APEC Port Development Report 2019

2019 APEC Port Development Report 2019

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2018 APEC Port Development Report www.apecpsn.org APEC Port Services Network (APSN) is an international organization established in response to the directives of the 14th APEC Economic Leaders’ Meeting in 2006 and with the support of all leaders from APEC member economies to promote exchanges and cooperation among port and port-related industries in the Asia-Pacific region. The mandate of the APSN is to facilitate trade and investment and enhance supply chain security by strengthening economic cooperation, capacity building, information and personnel exchanges among port and port-related industries and services in the region, so as to achieve the common prosperity of the APEC member economies as a whole.

Ever since establishment of APSN, as a complimentary service for port-related industries in the Asia-Pacific region, APEC Port Development Report has published 10 issues. This report focuses on the development of Asia-Pacific ports in 2019, covering trade, ocean shipping, port infrastructure and operation, laws and regulations, intelligent and sustainable development. With its detailed statistics, and in-depth analyses, APEC Port Development Report has become an important reference for those engaging in port-related industries.

The APSN secretariat sincerely welcomes your advice, and we hope that ports and organizations can contribute variously valuable information so that we can follow the development of the industry even closer, and provide our readers with more accurate information in a more timely fashion.

Fei Weijun Secretary General APEC Port Services Network May 2020

2018 APEC Port Development Report www.apecpsn.org 3 4

2018 APEC Port Development Report www.apecpsn.org 4 Table of Contents

Chapter 1 Review of Global and Asia-Pacific Economic and Trade Development in 2019 1.1 Review of Global Economic and Trade Development...... 6 1.2 Review of Asia-Pacific Economic and Trade Development...... 11 Chapter 2 Review of Global and Asia-Pacific Shipping Industry Development in 2019 2.1 Review of Global Shipping Industry Development...... 20 2.2 Review of Asia-Pacific Shipping Industry Development...... 28 2.3 Changes in Shipping Costs...... 39 2.4 Changes in Shipping Laws and Regulations...... 45 2.5 Development Trends of International Shipping Organizations...... 48 Chapter 3 Review of Asia-Pacific Port Development in 2019 3.1 Features of Port Route Network and Hub Ports in Asia-Pacific region...... 50 3.2 Review of Port Production...... 55 3.3 Business Performance of Port Enterprises...... 82 3.4 Review of Multimodal Transport Development of Ports...... 94 3.5 Review of Port Infrastructure Construction...... 102 3.6 Review of Intelligent, Green and Safe Port Development...... 110 3.7 Review of International Port Organizations Development ...... 115 Chapter 4 Review and Comment on Major Shipping and Port Events in the Asia-Pacific Region in 2019 4.1 Review and Comment on 10 Major Shipping Events in Asia-Pacific Region in 2019 ...... 118 4.2 Review and Comment on 10 Major Port Events in Asia-Pacific Region in 2019 ...... 122 References2...... 128

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Chapter 1 Review of Global and Asia-Pacific Economic and Trade Development in 2019

1.1 Review of Global Economic and Trade Development

1.1.1 Global economy under increased downside pressure

The global economy in 2019 was dampened by factors including the prolonged trade disputes, the volatile financial market, escalated geopolitical tensions, and uncertainties in trade policies, and growth slowed down dramatically, with major economic indicators falling to historical lows. In the World Economic Outlook released in January 2020, the International Monetary Fund (IMF) lowered the global economic growth rate in 2019 to a 10-year low of 2.9%. In addition, factors such as lower productivity, insufficient endogenous drives for economic growth, and climate changes due to lack of technological innovation, aging population, and slow progress of reforms, among other reasons, have restrained the current global economic growth to a certain extent.

Table 1-1 Global GDP Growth Rates in 2018-2021 (Unit: %)

Historical Estimated Forecast Value Item Value Value 2018 2019 2020* 2021* Global GDP 3.6 2.9 -3.0 5.8 Advanced Economies 2.2 1.7 -6.1 4.5 The United States 2.9 2.3 -5.9 4.7 Euro Area 1.9 1.2 -7.5 4.7 Japan 0.3 0.7 -5.2 3.0 United Kingdom 1.3 1.4 -6.5 4.0 Canada 2.0 1.6 -6.2 4.2 Emerging Markets and 4.5 3.7 -1.0 6.6 Developing Economies Russia 2.5 1.3 -5.5 3.5 China 6.7 6.1 1.2 9.2 India 6.1 4.2 1.9 7.4 ASEAN-5 5.3 4.8 -0.6 7.8 Brazil 1.3 1.1 -5.3 2.9 South Africa 0.8 0.2 -5.8 4.0

Note: * indicates projections; ASEAN-5 represents Indonesia, Malaysia, Philippines, Thailand, and Vietnam. Source: International Monetary Fund (IMF)

In 2019, the global economic and trade growth slowed down significantly, with foreign direct investment slumping, growth of major advanced economies continuing to dip, and emerging economies under increased downside pressure. The latest IMF report shows that the economic growth rates of advanced economies, emerging

2018 APEC Port Development Report www.apecpsn.org 6 markets and developing economies all declined to vary degrees year-on-year. Specifically, advanced economies recorded an economic growth rate of 1.7%, a year-on-year drop of 0.5 percentage points and emerging markets and developing economies registered 3.7% growth rate, down by 0.8 percentage points year-on- year.

Among advanced economies, the United States recorded an economic growth rate of 2.3% in 2019, down by 0.6 percentage points year-on-year. Against an across- the-world economic slump in 2018, the United States economy "outshone others". However, the United States economic growth has been slowing down since 2019, and its relatively strong performance is diminishing. Meanwhile, the combined impacts from the negative term spreads, the high corporate debts, the new low of unemployment rate, the easing trade tensions, the upcoming election of United States, and the sharp drop in the private investment contribution to GDP growth have driven the United States economy to decline at a faster rate in 2019. European economic growth remained low, with the euro area recording only 1.2% in 2019, down by 0.7 percentage points year-on-year. It is worth noting that Germany, the "engine of European economy", fell into technical recession. Its economic growth in 2019 was only 0.6%, and its manufacturing depression has continued for six consecutive quarters. The economy of the debt-ridden EU member states in southern Europe, represented by Italy, also remained sluggish, and the large-scale strikes in France are hurting the economy. Due to postponements of the United Kingdom's Brexit, the British economy fluctuated widely in 2019 and continued the slowdown in recent years, with its economic growth standing at 1.4%. As a result of the sluggish external demand and weak inflation, as well as the consumption tax rise, Japan's economic growth was restrained and became weak, with its 2019 economic growth recording only 0.7%. Driven by the large-scale economic stimulus policies of the government, Japan became one of the few economies that succeeded in maintaining faster economic growth among major advanced economies.

In 2019, due to factors such as geopolitical uncertainties, intensified global trade frictions, global economic depression, and structural issues, emerging markets and developing economies witnessed a new low in economic growth since 2009, with the annual economic growth standing at 3.7%, down by 0.8 percentage points year-on-year. Emerging markets and developing economies experienced a general decline in economic growth in 2019. China, under the pressure of weak domestic and foreign demands and increased tariffs imposed by the United States, recorded an economic growth rate of 6.1%, down by 0.6 percentage points year-on-year. It is worth noting that, with India's non-banking financial sector debt easing and loan growth falling, its domestic demand growth slowed down faster than expected. As a result, India's economic growth decelerated significantly. In 2019, India recorded an economic growth rate of 4.2%, down by 1.9 percentage points year-on-year. In 2019, Russia's economic growth declined to 1.3% due to multiple unfavorable factors including poor business investment, slower growth of import and export trade, and sluggish household consumption demand. South Africa, hurt by power shortages, low confidence in business performance, government policy uncertainties, and poor

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operations and management of state-owned enterprises among other factors, fell into technical recession in 2019. In addition, the ASEAN-5 and Brazil also suffered significant economic downturns.

Looking into 2020, the COVID-19 pandemic has produced all-round shocks to global manufacturing, services, people's confidence, and social governance in all aspects. The international financial market is turbulent and suffers a liquidity crunch, which will worsen the already weak global economy. It is highly probable that the global economy will fall into recession in 2020.

Source: International Monetary Fund (IMF)

Figure 1-1 GDP Growth Rates of Global Economies in 2019

1.1.2 Global trade growth drops sharply

The global economy continued to decline in 2019, with trade tensions intensified and global manufacturing and investment activities slowed down. The downside pressure and negative factors jointly threw the global trade into weak territory. According to IMF data for April 2020, the world trade volume growth in 2019 fell from 3.8% in 2018 to 0.9%, indicating a significant slowdown in trade growth. On the one hand, global trade frictions continued to spread in 2019. The four core economies, namely the United States, the European Union, China, and Japan, were all involved in trade disputes and troubled by bilateral or multilateral trade frictions. The increased trade barriers and uncertainties caused by global trade tensions led to continued declines in year-on-year growth of global export values. On the other hand, the trade protectionism and unilateralism deteriorated the international trade and investment environment. International trade liberalization was seriously undermined, and the international trade environment became grimmer, resulting in a downturn in international trade activities.

2018 APEC Port Development Report www.apecpsn.org 8 In terms of the trade growth of major economies, the trade growth of advanced economies, emerging markets and developing economies slowed down synchronously based on IMF statistics. The trade growth of advanced economies was 1.7%, a decrease of 0.5 percentage points year-on-year. In advanced economies, the United States' threat on imposing auto tariffs, the dispute between the United States and Europe on digital taxes, the twists and turns of the United States-Mexico-Canada Agreement (USMCA), and the escalated trade tensions between Japan and Korea all hurt global trade activities. The global trade growth of emerging markets and developing economies in 2019 fell by 0.8 percentage points to 3.7% due to the global trade tensions.

Table 1-2 Global Trade Growth Rates and Projections in 2018-2021 (Unit: %)

Historical Estimated Item Forecast Value Value Value

2018 2019 2020* 2021*

World Trade Volume (Cargo and 3.8 0.9 -11 8.4 Service)

Advanced Economies 2.2 1.7 -6.1 4.5

Emerging Markets and 4.5 3.7 -1 6.6 Developing Economies

Note: * indicates projections. Source: International Monetary Fund (IMF)

Source: World Trade Organization (WTO)

Figure 1-2 Quarterly Growth of Global Import and Export Trade in 2014-2019

1. World Trade Outlook Indicator (WTOI)

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According to the World Trade Outlook Indicator (WTOI) released by the World Trade Organization (WTO), the WTOI was below 100 points for four consecutive quarters in 2019, the lowest level since March 2010. In the WTOI, the index for container port throughput picked up in the fourth quarter to slightly higher than the trends after ups and downs in the first three quarters. In addition, the indexes for export orders and air freight have remained below the trend level for four consecutive quarters.

Table 1-3 WTOI and Trends in 2018

Q1 Q2 Q3 Q4 Trend Trend Trend Trend 2019 2019 2019 2019

WTOI 96.3 ↓ 96.3 → 95.7 ↓ 96.6 ↑

Export orders 95.3 ↓ 96.6 ↑ 97.5 ↑ 97.5 →

Air freight 96.8 ↓ 92.3 ↓ 91.4 ↓ 93 ↑

Container port 100.3 ↓ 101 ↑ 99 ↓ 100.8 ↑ throughput

Note: “↑” indicates growth; “↓” indicates decline.

Source: World Trade Organization (WTO)

2. Growth of global cargo trade declines across the board

According to WTO data, the global cargo trade volume grew by 1.2% in 2019, down by 1.8 percentage points from the growth rate of 3.0% in 2018. The global trade suffered a setback due to multiple factors including the impaired multilateral trading system because of unilateralism and protectionism, the uncertainty in the Brexit process and the surging number of non-tariff measures.

