang autonomous region, have set up a single-platform port system following Zhejiang’s example.

Plans for single-platform port system in Shandong were announced in 2018. A transportation industry analyst predicted that the consolidated operator will include Rizhao Port Co. Ltd., Yantai Port Group Co. Ltd. and Shandong Bohai Bay Port Group Co. Ltd., the three largest state-owned port operators after Qingdao Port.

Rizhao Port reported annual freight volume of 381 million tons in 2018, according to the company's financial report (link in Chinese). Yantai Port transported 370 million tons in the same period. Bohai Bay Port booked 100 million tons last year.

The analyst told Caixin that such a merger could prevent “vicious competition” between port companies in the province, and more importantly, help reduce excessive investment and prevent overcapacity.

Last week, the two largest shipbuilders in China, China State Shipbuilding Corp. and China Shipbuilding Industry Corp., announced a possible merger, which could form the world’s largest shipbuilder.

Mo Yelin contributed to the report.

Contact reporter Tang Ziyi (ziyitang@caixin.com)

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