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February 2009 Sinopec has started construction of a Rmb14bn ethylene plant in Wuhan, capital of Hubei province.
The plant will have a production capacity of 800,000 tonnes a year, according to a government statement.
Sinopec owns a 65 per cent share in the chemicals facility, with the remainder held by South Korea’s largest refiner, SK Energy.
The investment is part of the central government’s plan to build major ethylene production bases in central and western parts of the country, where demand for petrochemicals is growing particularly fast.
In addition to the 800,000 tonnes of ethylene, the project will also produce important petrochemical products, including 300,000 tonnes a year of high-density polyethylene, 300,000 tonnes a year of linear low-density polyethylene and 400,000 tonnes a year of polypropylene.
Commodity shipping rates in India, which rose in early February, were expected to fall in the near term, industry observers told DNA India on 24 February.
The comments followed a drop in demand for Indian iron ore from China, which was negotiating long-term contracts with Australia and Brazil. The contracts were expected to be finalised within the following 10 days.
While China, the world’s largest iron ore importer, sources most of its committed iron ore from Australia and Brazil, the majority of its short-term spot requirements are met by imports from India. About 80 per cent of India’s iron ore exports are destined for China.
According to one shipping agent, no China-bound iron ore cargo had moved out of India in the previous four days. The situation had worsened so much that exporters who had committed ships and had already brought the cargo in the port were faced with situations where buyers had withdrawn.
Loans by the Industrial and Commercial Bank of China, the country’s largest bank, soared in January in response to government calls to support the weakening economy. The bank extended Rmb117.1bn of new loans last month, equivalent to 22 per cent of the amount lent in the whole of 2008.
Some 59 per cent of the total, Rmb69.3bn, was directed to infrastructure projects including railways, roads, power grids and nuclear power stations.
Late last year China urged local lenders to increase credit to support its RMB4,000bn stimulus package aimed at stimulating economic growth.
FedEx has cut its express service prices by 70 per cent in a bid to win bigger market share in China, Xinhua reported. According to the story, FedEx China cut its prices four times between October 2007 and August 2008 to bring them into line with those set by domestic private express firms.
Statistics from the China Federation of Logistics and Purchasing showed that FedEx's market share increased to 4.8 per cent at the end of September from 0.8 per cent at the end of June, putting it ahead of its major overseas competitors, UPS, DHL and TNT.
The US-based FedEx entered China in the 1990s and it now has operations in more than 220 Chinese cities.
Meanwhile, DHL Express Worldwide said it would centralise some mainland Chinese operations in an effort to improve efficiency, South China Morning Post reported. However, the company denied an earlier media report that it would move some operations from first-tier cities to Chengdu so as to reduce labour costs. It has a total of 82 branches across the mainland.
For its part, TNT’s wholly-owned China operation TNT-Hoau has launched its first domestic day-definite road distribution service in the country. The service will first be offered between 115 depot pairs covering the key economic areas of the Yangtze River Delta, Bohai Economic Rim and the Pearl River Delta regions. Coverage will be increased to more than 260 depot pairs by July 2009. All shipments will be bar-coded to allow customers to ‘track and trace’ their shipments via the internet.
Construction of the Rmb 62bn Chengdu-Lanzhou railway, linking the capitals of Sichuan and Gansu provinces, got under way on 21 February.
Due to be completed in December 2014, the 731km line will reduce the journey time between the two cities from more than 17 hours to about four hours.
The line is designed to boost economic development in northwest and southwest China, and provide a stimulus for tourism in these areas. It will pass through Jiuzhaigou in Sichuan, a UNESCO World Cultural Heritage site, and Gannan Tibetan autonomous prefecture in southern Gansu, another popular tourist destination.
The line will link with the Lanzhou-Chongqing, Baoji-Chengdu, Sichuan-Qinghai and Sichuan-Tibetan lines, construction of which will also start this year.
A major new reservoir near Chongming Island at the mouth of the Yangtze will start supplying water to 18m Shanghai residents before 1 May 2010, when the Shanghai World Expo begins. Zhang Quan, director of the Shanghai Environmental Protection Bureau, said construction of the Qingcaosha reservoir dam was completed in late 2008.