Table 1-4 Growth Trends of Global Cargo Trade Volumes in 2015-2019

Year-on-year Growth 2015 2016 2017 2018 2019* (%)

World Cargo 2.3% 1.7% 4.6% 3.0% 1.2% -1.8 Trade Volume Exports: Advanced 2.4% 1.0% 3.6% 2.1% 0.4% -1.7 Economies

2018 APEC Port Development Report www.apecpsn.org 10 Developing 1.7% 2.3% 5.6% 3.5% 2.1% -1.4 Economies

North America 1.1% 0.3% 4.2% 4.3% 1.5% -2.8

Asia 1.4% 2.3% 6.8% 3.8% 1.8% -2.0

Imports: Advanced 4.2% 2.0% 3.3% 2.5% 1.6% -0.9 Economies Developing 0.6% 1.3% 6.8% 4.1% 1.1% -3.0 Economies North America 5.4% 0.1% 4.0% 5.0% 2.9% -2.1 Asia 3.9% 3.6% 8.3% 5.0% 1.3% -3.7

Note: * indicates projections. Source: World Trade Organization (WTO) 1.2 Review of Asia-Pacific Economic and Trade Development

1.2.1 Economy development in the Asia-Pacific region

In 2019, economies in the Asia-Pacific region maintained stable economic growth, though at a lower rate year-on-year, and remained an important engine fueling global economic growth. According to the IMF, the Asia-Pacific economic aggregate reached US$52.7 trillion in 2019, accounting for 60% of the world's total, at a growth rate of 4.5%. Specifically, the GDPs of the United States, China, and Japan accounted for 39.8%, 27.1%, and 9.7% of the economic aggregate of Asia-Pacific economies, respectively, keeping them still in the top three.

Source: International Monetary Fund (IMF)

Figure 1-3 APEC Economies' Shares in APEC's Total GDP in 2019

With trade and investment depression continuing, regional economic development risks mounted in 2019, and most economies in the Asia-Pacific region recorded

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a slowdown in economic growth. According to the Asian Development Outlook Supplement released by the Asian Development Bank in December 2019, the economic growth of East Asia in 2019 fell to 5.4%, primarily because of the continued trade tensions in China and Korea; the economic growth of South Asia dropped to 5.1%, primarily because of the significant slowdown of India's economic growth; in addition, the economic growth in Southeast Asia also faced downside pressure, and the rate was expected to fall to 4.4%.

Economy-wise, the rapid economic growth in India, China, and part of ASEAN economies was the driver behind the overall economic growth in the Asia-Pacific region. Specifically, Vietnam surpassed China in terms of economic growth and became the fastest growing economy in the Asia-Pacific region in 2019. Vietnam's strong economic growth was primarily due to its abundant and low-cost labor resources, the rapid development of its processing and manufacturing sectors, and the increased foreign investment. Among ASEAN economies, Singapore and Thailand experienced sharp declines in economic growth, while India also preformed poorly in this regard, primarily due to the combined adverse impacts of increasing risk aversion in the Indian financial sector, slow employment growth, and aggravated predicament in rural areas from agricultural harvest rundown. Weighed down by its weak domestic demand and continued trade frictions, China's economic growth in 2019 slowed down but still maintained a high rate of 6.1%.

Note: The size of bubbles represents the GDP (the prices of the respective years) scale. Source: International Monetary Fund (IMF)

Figure 1-4 Growth Rates of APEC Economies in 2019

The U.S. economic growth in 2019 was 2.3%, lower than the 2.9% in 2018 and the 2.4% in 2017, and far below the 3% target set by the U.S. government. The slower economic growth of the U.S. in 2019 was a result of the trade frictions, the weakening effects of tax cuts and stimulus policies, and the generally sluggish global economy. The U.S. corporate investment and industrial output peaked in 2018. But as trade frictions escalate and global economic

2018 APEC Port Development Report www.apecpsn.org 12 growth slows down, the demand remains low. Its corporate investment willingness fell sharply, and its manufacturing sector has met headwinds. The U.S. corporate investment growth in the second and third quarters of 2019 dropped from the peak of 13.7% in the third quarter of 2018 to -6.1% and -1.5%, respectively, which negatively impacted the GDP growth for two consecutive quarters. The U.S. manufacturing PMI also stayed below the demarcation line for several months. The manufacturing PMI for December was only 47.2 points, the lowest level in the past 10 years. In addition, factors including the strong labor market and wage growth, as well as the wealth effect supported by the capital market managed to sustain the stable growth of consumer spending, which accounted for about 70% of the U.S. economy. This has become the current foundation of the U.S. economic growth. In general, despite the heavy downside pressure, the U.S. economy continued a moderate momentum of growth, which can be described as "outshining others" among major economies. This is primarily because its private consumption has been driving economic growth, and its unemployment rate remains at the lowest level in the past 50 years.

Source: The University of Michigan

Figure 1-5 Michigan Consumer Sentiment Index (MCSI) and Unemployment Rate

Affected by the weak manufacturing and domestic demand, Japan showed signs of weak economic growth in 2019. It is worth noting that the impact of the consumption tax rise and the typhoon disaster cooled down consumer spending, corporate investment and production supply chains, causing Japan's economy in the fourth quarter of 2019 to contract by 6.3% quarter-on-quarter, the widest drawdown in the past six years. Besides, in the first half of 2019, inflation rose slightly boosted by the rising prices of energy and household durable goods. Since the second half of the year, Japan's inflation has continued to fall due to lower mobile phone charges, education costs and energy prices, and the overall inflation level was low. Affected by the U.S.-China trade frictions, Japan faced contracted external demands, a sharp decline in exports, and sluggish performance of major sectors including automotive and machine tools. In addition, the economic stimulus measures introduced by the Japanese government haven't started to drive economic growth. All these factors

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have increased the downside pressure on Japan's economic development in 2019. Japan's economic growth in 2020 is expected to plunge due to the COVID-19 pandemic and the postponement of the Tokyo Olympics.

China faced even more complicated internal and external environments for economic development in 2019, and its economic growth fell significantly from the 6.6% in 2018 to 6.1%, reaching a 30-year low. China's annual GDP growth declined, with the downside pressure on a rise. Risks such as the U.S.-China trade frictions, weak domestic demand, and sluggish real economy demand have all become barriers to China's rapid economic growth. Its trade, investment, consumer spending and corporate confidence declined across the board. As the corporate and consumer demands weakened, China's import value in 2019 fell by 2.8%. Despite its economic slowdown, China's economic growth was twice the global average (3%), still exceeding that of most emerging economies. With the current slowdown of the world economic and trade growth, the increasing sources of turbulence and risk points, and the domestic structural, institutional, and cyclical problems intertwining, China is expected to continue facing huge downside pressure.

Source: International Monetary Fund (IMF)

Figure 1-6 GDP Growth Rates of Major APEC Economies (2000-2019)

2018 APEC Port Development Report www.apecpsn.org 14 Source: Wind Information

Figure 1-7 Trends of Manufacturing PMIs for Major APEC Economies

In 2019, following a severe economic slowdown and saving and loan crisis, India's GDP growth fell sharply from the 7.3% in 2018 to 4.2%. Its consumer confidence index fell to a five-year low, and its labor market remained fragile, with the unemployment rate climbing to 6.1%, a 45-year high. In addition, the cooling personal consumption, the slowdown of industrial activities and investment stagnation all curbed India's economic growth. In addition to its domestic problems, the poor external economic environment was also a contributor to its current economic downturn. The global economic slowdown and the stalemate in the U.S.- China trade frictions also imposed great pressure on India's economic growth.

In 2019, Vietnam's GDP growth exceeded expectation to reach 7.02%, crossing 7% for the second consecutive year. Vietnam has surpassed India in terms of economic growth rate and become one of the fastest growing economies in Asia. It is worth noting that Vietnam's macro economy also remained relatively stable, and its inflation rate remained at the lowest level in the past three years. Processing and manufacturing, as well as market services, the main sectors driving the Vietnamese economy, all maintained a growth rate of higher than 8%. In addition, the United States imposed tariffs on China-exported cargoes, which drove some manufacturing activities out of China, and Vietnam became one of the biggest beneficiaries of this round of industrial transfer. Against this background, Vietnam's total import and export values exceeded the US$500 billion mark, with growth rates being 7% and 8.1%, respectively.

1.2.2 Trade development in the Asia-Pacific region

Impacted by distorted trade measures and uncertain polices, commodity trade and investment growth slowed down significantly in 2019, which has curbed the economic and trade activities in the Asia-Pacific region. Specifically, the total trade

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volume in the Asia-Pacific region fell by 2.5%, and the import volume dropped by 3.5%, marking the region's first decline in trade value and trade volume since the global economic crisis in 2009. Affected by external risks including weaker-than- expected growth of major trading partners, non-tariff barriers to trade, rising oil prices and the U.K.'s "disordered Brexit' process, and adverse internal factors including exacerbated geopolitical risks, the U.S.-China trade frictions and the deteriorated bilateral relations between Japan and Korea, the trade development in the Asia- Pacific region has been undermined to some extent.

The following are some features of the import and export trade of major economies in the Asia-Pacific region:

1. China's foreign trade shrinks

In 2019, although China was impacted by the U.S-China trade frictions, its foreign trade grew against the trend benefiting from its favorable foreign trade policies and stable domestic economy. China's foreign trade showed an overall stable and high- quality momentum. According to the General Administration of Customs, China's cargo trade import and export value amounted to RMB 31.5 trillion in 2019, up by 3.4% year-on-year. Specifically, its export trade value totaled RMB 17.2 trillion, an increase of 5% year-on-year; its import trade value totaled RMB 14.3 trillion, a rise of 1.6% year-on-year; and its cumulative trade surplus of the year reached RMB 2.9 trillion. Despite China's declining exports to the United States in 2019 due to the U.S.-China trade frictions, Chinese companies performed well in exploring market diversity, and the exports to non-U.S. markets increased. With this offset effect, China's exports sustained growth overall.

China's trade structure was further optimized in 2019. On the one hand, the rankings of China's major trading partners changed as a result of the continued impact of the U.S.-China trade frictions. Benefiting from the rapid development of China-ASEAN economic and trade cooperation, ASEAN has become China's second largest trading partner, with China's imports to and exports from ASEAN economies totaling RMB 4.4 trillion throughout the year, a year-on-year increase of 14.1%. The EU secured its position as the largest trading partner, with China's import and export value with EU growing by 8%. In contrast, the U.S. fell to the third place on China's trading partner list, recording RMB 3.7 trillion of import and export value with China, down by 10.7% year-on-year. China registered an import and export value of RMB 9.3 trillion with these economies, a year-on-year increase of 10.8%, which was 7.4 percentage points higher than the overall growth. Specifically, the import and export value with these economies accounted for nearly 30% of China's total import and export value. Moreover, main players of China's foreign trade changed. Private companies have, for the first time, surpassed foreign-invested companies to become China's largest foreign trade players. The imports and exports of private companies in 2019 amounted to RMB 13.5 trillion, a rise of 11.4% year-on-year, accounting for 42.7% of China's total foreign trade value, the share rising by 3.1 percentage points year-on- year. In constrast, the imports and exports of foreign invested companies amounted to RMB 12.6 trillion, accounting for 39.9% of China's total foreign trade value.

2018 APEC Port Development Report www.apecpsn.org 16 Note: The left coordinate axis represents the import and export volume, and the right coordinate axis stands for the trade value difference. Source: General Administration of Customs of China

Figure 1-8 China's Import and Export Values and Trade Value Differences in 2012-2019

2. U.S. foreign trade imports and exports contract, and trade deficit declines slightly

The U.S. trade deficit fell for the first time in the past six years in 2019, as the U.S.-China trade frictions inhibited the U.S. imports. In addition, the Trump administration's "America First" strategy reduced the commodity flows in 2019, and the U.S. exports fell for the first time since 2016. According to statistics from the U.S. Department of Commerce, the cargo import and export value of the U.S. in 2019 was US$4.14 trillion, down by 1.5% year-on-year. Specifically, due to the declined shipping of capital goods, industrial supplies and materials, and other cargoes, the U.S. export value totaled US$1.65 trillion, down by 1.2%. The sharp drops in industrial raw materials and supplies, consumer goods and other commodities contributed to the import value of US$2.5 trillion, a decline of 1.7% year-on-year. The U.S. trade deficit stood at US$853.23 billion, a year-on-year decrease of 2.5%, and the trade deficit narrowed for the first time in the past six years. However, because the U.S. relies heavily on imported clothing, mobile phones, consumer electronics and other industrial supplies, such trade deficit decline is unlikely to become a norm, given that these products are no longer produced in the United States.