"By late next year, around 70 to 80 per cent of the overall population in Shanghai will get access to the better-quality drinking water from the Yangtze River,” China Daily quoted Zhang as saying.
Qingcaosha will be able to store 435m cubic metres of water and provide more than half of the city’s water needs with an estimated daily supply of 7.2m cubic metres.
The reservoir will be the third major water source for Shanghai; one located on the upper reaches of the Huangpu River currently contributes 80 per cent of Shanghai’s water, with the rest supplied by Chenhang reservoir.
Although Shanghai has abundant water resources due to its location at the mouth of the Yangtze, it has long been suffered from poor water quality. High emission rates of ammonia and nitrogen in the upper reaches of the Huangpu River and salt tides, which mostly occur during the drier winter months, are two major problems.
Chinese home appliance and consumer electronics retailer Suning is to invest several billion renminbi on constructing nine logistics bases around China, said the company’s president Sun Weimin. Xinhua reported that the bases would be built in Shenyang, Tianjin, Beijing, Wuxi, Chengdu, Chongqing, Xuzhou, Suzhou and Shanghai, and cover a combined area of 400,000 sq metres. Suning also hopes to cooperate with third parties to establish a further 16 logistics bases, with the ultimate aim of operating some 60 logistics bases nationwide.
The company is planning to enter 70 new cities this year, opening a minimum of 200 stores.
The global sports apparel maker Nike is to invest US$99m in a new distribution centre in Taicang, Jiangsu province, reported China Sourcing News. The 120,000 sq metre facility in Taicang Economic Development Area will provide distribution support for Nike’s footwear, apparel and equipment products.
Construction will begin in spring 2009 and the centre will be put into operation in the third quarter of 2010. It should reach full initial capacity by the second quarter of 2011.
Mr Willem Haitink, vice president and general manager for Nike China, said the new centre would help to reduce delivery times by up to 15 per cent.
On 19 February, an inspection team from the General Administration of Customs visited Rugao terminal in Nantong, Jiangsu province, and approved its status as an open terminal that can accommodate foreign vessels. The stretch in question is 11.6km long and contains 35 berths, serving largely the chemical, petrochemical, shipbuilding and logistics sectors.
Under the current 11th five-year plan, 15 quays are planned to be built at Rugao to create a transhipment centre for oil and petrochemical products and bulk cargo, a distribution centre for materials and a logistics centre.
The State Development and Reform Commission has recently approved the feasibility report on Jiujiang No.2 Yangtze Bridge. Construction of the road bridge is scheduled to start in July. Located 10.8km upstream of the city’s No.1 Yangtze Bridge, the second bridge forms part of the Fuzhou-Yinchuan Expressway, connecting the capitals of Fujian province and Ningxia autonomous region. Allowing a top speed of 100kph, the six-lane bridge will also link with the Nanchang-Jiujiang Expressway, further improving the road network between the interior and the coast.
The bridge will be funded jointly by Jiangxi and Hubei provincial governments. The 11.26km southern approach road and the bridge itself, 5.53km long, will cost Jiangxi nearly Rmb4bn. Construction is expected to take three years to complete and the bridge will open for traffic by 2012.
Container throughput in Hong Kong and Shenzhen fell significantly in January.
Hong Kong port’s container throughput fell 23.2 per cent last month from a year ago to 1.62m teu, South China Morning Post reported, its biggest fall since the early 1990s. Shenzhen port’s throughput experienced its worst ever monthly decline, falling 17.5 per cent to 1.526m teu.
Although last month’s decline in Hong Kong was smaller than the 24.1 per cent drop in December, last month should have been bolstered by the traditional cargo rush before the Chinese New Year, according to Sunny Ho Lap-kee, executive director of the Hong Kong Shippers’ Council.
"February and March will be a lot worse than January,” he added. “We'll be lucky if February’s throughput in Hong Kong is a third of January’s.”
This is because throughput tends to fall more than 60 per cent in the month following the Lunar New Year from the previous month, Ho said. "Factories have not started production yet. There are virtually no orders.”
Because of this lack of orders, many workers who went home for the Chinese New Year have delayed returning to the factories in the Pearl River Delta.
Air China will launch two direct flights from Wuhan to Paris and Tokyo this year, according to a local government website. Wuhan, the capital of central Hubei province, is a major transportation hub, with several important railway and highway arteries running through it. The city’s airport currently has international flight routes to Seoul in South Korea and Ho Chi Minh City in Vietnam.
In a separate development, South Korea will open a consulate general in Wuhan in 2009. It will become the third country to set up a consulate in the city after France and the US.
South Korea is Hubei’s fourth largest trade partner. By the end of 2007, a total of 62 Korean companies had invested in Wuhan with a combined investment of US$217m. Friendship city ties have been established between Wuhan and Cheongju City as well as Hubei’s Jingzhou and Korea’s Gangneung.
Shanghai-based TNT-Hoau, a wholly owned subsidiary of TNT Express, has officially entered China’s domestic road distribution market. China Knowledge reported that the company plans to start new service trials in 115 depots in key economic areas such as the Yangtze River Delta, Bohai Economic Rim and the Pearl River Delta regions; the number is expected to increase to more than 260 by July 2009.
TNT Express is the only express company that operates road distribution and international express businesses in China, said Michael Drake, board manager of TNT's Asia-Pacific operations.
Alstom’s new factory for Wuhan Boiler Co will be built and put into operation in the suburbs of Wuhan in the second half of this year, reported People’s Daily. Wuhan Boiler is 51 per cent-owned by Alstom. Upon construction, it will become Alstom’s largest boiler facility in the world.
The Europe-based supplier of services and equipment for the power generation and rail transport industries has decided to expand its investments in China in 2009, said Patrick Kron, the company's Chairman and CEO. He noted that the central government’s Rmb4,000bn stimulus package includes investments in environment-friendly infrastructure, which means a favourable investing environment and significant business opportunities for Alstom.
The Ministry of Environmental Protection is to investigate firms that discharge waste into the Yangtze River and punish those that do so illegally, reported China Daily.
Vice-minister Zhang Lijun said that the ministry will inspect businesses in 10 provinces and municipalities that the river flows through, starting in February.
"The main task is to figure out the number of waste channels and the main wastes dumped into the river,” he said.
Jiangsu provincial government says that it plans to invest more than Rmb81bn on transport infrastructure in 2009. Out of this total, Rmb35bn will be spent on railways, Rmb31bn on roads, Rmb9.6bn on ports, Rmb3.3bn on waterway dredging and Rmb1.4bn on airports. Last year, Jiangsu’s spending on transport infrastructure topped the national league, totalling Rmb77bn.
Changsha city government announced on 10 February that the first phase of its urban light rail system costing Rmb22.2bn would start construction this year. Approved in mid January by the State Council, the first and second lines will be completed by 2015. The government has already set up Changsh Light Rail Transport Corporation to own the project and a construction management commission.
In another development, Wuhan has started building a 3km-long tunnel under the Yangtze, which will form part of the city’s second metro line. The project will take just over three years to complete.
Changsha is located on the Xiangjiang River, a Yangtze tributary, and is an important feeder port to Wuhan.
The Railway Commission of Jiangsu province announced recently that six new rail passenger lines worth a total investment of Rmb65bn will start construction this year in the northern part of the province, traditionally much under developed than the southern part. Four of them have a designed speed of200km per hour.
Statistics show that Chongqing utilised Rmb123bn-worth of investments relocated from the east coast of China over the past three years. Some Rmb66.1bn was channelled into the municipality in 2008, more than double that of the previous year. The relocations mainly came from Guangdong, Beijing, Shanghai and Zhejiang, which accounted for about 60 per cent of the total relocated investments.
The Yangtze Waterway Bureau is to announce actual water levels on 16 major shoals in the trunkline on the 1st, 11th and 21st days of the month, on top of the monthly guaranteed water levels released during the second half of the previous month. The new measure will allow shipping lines to adjust their shipload accordingly, not only to avoid the risk of being stranded but also to maximise capacity.