It is worth noting that the U.S. exports to Canada, Mexico, China, and Japan fell by 2.5%, 3.4%, 11.3%, and 0.8%, respectively, year-on-year. Specifically, the export values to these economies accounted for 17.8%, 15.6%, 6.5%, and 4.5% of the total U.S. export value, respectively. The top four contributors to the U.S.' trade deficit

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were China, Mexico, Japan, and Germany in a decending order. The U.S. deficit with China, which accounted for about half of its total, also fell by 17.6%, and its exports to China decreased by 11.3%. But the drop in imports (by 16.2%) was even sharper. On the other hand, due to companies' adjustments on their supply chains, the U.S. trade deficit with Mexico expanded by 26.2%, hitting a record high. In addition, its deficit with Japan also rose by 2.7%, and its trade deficit with Vietnam increased by 40%. The U.S. trade surplus was primarily from Hong Kong, China and the Netherlands. The surplus in 2019 was US$26.09 billion and US$21.47 billion, down by 15.9% and 11.3%, respectively. From the combined import and export volumes, the U.S.' largest partner in 2019 changed from China to Mexico.

Note: The left coordinate axis represents the import and export volume, and the right coordinate axis stands for the trade value difference. Source: U.S. Department of Commerce

Figure 1-9 U.S. Import and Export Values and Trade Value Differences in 2009-2019

3. Japan's foreign trade growth slows down, trade deficit comes back

In 2019, Japan's import and export trade volumes both fell. Its annual export value was JPY 76.9 trillion, a year-on-year decrease of 5.6%, the first decline in the past three years. Specifically, Japan's exports to China, the U.S., and the EU fell across the board, the decline being especially evident in the steel, automobiles, and other products. Affected by the drop in crude oil prices in the international market and other factors, Japan's import value fell by 5% year-on-year to JPY 78.6 trillion. According to the 2019 trade statistics released by Japan's Ministry of Finance, Japan's foreign trade deficit for the whole year was JPY 1.6 trillion, a trade deficit for the second consecutive year.

In terms of Japan's export destinations, China lost its status as the largest importer of Japan's exports in 2018, becoming the second largest, with Japan's export value to China falling by 7.6%. Specifically, the export value of manufacturing equipment

2018 APEC Port Development Report www.apecpsn.org 18 such as semiconductors decreased by 16.6%, and that of electronic components such as semiconductors dropped by 10.6%. The U.S.-China trade frictions and intensified high-tech frictions in 2019 curbed China's production and investment, and dealt a blow to Japan's supply of manufacturing equipment and components to China as well. In addition, Japan's exports to Singapore fell by 14.9% year-on-year, and its exports to Thailand dropped by 7.6% year-on-year. Japan's exports to major ASEAN economies also declined. As Japan-Korea relations soured, Japan's exports to Korea decreased by 12.9% year-on-year to JPY 5.4 trillion, and its food exports fell by 22.6%. Manufacturing equipment exports such as semiconductors decreased dramatically by 49.7%. Meanwhile, Japan's exports to the U.S. fell by 1.4%, and the total export value stood at JPY 15.2 trillion. Its exports of automobiles and auto parts both declined. Against the backdrop of the deteriorating global trade environment and the international demand growth slowdown, Japan's trade growth was under pressure and Japan's future growth prospects have worsened.

4. Indonesia's foreign trade growth declines; Vietnam's foreign trade imports and exports record robust growth

Indonesia's foreign trade value in 2018 was US$338.25 billion, a drop of 8.3% year- on-year. Specifically, Indonesia's export value was US$167.53 billion, a year-on- year decrease of 6.9%, as a result of the exports slump of main export commodities such as mineral products, animal and vegetable fats and oils, as well as the falling exports of mechanical and electrical products, textiles and raw materials. Its import trade amounted to US$170.72 billion, down by 9.5% year-on-year, and its cumulative trade deficit was US$3.2 billion. China was Indonesia's largest export and import partner. Indonesia's exports to China grew by 6% year-on-year, which marked a fall of 8.4 percentage points from the 14.4% last year. Indonesia imported US$44.58 billion worth of goods from China, a drop of 1.5% year-on-year, and its imports from China accounted for 30% of its total import value.

Vietnam's total foreign trade value in 2019 was US$517.26 billion, a rise of 7.6% year-on-year. Specifically, Vietnam's cargo export value was US$264.19 billion, an increase of 8.4% year-on-year; its total import value was estimated to be US$253.07 billion, an increase of 6.8% year-on-year. The trade surplus was about US$11.12 billion, marking the fourth consecutive year for Vietnam to maintain steady growth in trade surplus. Relying on its labor dividend, low tax rates and a free trade environment, the Vietnamese market has been much favored by international investors. The Comprehensive and Progressive Agreement for Trans- Pacific Partnership (CPTPP), which came into force in early 2019, and the free trade agreement (FTA) between the EU and Vietnam signed in June 2019 will both effectively elevate Vietnam's international trade status and promote exports of manufacturing products.

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Chapter 2 Review of Global and Asia-Pacific Shipping Industry Development in 2019

2.1 Review of Global Shipping Industry Development

2.1.1 Review of international container market development

The year 2019 marked the second consecutive year of global container shipping volume's growth slowdown, with the annual shipping volume increasing to 198 million TEUs, a rise of 2% year-on-year, the rate being 2.2 percentage points lower than that in 2018. In terms of demand, the consecutive growth slowdown of global container shipping volume led to the first negative growth of the shipping volume on trans-Pacific routes in the past 10 years, while other major routes welcomed shipping volume growth. In terms of supply, the total capacity of fleets kept expanding at a low speed, the active capacity growth reached a three-year low, and the idle capacity of global fleets hit a two-year high. In general, the global container shipping market in 2019 was weak on either the supply or the demand side.

1. Growth of global container shipping volume continues to slow down

The persisting global economic growth slowdown and trade frictions in recent years have contributed to the slowdown of international commodity trade growth. As a main shipping mode of international commodity trade, container shipping also suffered a growth decline. According to Clarksons, the global container shipping volume in 2019 stood at 198 million TEUs, up by 2% year-on-year, the rate being 2.2 percentage points lower than that in 2018. Since 2018, the growth of global container shipping volume has been falling for two consecutive years.

Source: Clarksons

Figure 2-1 Global Container Shipping Volumes in 2005-2019

2. Total fleet capacity grows at a low speed, ship upsizing trend becomes evident

The total capacity growth of global container fleets presented a slow downward trend in 2019. The annual total capacity reached 22.07 million TEUs (an increase of 4%), the rate falling by 1.6 percentage points from that in 2018, but maintaining

2018 APEC Port Development Report www.apecpsn.org 20 a slow growth trend overall. Specifically, the growth of active capacity in November hit a three-year low of 0.4%. In the capacity structure, small and medium-sized ships showed narrower fluctuations in capacity, while the capacity of large ships grew significantly. Specifically, the capacity of ships of 12,000-14,999 TEUs increased by 7.8%, and that of ships above 15,000 TEUs rose by as much as 23%.

Source: Clarksons

Note: Active capacity = Total capacity - Idle capacity

Figure 2-2 Total Capacities and Active Capacities of Global Container Fleets

3. International container shipping freights in recovery and adjustment at low levels

In 2019, the international shipping market was weak in either supply or demand. The total capacity growth of container fleets was brought under control, but the shipping volume growth also slowed down. Due to this impact, the market freight rates were in recovery and adjustment at low levels overall after hitting a historical low in 2016, and the CCFI ranged narrowly between 800 and 900 points.

21 Chapter 2

Source: Shanghai Shipping Exchange

Figure 2-3 Fluctuations of China Containerized Freight Index (CCFI) in 2010-2019

4. Global fleets' idle capacity hits two-year high

As of the end of 2019, the idle capacity of global container fleets recorded 1.38 million TEUs, accounting for 6% of the global fleets' total, which was flat with that in March 2017 and an increase of 3.1 percentage points year-on-year. The proportion of idle container fleet capacity in 2019 fell and then rose. Specifically, the proportion of idle capacity reached the yearly low of 1.3% at the end of April. As more ships were docked to install the desulfurizers and shipping service providers intensified their shipping suspension, the proportion of idle capacity increased sharply and reached a two-year high in December.

Source: Clarksons

Figure 2-4 Idle Capacities of Global Container Ships in 2016-2019

2018 APEC Port Development Report www.apecpsn.org 22 2.1.2 Review of international dry bulk market development

1. Dry bulk shipping demand growth continues to decline

The global dry bulk shipping volume in 2019 was around 5.28 billion tons, an increase of 1.1% year-on-year, the growth rate continuing to decline year-on-year. Specifically, iron ore shipping volume was 1.45 billion tons, accounting for 27.5% of the total; coal shipping volume was 1.29 billion tons, 24.3% of the total; grain shipping volume was 477 million tons, 9.0% of the total; and minor bulk shipping volume was 2.07 billion tons, 39.1% of the total.

Source: Clarksons

Figure 2-5 Growth of International Dry Bulk Shipping Demand in 1987-2019

2. Growth of dry bulk shipping fleets' capacity speeds up, while growth of Panamax ship capacity soars

There were a total of 11,958 fleets globally in 2019, with a total capacity of 879 million deadweight tons, up by 4.0% year-on-year. Specifically, Capesize ships totaled a capacity of 349 million tons with 1,779 ships, with the deadweight tons growing by 4.1% year-on-year; Panamax ships totaled 217 million tons with 2,697 ships, with the deadweight tons growing by 5.2% year-on-year; Handymax ships totaled 208 million tons with 3,741 ships, with the deadweight tons growing by 3.6% year-on-year; and Handysize totaled 105 million tons with 3,741 ships, with the deadweight tons growing by 2.1% year-on-year.

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Source: Clarksons

Figure 2-6 Growth Structure of Global Dry Bulk Shipping Capacity (DWT) in 2007-2009

3. BDI rises after a fall

The annual average of Baltic Dry Index (BDI) stood at 1,352.8 points, running flat with the 1,352.6 points in 2018, and the BDI followed a V-shaped curve overall. In the first quarter, the Chinese Spring Festival, as well as the tailings dam bursting of Vale of Brazil and the hurricanes in Australia seriously impaired the iron ore shipping demand. The BDI reached a yearly low of 595 points in February. Later, with the demands of China's steel plants gradually recovered, the raw materials supply was strained, and iron ore price soared. Meanwhile, as China implemented a cap on coal imports, some plants placed orders in advance to consume their quotas, and India and Southeast Asia showed strong demands for coal imports. In addition, part of the capacity was unavailable as ships were docked to install desulfurizers, and the freight rates in the market picked up quickly. The BDI reached a nine-year high of 2,518 points in September. At the end of the third quarter, China rolled out its routine production trims for purpose of environmental protection in autumns and winters, and the blast furnace operating rate dipped, coupled with the production limit during the National Day holiday. China's soybean procurement market was quite sensitive to policies. As a result, despite the harvest season in North America, traders generally took a wait-and-see attitude with lower shipping demands, and the freight rates fell quickly. Although the coal shipping demand was stable at the end of the year, ship owners became less willing to invest in long-haul shipping capacity in view of the upcoming sulfur restriction in 2020. Meanwhile, as the Christmas and New Year holidays were also approaching, shipowners became more likely to lower prices to conclude business.

2018 APEC Port Development Report www.apecpsn.org 24 Source: Baltic Exchange

Figure 2-7 Fluctuations of Baltic Dry Index (BDI) in 2018-2019

2.1.3 Review of international oil tanker market development

1. Global oil demand growth slows down

According to International Energy Agency (IEA), the global oil demand in 2019 was 99.67 million barrels/day, up by 0.84% year-on-year, the rate being significantly lower than that in last year. Specifically, the oil demand of Organization for Economic Cooperation and Development (OECD) economies totaled 47.91 million barrels/day, up by -0.21% year-on-year; and that of developing economies was 33.08 million barrels/day, up by 1.41% year-on-year. According to Clarksons, the global oil shipping volume in 2019 was 3.04 billion tons, down by 1.7% year-on-year. Specifically, the shipping volume of crude oil was 1.999 billion tons, up by -0.7% year-on-year, and that of product oil was 1.04 billion tons, up by -3.4% year-on-year.

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Table 2-1 Crude Oil Demands of Global Economies (Unit: million barrels/day)

Time 2019 2019 2019 2019 2018 2019 Economy Q1 Q2 Q3 Q4

OECD-Americas 25.60 25.14 25.29 26.03 25.99 25.62

OECD-Europe 14.33 14.09 14.25 14.75 14.25 14.34

OECD-Asia Pacific 8.08 8.50 7.61 7.68 8.05 7.96

Total for OECD 48.01 47.72 47.15 48.46 48.29 47.91

China 12.71 12.63 13.19 12.95 13.52 13.07

Developing 32.62 32.96 32.84 33.41 33.10 33.08 Economies

Global Total 98.84 98.75 98.56 100.53 100.79 99.67

Note: The 2019 data is projections. Source: OPEC

Source: Clarksons

Figure 2-8 International Oil Tanker Shipping Demand in 1991-2019

2. Global oil tanker fleet size continues to rise

According to Clarksons, the global tanker fleets in active service (of 10,000 tons and above) totaled 620 million deadweight tons (DWT) in 2019, up by 5.79% year- on-year, the growth rate continuing to rise. Specifically, very large crude carriers (VLCCs) totaled 248 million DWT, up by 8.58% year-on-year; Suezmax ships totaled

2018 APEC Port Development Report www.apecpsn.org 26 90 million DWT, up by 3.39% year-on-year, a stable increase overall; Aframax ships totaled 110 million DWT, up by 5.3% year-on-year; and Panamax and Handysize ships grew by 2.1% and 3.7%, respectively, in capacity. Oil tanker fleets of various ship types all sustained stable growth in shipping capacity, showing a prominent trend of fleet expansion, and VLCC growth was particularly strong. Crude oil tankers for trade recorded a capacity of 420 million DWT. The crude oil tanker market continued to be oversupplied with the oil tanker utilization rate standing at 87%, posting stable performance overall.

Table 2-2 Capacities of International Oil Tanker Fleets

Time YoY 2018 2019 Type Increase

International Oil Tanker Fleets (Carriers of 10,000 Million DWT 588.5 622.6 5.79% DWT or Above)

VLCC Million DWT 228.4 248 8.58%

Suezmax Million DWT 88.4 91.4 3.39%

Aframax Million DWT 108.7 114.5 5.34%

Panamax Million DWT 32.9 33.6 2.13%

Handysize Million DWT 130.1 135 3.77%

Source: Clarksons

Table 2-3 Crude Oil Tanker Supply and Demand List (Unit: million DWT, unless otherwise stated)

Capacity Oil Capacity Capacity Crude Demand Tanker Contributed Supply (100 Oil Tanker Year Oil Trade (100 Fleet by Other million ton- Utilization Capacity million Capacity Fields miles) ton-miles) 2014 340.3 12.9 353.2 102070 87770 86% 2015 346.4 14.7 361.2 107410 97400 91% 2016 366.6 18 384.6 117440 103100 88% 2017 384.1 16.9 400.9 124490 107140 86% 2018 387.0 17.3 404.2 126550 108230 86% 2019* 412.3 17.6 429.9 125460 108660 87%

Note: * indicates projections. Source: Drewry

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3. Crude oil tanker freight fluctuates upward

The Baltic Exchange Dirty Tanker Index (BDTI) has been on a general rise since the middle of 2019. Route wise, due to the mounting geopolitical dangers in the Persian Gulf region and the attacks on Saudi oil equipment, the BDTI rose rapidly in September and reached a yearly high of 1,958 points on October 14, before it fell back quickly.

Source: Baltic Exchange

Figure 2-9 Fluctuations of Baltic Exchange Dirty Tanker Indexes (BDTI) in 2018-2019

2.2 Review of Asia-Pacific Shipping Industry Development

2.2.1 Review of Asia-Pacific container shipping market

1. Container shipping market in the Asia-Pacific region

The Asian container shipping market slowed down growth slightly in 2019, but the region's share in the global container shipping market continued to expand in terms of shipping volume, to 30.47% of the global total.

(1) Container shipping volume growth slows down in Asia

Due to the trade frictions between major economies in the Asia-Pacific region, the container shipping volume in Asia in 2019 was 60.2 million TEUs, a growth rate of 3.3%, which was significantly slower than that of last year, but still higher than the global level of 2%. Specifically, due to the U.S.-China trade frictions, the shipping volume of trans-Pacific routes suffered negative growth for the first time in the past 10 years, with the year-on-year increase standing at -1.3%.

2018 APEC Port Development Report www.apecpsn.org 28 Source: Clarksons

Figure 2-10 Container Shipping Volumes in Asia in 2008-2019

(2) Container shipping capacity input in Asia shrinks

As per the latest data of Alphaliner, the global top 20 lines allocated 10.2% of their shipping capacity to the routes in Asia in 2019, which marked a contraction compared with the 11.4% in 2018. Primarily due to the trade demand growth slowdown of major Asia-Pacific economies as a result of the U.S.-China trade frictions, COSCO Container Lines Co., Ltd. reduced its shipping capacity input from 20% in 2018 to 17%, but remained the first among the 20 largest lines. Maersk also significantly cut its capacity in Asia, namely from 5% of its total capacity to 2%.

Source: Clarksons

Figure 2-11 Container Ship Capacity Input in Asia by Major Lines in 2019

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(3) Freight rates of major Aisan routes stay low

The Asian shipping market was weak either in supply or demand in 2019, with both container shipping volume and container freight rates staying sluggish. The China (Export) Containerized Freight Index (CCFI) of China–Japan, China–Korea and China–Southeast Asia routes in Asia oscillated at low levels and remained the same as those in 2018. Specifically, the CCFI of China–Southeast Asia routes dipped in the middle of the year to as low as 623.4 points, a drop of 9% from the annual average; the CCFI of China–Japan routes remained stable; and that of China–Korea routes fluctuated within a narrow range.

Source: Shanghai Shipping Exchange

Figure 2-12 CCFI Trends of Major Routes in Asia in 2013-2019

2. Container shipping market in Far East–North America sluggish

(1) Far East–North America shipping volume suffers first negative growth in 10 years

The international economic and trade situations in 2019 led to a dramatic decline of demand for trans-Pacific shipping. Trans-Pacific routes recorded a container shipping volume of 26.2 million TEUs, a growth rate of -1.87% year-on-year.

Source: Clarksons

Figure 2-13 Annual Container Shipping Volumes of Far East–North America Routes in 2012-2019

2018 APEC Port Development Report www.apecpsn.org 30 (2) Growth of total shipping capacity of trans-Pacific routes slows down

As the container shipping demand in the Asia-Pacific region fell, the total shipping capacity growth of trans-Pacific routes slowed down significantly. The total capacity input to these routes in 2019 was 16.6 million TEUs, up by 3.3% year-on-year, lower than the 8.3% growth rate. Quarter-wise, the total capacity input to trans-Pacific routes has been oscillating at low levels since 2019. Except the second quarter in 2019, the growth rates in the other three quarters were all negative.

Source: Alphliner

Figure 2-14 Total Far East–North America Shipping Capacities by Quarter in 2016–2019

(3) Container shipping freights of Far East–North American routes stable

The container shipping capacity input to Far East–North America routes slowed down significantly in 2019, and the container shipping volume in demand fell, presenting weak supply and demand. The container shipping freight rates of Far East–North America routes fluctuated narrowly at low levels. Specifically, the CCFI of Far East–U.S. west coast routes was averaged at 690.26 points, recording a decline of 1% year-on-year in terms of the annual average rate; while the CCFI of Far East–U.S. east coast routes was averaged at 885.84 points, running flat with that of last year.

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Source: Shanghai Shipping Exchange

Figure 2-15 CCFIs of China's Exports to North America in 2018-2019

2.2.2 Review of Asia-Pacific dry bulk shipping market

1. Asia-Pacific region's share in dry bulk importing market continues to grow

The seaborne trade growth of dry bulk imports in Asia-Pacific economies slowed down in 2019, but the region's share in the global seaborne trade of dry bulk imports continued to expand from the 78.7% in 2018 to 79.7%. This was primarily due to the fact that the seaborne trade growth slowdown of dry bulk imports in Asia- Pacific economies was weaker than the global level. Specifically, the region's import volumes of iron ore and grain ran flat with those in last year, and its coal import volume maintained a steady increase, with its share in the world expanding from 80% to 82%.

Source: Clarksons

Figure 2-16 Shares of Asia-Pacific Economies in Terms of Dry Bulk Shipping Volume in 2019

2018 APEC Port Development Report www.apecpsn.org 32 In terms of iron ore, the total iron ore production in major mines was undermined by short- term factors in 2019, and the global iron ore production stayed low overall. Among major Asia- Pacific economies, Australia's iron ore supply was trimmed because of the fires and hurricanes at its major iron ore shipping ports; China recorded a slight rise in iron ore production. The period from January to March is a routine season when Chinese steel plants stock up cargoes around the Spring Festival, and blast furnaces mostly receive overhauls during the Spring Festival. This led to a short-term inventory rise. Due to the temporary shortage of supply from major foreign mines, the shipment volumes of mines were cut dramatically in March. Coupled with the higher outbound shipment from ports, the imported ore inventories of ports started to fall sharply from April, from the highest inventory of 148 million tons in early April to 116 million tons in early July, a decrease of 20%. In the second half of the year, shipments from major mines gradually picked up. The shipments in Australia after June have been higher year-on- year, and iron ore inventories of ports gradually picked up, but overall the inventory was far lower than that in the same period of 2018.

Source: Clarksons

Figure 2-17 Seaborne Iron Ore Trade in Asia-Pacific Economies in 2019

In terms of coal, the global coal production dropped slightly in 2019, and most of the world's major coal producers saw production declines. Among major coal trading economies in the Asia-Pacific region, China sustained the dominance of imported coal because of the high price gap between domestic and foreign coal, and imported 255 million tons of coal in 2019, up by 8% year-on-year. The coal demand in Southeast Asia grew at a relatively high rate, with Vietnam posting the highest growth. Vietnam's coal imports in 2019 stood at 43.85 million tons, a near-doubling increase of 91.9% year-on-year over the 22.86 million tons in 2018. India's annual coal imports were expected to reach 245 million tons, an increase of 7% year-on- year.

33 Chapter 2

Source: Clarksons

Figure 2-18 Seaborne Coal Trade in Asia-Pacific Economies in 2019

The global seaborne grain trade volume was 477 million tons in 2019, up by 1% year-on-year. China increased its soybean imports from Brazil after the U.S.-China trade frictions broke out. In 2018, Brazil-exported soybeans accounted for nearly 75% of all imported soybeans in China. In 2019, as Brazil's soybean prices rose by nearly 70% from July to August 2019, the share of Brazil-exported soybeans in China's total soybean imports fell to 69%, while the soybeans exported from Argentina to China picked up quickly after the recovery of Argentina's soybean production. In the third quarter, U.S.-China trade negotiations yielded a phased breakthrough. On September 13, China excluded U.S. soybeans from the tariff rise list, allowing five private processors to import up to 5 million tons of U.S. soybeans. The soybean trade between the U.S. and China began to recover to a large extent.

Source: Clarksons

Figure 2-19 Seaborne Grain Trade in Asia-Pacific Economies in 2019

2018 APEC Port Development Report www.apecpsn.org 34 2. Growth of dry bulk shipping capacity in the Asia-Pacific region accelerates

The share of Asia-Pacific shipowners in the global total dry bulk shipping capacity rallied in 2019, from the 54% in 2018 to 54.4%, or up by 6.4% year-on-year, with the capacity totaling 264 million tons. Among the top 20 dry bulk shipowners in the world, 15 were located in the Asia-Pacific region.

Source: Clarksons

Figure 2-20 Ownership of Dry Bulk Ships by Registry in 2012–2019

Table 2-4 Rankings of Global Top 20 Dry Bulk Shipowner Groups

Fleet Size

Ranking Dry Bulk Shipowner Economy Million Quantity DWT 1 China COSCO Shipping Group China 292 30.25 2 NYK Lines Japan 178 16.48 3 KLINE Japan 114 13.28 Hong Kong, 4 Pacific Basin Shipping Ltd 112 4.48 China Hong Kong, 5 China Merchants Group 108 11.67 China 6 Star Bulk Carriers Greece 107 11.75

7 Wisdom Marine Group Chinese Taipei 107 5.63

8 Fredriksen Group Cyprus 105 12.69 9 Mitsui O.S.K. Lines Japan 102 11.68 10 Imabari Shipbuilding Co., Ltd Japan 82 8.2

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11 Oldendorff Carriers Germany 79 8.25 12 Navios Holdings Greece 78 8.29 13 Mitsubishi Japan 78 6.49 14 Nissen Kaiun Japan 65 6.45 the United 15 Genco Shipping & Trading Limited 59 5.15 States 16 Pan Ocean Shipping Korea 58 8.3 17 Doun Kisen Japan 58 5.28 18 Berge Bulk Singapore 54 11.15 19 Angelicoussis Group Greece 52 9.17 20 Santoku Shipping Japan 50 3.84

Source: Clarksons

3. Freight rates of major dry bulk shipping routes in the Asia-Pacific region oscillate at low levels

Both the capacity and demand of the dry bulk market in the Asia-Pacific region increased in 2019. The freight rates of different types of dry bulk carriers on major routes fluctuated at low levels, and the average freight rates were flat year-on-year overall, recording a high in September. In the second half of the year, the demands for imported iron ore and coal in China, India, and Southeast Asia among other areas were strong. In addition, as part of the capacity was unavailable due to ships being docked to install desulfurizers, the actual capacity supply was compromised,

and the freight rates in the market quickly picked up.