According to Minsheng Shipping, the largest private barge operator in the Yangtze, the guaranteed water level at several shoals in the middle reaches announced in January for the following month was 2.9 metres but on 11 February the actual level increased to 3.1 metres due to the water release cycle of the Three Gorges Dam. The greater frequency of water level announcements will allow shipping lines to better optimise the number of containers they can load onto a 150-teu barge and thereby realise significant cost savings.
Chinese exports in January dropped 17.5 per cent year-on-year, the country’s biggest decline in more than a decade. Imports to China declined by 43.1 per cent, an indication of sharply lower demand in the Chinese economy. Lower raw material prices were another reason for the decline in imports, but analysts said it also reflected reduced investment by private firms. Imports of copper products fell 19 per cent.
January was the third month in a row that Chinese exports fell, although the rate of fall was much faster than the 2.8 per cent drop in December. The decline in imports also accelerated sharply from the 21.3 per cent contraction in December.
Economists cautioned that year-on-year comparisons were complicated by the fact that the Chinese new year holiday fell in January this year and in February last year. This meant there were fewer working days in January this year.
The volume of imported scrap steel hit a record high of 334,000 tons in Zhangjiagang port in January, more than 18 times that of January 2008. Analysts believe that increased government spending to boost the economy has stimulated demand for steel and major local steel plants such as Shagang, Yonggang and Puxiang Stainless Steel have needed to import large quantities of raw materials to fulfil their order books. Also, for these plants, converting imported scrap steel in the production process is more cost effective than imported iron ore.
Plummeting ocean shipping prices have also contributed to the January surge in scrap steel volumes: several old vessels went direct to the scrap heap after their final journey to Zhangjiagang port.
Fog has continued to cause serious problems for shipping in the Shanghai region. More than 300 vessels were stranded in the Yangtze River Estuary on 8 February, the local maritime authority said. Visibility was 500 meters in some places, and the ferry service between the city’s downtown area and Chongming Island was suspended.
Clear weather on the previous day allowed more than 1,000 stranded vessels to set sail.
China’s aviation market reported a single digit growth in air traffic in 2008 for the first time in five years.
Passenger volume rose 3.3 per cent to 192m last year, down from 16 per cent in 2007; cargo volume increased by just 0.3 per cent to 4m tons compared with 13 per cent in 2007, the Civil Aviation Administration of China said. In December, domestic airlines carried 15.67m passengers, a rise of 8.2 per cent from a year earlier, and delivered 307,853 tons of cargo, a drop of 15.2 per cent.
Passenger numbers are expected to increase by 11 per cent in 2009, with cargo growth predicted at 8 per cent. CAAC said the upturn would come about as a result of stimulus plans to boost demand.
These included waiving several fees and taxes that airlines have to pay, and urging carriers to cancel or postpone plane deliveries due this year and parking unnecessary planes.
China should place more emphasis on environmentally sustainable transport systems that can help reduce its heavy reliance on oil, according to a new Asian Development Bank publication.
China has made great advances in transport infrastructure over the past few decades, with its highway system growing nearly 300 per cent in 26 years, air passenger traffic in kilometres travelled tripling in size from 1995 to 2006, and its rail network growing 45 per cent since 1980.
At the same time, according to the publication, it has become the world’s fastest-growing oil consumer, with 35 per cent of the total consumed going into road transport alone as private motor vehicle use soared in step with rising personal incomes. As a result, the transport sector now accounts for around 7 per cent of China’s greenhouse gas emissions, up from 5.4 per cent in 1990. By 2030, the proportion is expected to rise to 11 per cent of the nation’s emissions.
Among recommended actions are a national transportation fund to focus on sustainable transport development; faster implementation of a fuel tax that discourages excessive motor vehicle use; more investment and regulatory reform for railways; special funds to develop inland waterways, and campaigns to promote the use of public transport.
Maersk Line, the world’s largest container shipping line, has closed its Greater China headquarters in Beijing and halved the number of its mainland sub-regional offices against a background of slowing demand, the South China Morning Post reported. Three sub-regional offices – in Xiamen, Shenzhen and Guangzhou – are to be merged into the three others -- in Qingdao, Shanghai and Hong Kong – that will now cover north China, east China and south China.
Maersk Line’s operations in Greater China are to be grouped under its north Asia regional office, headquartered in Hong Kong. Beijing will remain as the mainland headquarters of Maersk Group, which also has terminal operations and logistics services.