Source: Clarksons

Figure 2-21 Freight Rates on Major Shipping Routes in Asia Pacific

2018 APEC Port Development Report www.apecpsn.org 36 2.2.3 Review of Asia-Pacific tanker shipping market

1. Oil shipping demand in the Asia-Pacific region weakens

As per the latest data of OPEC, the crude oil demand in the Asia-Pacific region weakened in 2019, with the annual average demand for crude oil being 7.96 million barrels per day, a drop of 1.49% year-on-year. In 2019, the depressed economic growth in major Asia-Pacific economies crippled crude oil demand, leading to long- term fluctuations of crude oil prices at low levels. Specifically, the United States is currently the world's largest crude oil consumer, and its consumption accounts for about 20% of the world's total. However, because the U.S. economy maintained a relatively low growth rate for a long time, its oil demand also grew slowly. The current demand for imported crude oil in China is relatively strong, but China's consumption of downstream refined oil is low, primarily due to the fact that the sales of automobiles, a major consumer of gasoline, have underperformed the previous two years.

2. Capacity supply of oil tankers in the Asia-Pacific region continues to shrink

According to Clarksons, among the global top 20 oil tanker owners in 2019, the Asia- Pacific economies took up eight spots, with a total shipping capacity of 100 million DWT, the growth rate being consistent with that in 2018. However, the share of the top 20 oil tanker owners in the global total contracted, from 50% in 2018 to 46.9%. Due to the slower growth of oil tanker shipping demand, the shipping capacity supply slowed down in the Asia-Pacific economies.

Table 2-5 Rankings of Global Top 20 Oil Tanker Owners

Fleet Size Ranking Oil Tanker Owner Economy Million Quantity DWT 1 China COSCO Shipping Group China 124 18.66 2 SCF Group Russia 119 11.6 3 Scorpio Group Monaco 115 7.86 Hong Kong, 4 China Merchants Group 128 19.3 China 5 Teekay Corporation Canada 84 11.14 6 TORM A/S Denmark 75 4.46 7 Mitsui O.S.K. Lines Japan 73 11.54 8 Tsakos Group Greece 73 7.55 9 Teekay Corporation Canada 72 18.18 10 Minerva Marine Greece 66 7.63 11 Dynacom Tankers Mngt Greece 65 10.74

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12 Sinokor Korea 64 6.06 13 Ocean Tankers Singapore 62 8.3 14 Fredriksen Group Cyprus 58 10.33 15 Petronas Malaysia 58 9.33 16 Thenamaris Greece 57 6.62 17 NSCSA Saudi Arabia 55 14.52 18 Nat Iranian Tanker Iran 54 13.66 19 Angelicoussis Group Greece 49 13.15 20 Navios Holdings Greece 45 5.62

Source: Clarksons

3. Tanker freight rates in the Asia-Pacific region rise

The global growth of crude oil demand and supply slowed down to varying degrees in 2019, but tanker freight rates slightly increased, primarily due to the wider reduction in tanker capacity supply than in capacity demand in the region. Specifically, the spot prices and Time Charter Equivalent (TCE) on U.S. west coast– China, Gulf–Japan, and Gulf–Singapore routes fell across the board. According to the forecast of the Drewry, the tanker freight rate will continue to be adjusted in 2020.

Table 2-6 Freight Rates of VLCC Ships

Current Freights (WS) TCE (US dollars/day)

U.S. U.S. West Gulf to Gulf to West Gulf to Gulf to Coast to Japan Singapore Coast to Japan Singapore China China 2017 61 59 60 21100 18300 20600 2018 56 56 53 18900 18200 17200 2019 66 66 67 41000 39300 41900 2020* 55 56 56 36200 35600 36200 2021* 49 51 49 32600 33000 32300 2022* 48 49 48 31800 31000 31500 2023* 48 49 48 29900 29300 29600

Note: * indicates projections. WS (Worldscale) refers to the New Worldwide Tanker Nominal Freight Scale. Source: Drewry

2018 APEC Port Development Report www.apecpsn.org 38 2.3 Changes in Shipping Costs

2.3.1 Shipbuilding costs rise slightly

As per Clarksons, the average price index of new ship deals in 2019 was basically the same as that in 2018, and the average price index of new ships was 130.4, a rise of 1.5% year-on-year. In 2019, the average price index of containers was 80.4 points, a rise of 3.1% year-on-year, underperforming the growth rate of 11.4% in 2018. From the demand perspective, new ship orders are transforming from the traditional three major ship types to a balanced structure covering five major ship types, and the orders for LNG ships and passenger ships (including luxury liners) have increased significantly on a global scale. In 2019, new orders for bulk carriers, oil tankers, container ships, LNG ships, and passenger ships (including luxury liners) accounted for 20.7%, 13.3%, 20.1%, 22.5%, and 16.5%, respectively, of all global orders in terms of compensated gross tons. From the supply perspective, global shipbuilders are accelerating integration in response to the market downturn. Hyundai Heavy Industries has substantially launched the Daewoo Shipbuilding & Marine Engineering (DSME) M&A program, and further strengthened the competitiveness of the Korean shipbuilding industry in the field of high-value-added ship types through alliances. Japan Imabari Shipbuilding and Japan Marine United (JMU) integrated their businesses, signaling the deepened integration between ship companies. In general, the shipbuilding cost continued to rise steadily, but the growth rate declined. The ship market started to stablize and the supply-demand contradiction eased to some extent.

Source: Clarksons

Figure 2-22 Average Price Indexes of New Ship Deals in 2014-2019

39 Chapter 2

Source: Clarksons

Figure 2-23 Average Container Shipbuilding Price Indexes in 2014-2019

2.3.2 Global fuel prices fluctuate in narrow ranges

The international fuel prices in 2019 were lower than those in 2018 and fluctuated at low levels overall. From the demand perspective, the global economic growth momentum weakened in 2019, and the international shipping market was depressed. Meanwhile, bonded marine fuel oil faced a shake-up, and the pressure on marine fuel demand declined. Due to the cost pressure and environmental policies, the market for traditional fuel oil for industrial and power-generation purposes shrank further. From the supply perspective, as the effective date of the 2020 global sulfur limit loomed, the demand for high-sulfur fuel oil fell, and the potential of low-sulfur fuel oil production rose. According to Clarksons projections, the installation of desulfurizers in 2020 will sustain 30 million tons of high-sulfur fuel oil demand in the global market, which will probably account for about 15%-17% of the marine fuel oil demand. In general, the international fuel oil market presented weak supply and demand, resulting in low oil prices.

Source: Clarksons

Figure 2-24 Fuel Oil Prices in Asia-Pacific Region in 2014-2019

2018 APEC Port Development Report www.apecpsn.org 40 2.3.3 Port costs continue to fall

China's port charge reductions ease burdens. China's Ministry of Transport and the National Development Regulatory Commission (NDRC) jointly issued the Notice on Revising and Circulating Administrative Measures for Port Charge on March 13, 2019, which came into effect on April 1, 2019, and will be valid for five years. The new policy further lowered the government pricing for items such as cargo port fees and pilotage (shifting) charges, and the maximum reduction reached 20%. The revision and improvement of the Administrative Measures for Port Charge are primarily reflected in the following aspects:

(1) Reduced government pricing and charging items, and much lower port charges and service fee rates;

(2) Optimized tugging and pilotage billing methods of ports, adopting a more reasonable approach of government referential prices;

(3) More flexible market-regulated pricing rules for tallying services and other market operations;

(4) Lump sum charges adopted for port operators to prevent cost rises on companies due to surcharges.

Meanwhile, China's ports have also canceled port dues on ships, a move which has reduced the operating costs of ship companies. From the port fee structure, fee items have been trimmed (cutting many taxable items), the fee collection procedures have been streamlined (collected in the form of lump sum charges), billing methods have been updated (by time, ship type, distance, etc.), and pricing systems have been optimized (market-regulated methods + caps on government referential prices). As a result, the charging mode is more in line with international pricing models, and is conducive to opening up the domestic market and cutting international trade costs.

Table 2-7 Comparison of Port Fees Before and After Port Charging Reform in China

Before After No. Item Type R e f o r m R e f o r m Formula (RMB) (RMB) RMB 3.3 * 50,000 Collected by 1 Tonnage tax 165000 165000 deadweight tons customs (discounted) Original billing Port dues on Canceled standard: RMB 35500 0 ships after reform 0.71 * 50,000 2 deadweight tons Cargo Government RMB 17/20 feet, port fees 34000 28900 pricing RMB 34/40 feet (cargoside)

41 Chapter 2

Port RMB 32/20 feet, construction Government RMB 48/40 3 108000 33600 dues (cargo pricing feet, free/empty side) container RMB 8/20 feet, Security fees Government RMB 12/40 4 26000 8400 (cargo side) pricing feet, free/empty container Basic rate RMB 0.45 * 40,000 Government Basic pilotage deadweight 5 referential 37500 22000 dues tons + RMB price 0.40 * 10,000 deadweight tons Government Direct pricing 6 Tugging fees referential 45800 10500 based on captain price and ship type RMB 0.25 * per Government deadweight ton 7 Berthage dues referential 23000 25000 (daily), estimated price to be collected on a two-day basis Heavy container RMB 638.3/FEU + Container Marketing- RMB 425.5/TEU; 8 handling lump regulated 697180 535020 empty container sum charge pricing RMB 441.1/FEU (Yangshan Port) RMB 18/TEU Container Marketing- * 300 + RMB 9 tallying regulated 30600 30600 36/FEU * 700 charges pricing (Shanghai Port)

Total 1202580 859020 28.6% drop

Note: The assumption for port charge comparison is that major ship types of port entry and exit in China are selected: 8,000-TEU ship (50,000 DWT, 88,000 gross tons), 320 meters of length, and a 12 meters of draft; port operations include: handling 300 20-foot heavy containers, 500 40-foot heavy containers, and 200 40-foot empty containers. Ships' expected stay at ports is two days, with the terminal operation time being 10 hours, the pilotage/tugging services time being four hours and for 10 nautical miles. The port area is Yangshan Port.

Source: Market research and estimates based on announcements of China's Ministry of Transport

2018 APEC Port Development Report www.apecpsn.org 42 Port charges in other Asia-Pacific economies vary. Compared with the port charges in other economies in the Asia-Pacific region, the charges imposed by China's port companies are much lower than their international counterparts'. In the set scenario, port charges in China are only about RMB 535,000 for handling 1,000 moves, while in Singapore, Yokohama and Hong Kong, China, the charges are significantly higher at RMB 909,000, CNY 855,000 and RMB 1.196 million, respectively. At Port of Busan it is RMB 655,000, as its charging standard is slightly higher than that in China.

Table 2-8 Comparison of Charges at Major Ports in Asia Pacific

(RMB)

Hong No. Item Billing Basis China Singapore Yokohama Kong, Busan China Tonnage Collected by 1 165000 0 117900 0 71280 tax customs Port dues Canceled 0 18902 on ships after reform 2 Cargo Government port fees 28900 pricing (cargoside) Port 38597 32750 40612 construction Government 3 33600 26520 dues pricing (cargoside) Security Government 4 fees 8400 pricing (cargoside) Basic Government 5 pilotage referential 22000 8937 10364 9215 10968 dues price Government Tugging Negotiated 6 referential 10500 22704 26645 18000 fees rate price Government Berthage 7 referential 25000 8173 15563 34080 39494 dues price Subtotal of referential fees 128400 78411 85322 83907 95884 (excluding tonnage tax) Subtotal of referential fees 293400 78411 203222 83907 167164 (including tonnage tax)

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Container Marketing- handling 8 regulated 535020 908676 855000 1195800 655000 lump sum pricing charge Container Marketing- 9 tallying regulated 30600 141900 — 0 22440 charges pricing Total 859020 1128987 1058222 1279707 862604

Note: The assumption for port charge comparison is that major ship types of port entry and exit in Asia are selected: 8,000-TEU ship (50,000 DWT, 88,000 gross tons), 320 meters of length, and a 12 meters of draft; port operations include: handling 300 20-foot heavy containers, 500 40-foot heavy containers, and 200 40-foot empty containers. Ships' expected stay at ports is two days, with the terminal operation time being 10 hours, the pilotage/tugging services time being four hours and for 10 nautical miles.