The company said the restructuring was not aimed at cutting costs.
Accelerating investment in transport infrastructure in China’s interior has halted the recent sharp decline in cargo throughput at ports along the Yangtze River, according the latest official figures.
In January 2009, the major ports along the Yangtze trunkline reported a year-on-year cargo throughput increase of 5.7 per cent to 80m tons, the first monthly rise since last August. Container throughput increased 19.6 per cent to 550,000 teu, compared with eight per cent in November and 14 per cent in December.
According to statistics released by the Yangtze River Administration under the Chinese Ministry of Transport, cargo throughput reached 1.15bn tons in 2008, up 9.2 per cent year-on-year. However there was a marked downturn in activity towards the end of the year due to the impact of the worldwide economic downturn. Throughput increased by 14 per cent during the first nine months, followed by zero growth in September, and falls of 17 per cent in October, 21 per cent in November and 30 per cent in December.
Higher levels of government spending to construct railways, roads, bridges and metros is driving the demand for imported iron ore and construction steel, two of the major commodities shipped on the Yangtze. According to the recently revised blueprint for the national rail network approved by the State Council at the end of October, planned new lines for the period up to 2020 will more than double from 16,000km to 41,000km. In 2009 and 2010, work will start on 20,000km of the new lines, including the Chongqing-Guizhou and Guizhou-Guangzhou lines, two major routes that connect the interior to the south coast.
Projects to improve shipping conditions on the Yangtze are also making the river a more viable mode of freight transport, according to Mr Tang Guanjun, newly appointed director of the Yangtze River Administration. “Huge investments in developing the Yangtze in recent years, involving dredging the waterway and modernising the ports, have made Yangtze shipping the backbone of the transport network for industries along the riverbank and beyond,” he said.
Detailed January commodity figures are not yet available, but according to major iron ore-handling ports such as Zhenjiang, iron ore volumes are picking up as steel producers add to their stockpiles to take advantage of iron ore prices that have fallen to about 40 per cent of their 2008 peak.
Reconstruction efforts in the aftermath of the Sichuan earthquake last May, sometimes involving the creation of entire new towns, continue to drive demand for building materials such as sand, stone and cement.
The single largest commodity shipped on the Yangtze, iron ore, accounted for more than 20 per cent of the total cargo throughput in 2008, increasing 4.7 per cent year-on-year to 210m tons. Iron ore throughput grew 22 per cent in the first half of the year, before slowing in the third quarter and falling by 17 per cent in October, 28 per cent in November and 38 per cent in December.
Coal and building materials, the second and third largest commodities shipped on the Yangtze, followed a similar pattern. Throughput of all the leading three commodities combined reached 557m tons last year, accounting for nearly 55 per cent of the general cargo total.
Similarly, container throughput during the first nine months grew by nearly 31 per cent but the pace slowed to 20 per cent in October, eight per cent in November and 14 per cent in December. Over the whole year, throughput increased 25 per cent to 6.92m teu, compared with 38 per cent in 2007.
These slowdowns in the container sector are less pronounced than in the export-driven ports along the coast. Throughput at China’s two largest ports, Shanghai and Shenzhen, fell by 6 per cent and 15.7 per cent respectively in December, the sharpest falls on record. “To a certain extent, we are less affected by the rapid shrinking of foreign trade than in the coastal ports because of continued robust domestic trade,” said Mr Gu Qiangsheng, executive deputy general manager of Wuhan Port Group. He believes, however, that it will take until May or June for government efforts to stimulate consumer demand to be translated into sustained and strong cargo growth.
Mr Huang Qiang, Communist Party Secretary of the Yangtze River Administration, agrees that there could be “a few more difficult months before we can be certain that we have come out of the woods in terms of throughput. But we are confident that business will improve markedly in the second half of 2009 and annualised cargo growth will be in the region of 9 per cent.”
Registration will close soon for early bird delegates of the Yangtze Business Network 2009 conference in Shanghai. Held on 15 April, the conference will explore the logistical challenges involved in accessing China’s vast interior. Delegates will hear the experiences of FIEs with established operations in central and western China, and learn about the latest developments of modernising the Yangtze corridor and government initiatives to improve the investment environment. Those registering by 16 February will be entitled to a US$300 discount off the full rate.
On the day following the conference, there is an optional logistical fact-finding trip to Wuhan. More details on both events can be found at http://www.yangtzebusinessservices.com.
Digging work on two tunnel that will form part of the Guiyang-Guangzhou railway line started on 1 February, signalling the beginning of construction of the 857km line between the capital cities of Guizhou and Guangdong provinces. The inter-city line with double electrified tracks is one of the major rail projects in the 11th five-year plan.
The high-speed line will cater for both passengers and cargo and will take six years to complete at an estimated cost of Rmb85.8bn. It will connect with the Chongqing-Guiyang New Line by 2015. The 67km-long New Line, costing Rmb7bn, will also be double-tracked and will cater for containers as well as passengers. Both projects are crucial elements of the central government’s ambitious plan to extend the national rail network to the interior.
The GDP of central China’s Hubei province stood at Rmb1,130bn in 2008, said Hubei Statistics Bureau. This was 13.4 per cent more than in the previous year and the fifth year in succession that the growth rate had exceeded 10 per cent.
Construction has begun on Chengdu’s first upscale European upscale shopping mall. The 86,000 sq metre Galleria is scheduled to be in trial operation by mid-2010. The mall hopes to attract clothing retailers, jewellers, restaurants, beauty salons and a cinema.
The Rmb650m project is being developed by GTC Real Estate of the Netherlands and Hong Kong’s Lucky Hope Group. GTC entered the China market in 2005, and has so far invested a total of Rmb1.6bn in seven residential and business projects in Shenyang, Xian, Hangzhou and Changzhou.
Erez Applerot, CEO of GTC China, said prices in the mall would reflect Chengdu’s consumption level. It would not sell luxury goods, he added, but instead it would target the middle class.
The value of imports and exports passing through China’s bonded zones and other special areas increased 17 per cent year-on-year to US$300bn in 2008, said China Customs. Exports grew 21.7 per cent to US$152.6bn and imports rose 12.2 per cent to US$146.9bn.
Bonded processing and logistics zones, as well as bonded ports and other special areas, accounted for 28 per cent of China’s processing trade volume in 2008. China has 94 such zones, offering protective tariffs for imported goods and simplified customs procedures.
Dense fog on 2 February delayed or cancelled more than 700 ships in the mouth of the Yangtze River. Visibility was less than 1,000 metres and in some areas below 100 metres, according to Shanghai Maritime Safety Administration. Sixty-six of the vessels were for international shipping, most of them in harbour at Waigaoqiao and Yangshan terminals. More than 2,000 vessels pass through Shanghai every day.
On the morning of the same day, fog also caused the closure of Shuangliu International Airport in Chengdu, resulting in 10 flights being cancelled and another 121 being delayed. This was the third closure of the airport in a month due to fog. The previous closures, which occurred in the second half of January, affected nearly 200 flights and stranded more than 15,000 passengers.
The airport is one of the busiest transport and distribution centres in southwest China.
In January 2009 total cargo throughput for the major ports along the Yangtze trunkline stood at 80m tons in, 5.7 per cent more than in the same period last year. Of this total, 9m tons was foreign trade related, up 1.2 per cent year-on-year. Container throughput reached 550,000 teu, up nearly 20 per cent.
Yangtze cargo throughput declined rapidly in the final third of 2008 as a result of the worldwide economic downturn. For November and December, cargo throughput decreased to the equivalent of 80-90 per cent of that of the same period in 2007, while growth in container throughput slowed down sharply from 20-30 per cent to around 15 per cent.
“All ports nationwide are affected by the economic downturn, but the Yangtze ports are withstanding the pressure better than the sea ports because of robust domestic trade,” said Mr Gu Qiangsheng, executive deputy general manager of Wuhan Port Group, the largest port operator in the middle reaches of the Yangtze. He predicted that, by June, throughput would rise to similar levels recorded in the first half of last year as the central government’s Rmb4,000bn stimulus package filters through the infrastructure projects in the interior and demand for bulk cargo such as cement and iron ore picks up again.
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