2.3.4 Ship operating costs continue to rise

1. Crew cost rises slightly

As per the statistics on crew recruitment websites, China's crew costs rose slightly in 2019, with the greatest rises seen in third mates and third engineers. The wage growth of third mates and third engineers on domestic-trade routes was faster because some domestic-trade shipowners increased the wages to attract talent to address understaffing. In the second half of the year, third mates and third engineers showed imbalance in supply and demand, primarily due to faults in the echelon training model, the drain of senior crew, and the decline in the number of maritime major students.

Table 2-9 Crew Salary Level of Chinese Container Ship in 2018–2019

Ocean-going Inshore Ocean-going Inshore Containers Containers Containers Containers in 2019 in 2019 in 2018 in 2018 (US$/month) (US$/month) (US$/month) (US$/month) Captain 7600 6900 7600 6500 Chief 7600 6600 7600 6300 Engineer First Mate 6500 5700 6400 5600 Second 3000 2500 3100 2300 Mate Third 2200 1950 2200 1600 Mate Boatswain 1650 1500 1600 1500

Sailor 1400 1350 1400 1400

Source: Recruitment of Crew Members, Shipping Online 44

2018 APEC Port Development Report www.apecpsn.org 44 2. Ship operating costs continue to rise

As per data of Binder Dijker Otte (BDO), an international network of public accounting, consulting and business advisory firms, the total operating cost of the shipping industry was expected to rise by 2.5% in 2019. Responses to an operating cost survey showed that insurance expenses increased significantly in 2019. In terms of protection and compensation insurance, the growth rate as reflected in each annual review was projected to stand at 2%, while hull and machinery insurance expenses were expected to increase by 1.9% in 2019. The dry docking and maintenance cost was forecast to rise by 1.8% in 2019. The overall cost growth in 2019 was the highest in the container ship sector, being 3.7% on average. This was because of the expected growth in protection and compensation as well as hull and machinery insurance expenses. Meanwhile, the cost growth of the bulk carrier market was projected to stand at 2.3% in 2019, that of the tanker market at 2.5% and of the offshore market at 2.6%.

2.4 Changes in Shipping Laws and Regulations

2.4.1 Changes in international shipping laws and regulations

1. IMO approves the issuance of implementation guidance for sulfur restriction

In 2019, the IMO approved the guidance on establishment of a ship implementation plan in the annex of the MARPOL Convention, in order to smoothly implement the 0.50% sulfur limit starting from 2020. The limit is also known as the 2020 sulfur restriction. The restriction took effect on January 1, 2020, requiring ships to use fuel with sulfur content not exceeding 0.5% m/m, or achieve the same low-sulfur emission goal by installing scrubbers or using other new fuel.

2. IMO updates escape route signs and equipment location markings

To ensure compliance of safety signs with the ISO (International Organization for Standardization) standards, the IMO has updated the signs and graphical symbols for indicating locations of escape routes, life-saving appliances and arrangements, and mandatory action signs for life-saving equipment. Safety signs and equipment location markings are now consistent with ISO standards.

3. Marine Environment Protection Committee revises the information that should be included in bunker delivery notes

The current bunker delivery note does not apply to supply of high-sulfur fuel oil to ships equipped with exhaust gas scrubbers or exemptions. Therefore, the text of the bunker delivery note has been revised to apply to this scenario. An option has been added to the bunker delivery note to indicate the sulfur limit specified by the buyer. The new option in the new bunker receipt form also requires the fuel supplier to obtain notification from the buyer that the fuel oil supplied is in conformity with the MARPOL (if the sulfur content of the supplied fuel exceeds the 0.5% limit). In addition to sulfur oxides, the emissions control effort in the Baltic and North Sea

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emission control areas will also include nitrogen oxides. Ships built on and after January 1, 2021, equipped with 130 kilowatts or above engines must meet Tier III emission standards when operating in the emission control areas.

4. MEPC delimits special area of the Baltic Sea

According to resolution MEPC.275 (69) of the MEPC, passenger ships are not allowed to discharge untreated sewage in the Baltic Sea. To discharge treated sewage, ships must be equipped with sewage treatment equipment that meets the requirements listed in the resolution MEPC.227 (64). Alternatively, the ship should have a sewage storage cabinet with a sufficient capacity.

5. European Commission rolls out regulation requiring ships to submit CO2 emission reports

Companies must send complete MRV emission reports satisfactorily verified for each ship the company owns to the European Commission and flag state authorities. The emission report should contain information on carbon dioxide emissions and other relevant information within the report period, and needs to be assessed by the verifier. As of June 30, 2019, all applicable ships must hold a Document of Compliance.

2.4.2 Changes in Asia-Pacific shipping laws and regulations

1. Promotion of IMO data collection system and ship energy efficiency management plan

As per Resolution MEPC.278 (70) and Part II of the Ship Energy Efficiency Management Plan adopted by Resolution MEPC.282 (70), all international navigation vessels of 5,000 gross tons or above shall collect data on the consumption of various types of fuel and additional designated data, including substitutes for transportation, in accordance with the procedure described in Part 2 of the Ship Energy Efficiency Management Plan (approved on December 31, 2018). Moreover, they shall send the collected data at the end of each calendar year to the flag states which will issue a declaration of conformity to each ship after determining that the data has been reported as required. The following are the emission control requirements for China, Chinese Taipei, and Hong Kong, China, respectively.

China: From January 1, 2019, ships shall use the fuel oil with sulfur content not exceeding 0.50% before entering Chinese territorial waters. Other key dates before 2020 include:

From July 1, 2019, ships with shore power receiving capability (except liquid cargo ships) must use shore power. From January 1, 2020, ships entering inland river emission control areas (Yangtze River and Xijiang River) must use fuel oil with sulfur content not exceeding 0.10% when operating in inland river emission control areas.

Chinese Taipei: Ships without exhaust scrubbers must use fuel oil with sulfur

2018 APEC Port Development Report www.apecpsn.org 46 content not exceeding 0.50% m/m before entering its commercial port area.

Hong Kong, China: Existing fuel oil rules during berth (requiring that ships should use fuel oil with sulfur content not exceeding 0.50% m/m) will be replaced by new rules. When enforced, the new rules will extend the requirement to all ships working on Hong Kong, China waters. Ships without exhaust scrubbers, whenever they are on Hong Kong, China waters, at sea or at anchor, should use fuel oil with sulfur content not exceeding 0.50% m/m.

2. Chinese crew tax cut bill passed

Chinese Premier Li Keqiang chaired the State Council Executive Meeting on November 20, 2019. The meeting decided, based on international practices, to include salaries and income of ocean-going crew members who sailed on ships for more than 183 days a year into the taxable income at 50% of the amount from January 1, 2019 to the end of 2023. Crew tax cuts have finally become a reality after many years. The fourth Working Conference of the National Tripartite Coordination Mechanism for Maritime Labor Relations was held on December 10, 2019. The meeting reviewed and approved the newly revised Chinese Seafarers Collective Agreement. According to the agreement, from January 1, 2020, the minimum base salary of ocean-going crew members will be increased by 4%; from January 1, 2021, the meal standard will rise by US$1 per person per day; the amount of injury compensation for ocean-going crew members will be increased.

3. India continues to advance new shipping policy

To cope with the economic development issues faced by India, the Indian government has rolled out policies in various fields to stimulate economic development. Specifically, the policies in the shipping field primarily include encouraging domestic and foreign private market players to enter the port field, earmarking funds to support port construction, and lifting bans on foreign ships for conducting transshipment businesses in India.

The Indian government continues to open up its shipping market to encourage domestic and foreign private market players to enter the port sector, and private entities are allowed to participate in port logistics services. Favorable policies to encourage private investment include: 1. Decentralization and tax holidays. The government allows as high as 100% foreign direct investment (FDI) in port construction and maintenance projects, and the companies involved in development, maintenance and operations of ports, inland shipping and inland ports can enjoy a 10-year tax holiday. 2. Price flexibility for capitalized operations of small and medium-sized ports. Small and medium-sized ports are allowed to set their own tariffs with reference to the guidance of the local maritime administrations. 3. The Model Concession Agreement (MCA) requires major ports to enter the bidding of selected projects during construction, operations and transformation, which has enhanced the transparency and standardization. After the government revised the MCA in March 2018, major ports have become friendlier to investments. 4. Major

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Port Authorities Bill allows future public-private partner operators to determine tariffs. With the implementation of this policy, port authorities will obtain a 40-year lease period for port-related land and a 20-year lease period for non-port-related enterprises. 5. The UNNATI plan initiated by the Indian government can identify areas of improvement for major ports. Under this plan, 116 schemes have been proposed, with 91 of them being implemented.

In addition, India's strategy of boosting economy with exports has prompted the government to support port construction through fiscal earmarking and policies. It plans to build a total of 3.2 billion metric tons of port capacity to respond to the expected 2.5 billion metric tons of shipping demand in 2020. In terms of capital attraction, the government allows as high as 100% foreign direct investment (FDI) in ports. In terms of taxation, the Indian government has provided a 10-year tax holiday for companies that develop, maintain, and operate ports, inland waterways, and inland ports.

2.5 Development Trends of International Shipping Organizations

2.5.1 World Shipping Council

In 2019, the World Shipping Council (WSC) continued to pay attention to such issues as the marine environment, marine safety, and port and shipping infrastructure. In terms of the environment, apart from continuous commitment to reduce exhaust emissions and ballast water discharge, the WSC also strives to protect specific marine biological communities and species, such as designated and specific marine habitats, by limiting the navigation speed of ships to reduce the impact of noise on whales and other species. In addition, the WSC has established international standards for managing marine waste and recycling containers. In terms of marine safety, apart from enhancing the safety of ports, ships, cargoes and people, various countries and regions have rolled out regulations and programs to enhance the security of international supply chains and promote the circulation of lawful cargoes. In addition, in response to the global COVID-19 pandemic, the WSC proposed that "To combat the pandemic, it is essential to maintain global cargo transportation and circulation. Despite the disruption of this crisis to people's daily life, they still need food, medicines and other supplies. Shipping companies must ensure that cargoes can be circulated at ports around the world so that food, medicines and supplies can be shipped."

2.5.2 Baltic and International Maritime Council

In 2019, the Baltic and International Maritime Council (BIMCO) focused on issues on the ocean, cybersecurity, and maritime digitalization. BIMCO's new digital "ecosystem" platform, co-built with Microsoft, was released in March 2019. The platform integrates BIMCO-certified shipping standard contracts, clauses and interpretations, contracting advice, and relevant information of core contract terms, providing users with a point-to-point contract editing environment with the security

2018 APEC Port Development Report www.apecpsn.org 48 of contract information ensured to help users manage contract-related risks. Meanwhile, BIMCO is committed to releasing recommendations, information, and analysis in response to the pandemic. To help shipping companies get through this pandemic, BIMCO has opened a COVID-19 column on its website to provide news and information related to the pandemic for free.

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Chapter 3 Review of Asia-Pacific Port Development in 2019

3.1 Features of Port Route Network and Hub Ports in Asia- Pacific region

3.1.1 Features of route distribution

The ship types are divided into five categories, namely ships below 4,000 TEUs, ships between 4,000 and 8,000 TEUs, ships between 8,000 and 12,000 TEUs, ships between 12,000 and 18,000 TEUs, and ships above 18,000 TEUs. According to the trajectories of different ships, it is found that the container route network of ships below 4,000 TEUs is highly concentrated in the Asia-Pacific region, focusing on regional shuttle shipping, such as between the ports in China's coastal areas, Southeast Asia and South Asia. Routes of containers ships between 4,000 and 8,000 TEUs are primarily for inter-regional shipping, such as from ports in East Asia to South Asia and Africa. Comparatively speaking, the inter-regional routes of ships between 4,000 and 8,000 TEUs feature a relatively even distribution, while container ships between 8,000 and 12,000 TEUs are primarily run by several trunk route operators, serving the shipping business from East Asia to the U.S. west coast, and from East Asia to Europe. Container ships between 12,000 and 18,000 TEUs primarily operate on the Far East–Europe trunk routes, in addition to a small number on the Far East–U.S. west coast routes. It is worth noting that after the Panama Canal expansion, more ships between 12,000 and 18,000 TEUs have joined the Far East–U.S. east coast routes. Container ships between 12,000 and 18,000 TEUs are primarily sailing on the China–Far East–Europe trunk routes, in addition to a small number on the Far East–U.S. west coast routes. Asia-Pacific ports such as Shanghai, Ningbo-Zhoushan, Shenzhen and Singapore are ultralarge container hub ports.

Figure 3-1 Trajectories of Container Ships below 4,000 TEUs in March 2019

2018 APEC Port Development Report www.apecpsn.org 50 Figure 3-2 Trajectories of Container Ships Between 4,000 and 8,000 TEUs in March 2019

Figure 3-3 Trajectories of Container Ships Between 8,000 and 12,000 TEUs in March 2019

Figure 3-4 Trajectories of Container Ships Between 12,000 and 18, 000 TEUs in March 2019

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Figure 3-5 Trajectories of Container Ships above 18,000 TEUs in March 2019

3.1.2 Structures of ships arriving at Asia-Pacific container hub ports

(1) Shanghai becomes the busiest port in the world

In 2019, based on the sample data in the port and shipping database of the Shanghai International Shipping Institute, the number of ship arrivals at Shanghai Port has surpassed that at Port of Singapore, making Shanghai Port the one with the highest number of ship arrivals in the world. In 2019, the container throughput of Shanghai Port reached 43.3 million TEUs, ranking first in the world for 10 consecutive years, and its container volume growth remained stable. Due to strong freight demand, the number of ship arrivals at Shanghai Port was also on a rise year by year. Data for January to September 2019 showed that the number of ship arrivals at Shanghai Port has surpassed that at Port of Singapore, and Shanghai Port has become the busiest one in the world.

(2) Ships below 4,000 TEUs account for a higher share at hub ports

It can be clearly seen from the structures of arriving container ships in the world in 2019 that Shanghai, Singapore, Hong Kong, Busan, Rotterdam, Dubai, Dalian, Xiamen and other hub ports featured a higher share of ships below 4,000 TEUs. Specifically, Shanghai, Singapore, Hong Kong, Busan and other ports are international hub ports, forming hub-and-spoke transportation networks with the ports of neighboring economies. The cargo sources from neighboring economies are transported to the hub ports by small and medium-sized ships, and then transported to the destinations in larger ships. As a result, the share of smaller ships is higher at hub ports overall, namely around 50%. Ports such as Dalian, Rotterdam, and Kaohsiung are regional hub ports that primarily serve cargo transportation in surrounding areas, with a higher frequency of calls by small container ships on near- sea routes. Ships below 4,000 TEUs accounted for a larger proportion, or more than 50%, in the ship type structure.

2018 APEC Port Development Report www.apecpsn.org 52 (3) Ships of 8,000-12,000 TEUs at U.S. ports surge

According to AIS ship statistics, from January to September 2019, the number of ships of 8,000-12,000 TEUs at the U.S. ports surged year-on-year, and arrivals of 8,000-to-12,000-TEU ships at the three major ports of Los Angeles, Long Beach, New York and New Jersey rose by around 20% to 30%. This is primarily because after the expansion of the Panama Canal, the maximum nominal capacity of container throughput is about 13,000 TEUs, more than doubling that of the past. After the expansion, large Asian ships (of above 8,000 TEUs) can directly arrive at the ports on the west coast of the United States. The container ship structure on Asia-Pacific routes was adjusted. Due to the restrictions of the Panama Canal, ships of 12,000 TEUs or above that arrived at the Port of New York and New Jersey on the west coast of the U.S. accounted for a smaller proportion in all ship types, far lower than the average.

(4) Large container ship arrivals at ports of Shanghai, Ningbo-Zhoushan, Shenzhen and others surge

The global container shipping market was generally weak in 2019. To gain a better competitive advantage, liner companies continued to promote the ship upsizing process. According to Clarksons, as of the end of November, the share of ships of 12,000 TEUs or above in the total shipping capacity was 28%, an increase of 5.4 percentage points from that in 2018. A more evident manifestation was that the frequency of large ship arrivals at ports of Shanghai, Ningbo-Zhoushan, Shenzhen and other large global container ports surged. Take Shanghai as an example. According to the data sample, there were only more than 1,000 ships of 12,000 TEUs or above arriving at Shanghai Port in 2018. From January to September 2019, the ships of this size arriving at the port were nearly 2,000.

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Types of Ships Arriving at Global Top 20 Container Ports Figure 3-6

2018 APEC Port Development Report www.apecpsn.org 54 3.2 Review of Port Production

3.2.1 Port throughput growth

1. Global ports maintain slow growth in cargo throughput

With the general slowdown of the global economy and the continued trade tensions in 2019, global port production grew at a low rate. In 2019, the cargo throughput of major ports in the world increased by 1.5% year-on-year, up by 0.9 percentage points from that in 2018.

Region-wise, except major ports in Asia which enjoyed stable growth in cargo throughput, all the other regions including Europe, Americas, and Oceania recorded slowdown in cargo throughput growth of major ports. Specifically, the trade prospect of the Europe region was unoptimistic as a result of the heavy blow to manufacturing export-oriented economies represented by Germany, the dual pressure of economic downturn and high debts on southern EU economies represented by Italy, and the continued impacts of the Brexit uncertainty. These factors have also curbed the throughput growth of European ports, as evidenced by the 1.6 percentage points of decline in the throughput of major European ports. In addition, the dramatic slowdown in cargo throughput growth of Europe's major hub ports including Port of Rotterdam and Port of Antwerp also retarded the cargo throughput growth of Europe as a whole. The cargo throughput of ports on the west coast of U.S. suffered the widest declines in the North America region, with their cargo throughput growth falling by 4.3% year-on-year. In addition, the price declines of crude oil, copper, and soybeans in South America frustrated Latin American economies that are highly dependent on primary product exports. Specifically, the sharp contraction of Brazilian automobile exports and the damage to its mining industry reduced Brazil's cargo throughput by 1.3%. In the Asia region, the cargo throughput growth of Asian ports maintained low and stable growth, or 2.4 percentage points higher than last year. In the Oceania region, the cargo throughput growth of major ports was only 0.8%, primarily due to the sharp decline in dry bulk trade, which dragged down ports' cargo throughput growth. Specifically, the coal throughput of Port of Hay Point fell by 10.2% year-on-year into the negative range, and Port of Hedland continued its low growth last year.

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Source: Official websites of various ports

Figure 3-7 Cargo Throughput of Major Ports in Various Regions in the World in 2019

2. Cargo throughput growth of ports in Asia-Pacific economies slows down

The commodity trade in the Asia-Pacific region faced an unfavorable situation in 2019. This has curbed trade activities, reducing the trade volume and impacting port production in the region. Major ports in Asia-Pacific economies recorded a cargo throughput of 15.29 billion tons, increasing by 2.6% year-on-year, continuing the slow growth of last year. Except China, Indonesia, and the Philippines, all the other economies suffered declines to varied degrees in port cargo throughput growth.

Table 3-1 Cargo Throughputs and Growth Rates of Major Ports in Asia-Pacific Economies in 2019 (Unit: 1,000 tons)

2018 2019 Port Throughput Growth Rate Throughput Growth Rate

Major Ports in 7176360 -2.5% 7358560 2.5% China

Port of Hong Kong, 258540 -8.2% 263320 1.8% China

Major Ports in 241140 -1.5% 227760 -5.6% Chinese Taipei

2018 APEC Port Development Report www.apecpsn.org 56 Major Ports in 681780 -0.7% 668500 -1.9% Japan

Major Ports in 1635610 3.1% 1643970 0.5% Korea

Major Ports in 536430 22.7% 653160 20.4% Vietnam*

Major Ports in 66780 -6.7% 78130 17.0% Indonesia

Major Ports in 105680 1.8% 104160 -1.4% Thailand*

Major Ports in 567570 6.4% 595240 4.9% Malaysia

Major Ports in the 256330 1.1% 265080 3.4% Philippines

Port of Singapore 630130 0.4% 626180 -0.6%

Major Ports in the 729390 0.1% 663790 -9.0% U.S.

Major Ports in 190790 3.1% 189200 -0.8% Canada

Major Ports in 1104550 2.4% 1113490 0.8% Australia

Ports in Russia 816700 3.8% 840200 2.9%

Note: Statistics for major ports included in the economies in the table can be found in Table 3-2. Source: Official websites of various ports or port associations in various economies

Table 3-2 Major Ports in Asia-Pacific Economies Included in Statistics

Economy Major Ports for Statistics

Ningbo-Zhoushan, Shanghai, Suzhou, Tianjin, Guangzhou, China Tangshan, Qingdao, Dalian, Rizhao, Yingkou, Yantai, Huanghua, Shenzhen, Xiamen, Lianyungang, Qinhuangdao

Chinese Taipei Kaohsiung, Taichung, Taipei, Keelung, Hualien, Suao

Japan Nagoya, Yokohama, Kobe, Tokyo, Kawasaki, Osaka, Shimizu

Busan, Incheon, Taesan, Pohang, Mukho, Taean, Hadong, Korea Masan, Gwangyang, Pyeongtaek-Dangjin, Ulsan, Mokpo and others

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Indonesia Tanjung Priok, Balikpapan, Tanjung Perak, Makassar, Belawan

Kelang, Tanjung Pelepas, Penang Pulau, Johor, Kuantan, Malaysia Bintulu, Tanjung Bruas, Kuching, Miri, Rajang, Sabah, Dickson, Kemaman

Thailand Bangkok, Laem Chabang

New York-New Jersey, Los Angeles, South Louisiana, Long the United States Beach, Northwest Seaport Alliance (NWSA), Virginia

Canada Vancouver, Montreal, Halifax

Hedland, Newcastle, Gladstone, Hay Point, Melbourne, Australia Fremantle, Brisbane, Flinders

Note: * indicates projections. Source: Official websites of various ports or port associations in various economies

Figure 3-8 Cargo Throughputs and Growth Rates of Major Ports in Asia-Pacific Economies in 2018-2019

In a comparison of the growth rates of major ports in Asia-Pacific economies, Hong Kong, China demonstrated the most significant increase in cargo throughput. Throughout 2019, Port of Hong Kong’s cargo throughput rose by 1.8% year-on-year to 263.3 million tons, an increase of 10 percentage points from last year. Benefiting from the recovery growth of arriving cargoes at the port, the arriving throughput went up by 7.2% year-on-year to 170.9 million tons, an increase of 15.8 percentage points year-on-year, driving the growth of Hong Kong's cargo throughput. However, the performance of Chinese Taipei ports in 2019 was quite a different story. Except for Hualien Port, which maintained a low positive growth rate of cargo throughput at 1.1%, all other ports in Chinese Taipei fell into the negative growth range, primarily due to the weak foreign trade and stagnant exports. Specifically, Kaohsiung Port

2018 APEC Port Development Report www.apecpsn.org 58 recorded a cargo throughput of 114.02 million tons, a year-on-year drop of 4.0%, the growth rate falling by 6.4 percentage points from that in 2018, and the throughput accounted for 50.1% of Chinese Taipei ports' total. The overall cargo throughput of Chinese Taipei ports lacked a growth momentum, recording 227.76 million tons for the year, down by 5.5% year-on-year.

The cargo throughput of China's ports above a designated scale maintained rapid growth in 2019. Driven by the growing domestic demand in China and the strong cargo throughput growth of inland river ports, China's ports above a designated scale recorded a total cargo throughput of 13.95 billion tons, a year-on-year increase of 8.8%. The domestic trade and foreign trade cargo throughputs of ports in China maintained stable growth in 2019, with the annual foreign trade cargo throughput standing at 4.32 billion tons, an increase of 4.8% year-on-year, which was a rise of 2.6 percentage points year-on-year, and the domestic trade cargo throughput increasing by 4.9% year-on-year to 1.40 billion tons. In terms of main cargo types, China's imported crude oil in 2019 went up by 9.5% year-on-year to exceed 500 million tons, as a result of domestic oilfield jurisdiction restrictions, higher extraction costs, and the decline of international crude oil prices. China's domestic natural gas demand was strong, and natural gas imports maintained a medium-to-high growth rate of 6.9%. In addition, impacted by the African swine fever epidemic in August, China's pork production declined significantly, and the growth of meat products imports rose. Its annual pork import hit 2.11 million tons, an increase of 75% year- on-year, and its beef imports rose by 59.7% year-on-year to 1.66 million tons.

Source: General Administration of Customs of China

Figure 3-9 Throughputs and Growth Rates of Domestic-trade and Foreign-trade Cargoes of Ports in China in 2016–2019

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Note: * indicates projections. Source: Ministry of Transport of China and official websites of various ports

Figure 3-10 Cargo Throughputs and Growth Rates of Major Ports in China in 2018 and 2019

The economic growth of the United States in 2019 slowed down constrained by unfavorable factors such as unstable consumption performance, declining private investment, and worsening trade deficit. Its manufacturing industry continued to shrink, corporate fixed-asset investment continued to drop, and exports remained sluggish. All these factors inhibited the trade volume growth of ports in the United States. In 2019, Port of Long Beach on the west coast recorded a cargo throughput of 170 million tons for the year, a drop of 5.4% year-on-year, primarily due to the continued adverse impact from the restrictive tariffs which became a drag on the port's supply chain, producing a serious damage to the port's operations and trade. As the largest grain and energy transshipment port in the United States, Port of South Louisiana is highly dependent on international trade. Due to the unstable international trade situation, the annual cargo throughput of the port reached 230 million tons, a decline of 14.7% year-on-year, of which imports fell by 13% and exports dropped by 18%. Canada's cargo import and export trade slowed down growth slightly in 2019, with the import value of cargoes falling by 1.5% and the export value of cargoes by 0.9%. Commodity-wise, mineral products, transportation equipment and mechanical and electrical products - major exported products of Canada - recorded growth rates of -0.3%, 2.3%, and 1.0%, respectively. The growth of most other product exports declined slightly. Specifically, mechanical and electrical products, transportation equipment and chemical products, which accounted for 53.2% of the total exports, slowed down their growth slightly. Therefore, the throughput growth of major ports in Canada ran out of steam. Port of Vancouver recorded a cargo throughput of 14.42 million tons, a drop of 2% year-on- year, and the Port of Halifax registered 4.46 million tons, a drop of 6.6% year-on- year.

2018 APEC Port Development Report www.apecpsn.org 60 The economic growth of Southeast Asian economies was uneven in 2019. Specifically, Vietnam became the destination of foreign industry transfer from China, securing a high annual GDP growth rate of 7%. It enjoyed growth in both import and export trade, with exports rising by 8.4%, and imports by 6.8%. As a result, the cargo throughput of ports in Vietnam was expected to record a high growth rate of 20.4%. Except Vietnam, most economies in Southeast Asia showed varying degrees of growth slowdown. Singapore and Thailand recorded a GDP growth rate of 0.7% and 2.4%, respectively, hitting a 10-year and five-year low, respectively. Specifically, the global cyclical downturn of the electronics industry have dealt a heavy blow to Singapore, an export-oriented economy. Its annual cargo throughput reached 630 million tons, a drop of 0.6% year-on-year. Due to the reduced demands from trading partners, Malaysia's import and export values in 2019 fell, with the total trade value dropping by 2.5%. The trade volume decline suppressed port throughput growth, with the cargo throughput growth of major ports in Malaysia slowing to 4.9%.

The sluggish international trade situation depressed the external demand in Japan, and Japan's import and export values both fell after three years of growth. Its exports to China dropped by 7.6% year-on-year. The cargo throughput of major ports in Japan continued the decline from last year, namely down by 2% year-on- year. The cargo throughput growth of major ports in Korea continued to slow down. Korea's monthly exports in 2019 continued to drop year-on-year, and its export value for the whole year fell by 10% year-on-year. The worsened bilateral trade relationship between Japan and Korea further impaired the cargo throughput growth of ports. Major ports in Korea registered a cargo throughput of 1.64 billion tons, a 0.1% increase year-on-year.

Ports in Russia maintained low-level growth at 2.9%, recording a cargo throughput of 840 million tons for the year. The growth was primarily driven by the growth of ports in the Baltic Sea such as the Port of Ust-Luga, as well as the rapid growth of coal transshipment and crude oil transshipment. Ports in Australia slowed down growth in cargo throughput. Specifically, the Port of Hay Point was hit by hurricanes, which contributed to the year-on-year decline of 1.6% in annual coal export volume, 10.2 percentage points lower than that of last year.

3. Rankings of top 30 ports in Asia-Pacific region in terms of cargo throughput

The competition landscape among Asia-Pacific ports became differentiated in 2019. The top 10 ports in the region kept their places while the other 20 ports on the top 30 list highlighted a reshuffle. The top 30 ports in the Asia-Pacific region recorded a total cargo throughput of 1.13 billion tons, a rise of 1.6% year-on-year. Specifically, the cumulative cargo throughput of the top 10 ports reached 6.31 billion tons, accounting for 55.6% of the top 30 ports' total, which ratio was a rise of 3.4 percentage points year-on-year. The total cargo throughput of the top 10 ports increased by 3.6% year-on-year, the rate being higher than the total throughput growth of the top 30 ports as a whole. Among the top 30 ports in the Asia-Pacific region ranked by cargo throughput, 18 ports are located in China, 5 ports in Japan and Korea, 3 ports in the United States, 1 port in Australia and 1 port in Southeast Asia.

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Among the Chinese ports on the list, Ningbo-Zhoushan Port recorded strong growth in 2019, with a total cargo throughput of 1.12 billion tons for the year. Benefiting from the growing number of foreign trade routes and the strong growth of domestic trade cargo throughput, Guangzhou Port registered a total cargo throughput of 610 million tons for the year, a year-on-year increase of 12.6%. Boosted by the integration of port resources and expansion of business chains in Shandong Province, Qingdao Port, Rizhao Port and Yantai Port achieved medium or high-speed growth. Specifically, benefiting from the rapid growth of dry bulk and liquefied oil products, the throughput of Yantai Port rose by 15.8% year-on-year. In addition, to fit into the development system of China Merchants Group soon, Liaogang Group actively advanced the north-south collaboration. However, the cargo throughput of Yingkou Port did not curb the decline, with its throughput growth dropping sharply by 35.6% and its ranking falling by seven places. The coal throughput growth of Qinhuangdao Port declined by 6.7% year-on-year due to environmental protection policies and that part of the cargoes on the Mongolia-Hebei Line went to Inner Mongolia instead, and the port's cargo throughput growth slowed down.

Korea's import and export trade was depressed. Among Korea's five major overseas markets, except the United States to which Korea's exports grew by 0.9%, China, EU, Japan and ASEAN all recorded declining import values from Korea. As a result, the cargo throughput growth of major ports in Korea slowed down. Due to increasing cargoes for transshipment and other factors, the throughput of the Port of Busan increased by 1.2% year-on-year to 470 million tons. Port of Incheon recorded a drop of 4.1% in cargo throughput growth due to the declined dry bulk volume. The cargo throughput of the Port of Nagoya in Japan also grew slowly, with the port's ranking on the list falling by one place. The Port of South Louisiana in the United States, as a grain and energy transshipment port in the economy, is highly dependent on international trade. Due to the current unstable trade situation, its cargo throughput decreased by 14.7% year-on-year, falling by three places on the list. The overall rankings of ports in Australia did not change much.

Table 3-3 Rankings of Top 30 Ports in the Asia-Pacific Region in 2019 in Terms of Cargo Throughput (Unit: 1,000 tons)

Rankings Growth Port Economy 2019 2018 2019 2018 Trend Rate

Ningbo- 1 1 ← China 1120090 1038080 7.9% Zhoushan

2 2 ← Shanghai China 716770 716590 0.0%

3 3 ← Tangshan China 656740 636990 3.1%

4 4 ← Singapore Singapore 626180 630130 -0.6%

5 6 ↓ Guangzhou China 606160 538330 12.6%

2018 APEC Port Development Report www.apecpsn.org 62 6 5 ↑ Qingdao China 577360 541610 6.6%

7 7 ← Suzhou China 522750 531790 -1.7%

8 8 ← Hedland Australia 521880 517990 0.8%

9 9 ← Tianjin China 492200 472810 4.1%

10 10 ← Busan Korea 467120 461550 1.2%

11 11 ← Rizhao China 463770 437520 6.0%

12 14 ↑ Yantai China 386320 333610 15.8%

13 13 ← Dalian China 366410 351300 4.3%

14 15 ↑ Gwangyang Korea 309780 301930 2.6%

15 16 ↑ Huanghua China 287160 287160 0.0%

Hong Kong, 16 18 ↑ Hong Kong 263320 258540 1.8% China

17 19 ↑ Shenzhen China 257850 251320 2.6%

18 23 ↑ Kelang Malaysia 243060 220700 10.1%

19 12 ↓ Yingkou China 238180 369840 -35.6%

South the United 20 17 ↓ 234650 274970 -14.7% Louisiana States Lianyungang 21 21 ← China 234560 225320 4.1% Port Qinhuangdao 22 20 ↓ China 218800 231290 -5.4% Port 23 22 ↓ Zhanjiang Port China 215700 221910 -2.8%

24 24 ← Xiamen Port China 213440 212800 0.3% the United 25 27 ↑ Los Angeles 207300 194500 6.6% States 26 25 ↓ Ulsan Korea 202300 202860 -0.3%

27 26 ↓ Nagoya Japan 194400 196590 -1.1%

28 29 ↓ Newcastle Australia 171140 165070 3.7%

the United 29 28 ↑ Long Beach 169920 179650 -5.4% States

30 30 ← Incheon Korea 157210 163860 -4.1%

Note: "↑" indicates upward movement, "↓" indicates downward movement, and "←" indicates no change. Source: Official websites of various ports

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3.2.2 Container throughput growth

1. Container throughput growth of global ports slows down

The international container trade maintained low growth in 2019. The growth of container shipping volume was slow, and the container throughput of global ports only increased by 2.3% year-on-year to 800 million TEUs. Region-wise, the container throughput growth rates of all regions declined to varying degrees year-on-year. Africa and Oceania regions posted negative growth rates, and all the other regions, except Latin America, recorded higher-than-average growth rates on the global scale. In Asia, the container throughputs of ports kept falling, recording a growth rate of 2.5% year-on-year. In North America, container ports on the west coast of the United States were hit hard. The exports of the Latin America region to the United States fell sharply and the container throughput of the region increased by 0.8% year-on-year, down by 6.6 percentage points from last year. The weak global trade hurt the exports and manufacturing sectors in Europe overall. The slowdown in the China-to-Europe export volume undermined the container shipping volume from Europe to the Far East to a certain extent. The container throughput growth of ports in Europe fell for a second time. The Africa region, impacted by the sharp decline of China–Africa trade volume, recorded a drop of 3% year-on-year in 2019 in terms of port container throughput, which was in stark contrast to the 5.2% growth rate in 2018. The region registered the largest decline in terms of container throughput in the world.

Source: Drewry Data source: Drewry

Figure 3-11 Container Throughputs and Growth Rates of Global Ports in 2009-2019

2018 APEC Port Development Report www.apecpsn.org 64 Source: Drewry Data source: Drewry

Figure 3-12 Container Throughput Growth of Ports in Various Regions in 2015-2019

2. Container throughputs of ports in Asia-Pacific economies

In 2019, major ports in the Asia-Pacific region accomplished a cumulative container throughput of 470 million TEUs, a year-on-year growth rate of 2.0%, lower than the 5.1% in 2018. The growth rate was basically equal to the global level. In terms of container transshipment volumes of global ports, the proportion of global containers for transshipment fluctuated narrowly, declined year by year and then stabilized since it reached a peak in 2008, falling again by 0.3 percentage points in 2019.

The global economic and trade environment was grim in 2019. China's foreign trade was affected, and its container throughput growth slowed down. China's container throughput in the year was 260 million TEUs, an increase of 4.4% year-on-year and less than the 5.3% of last year. In the container shipping structures of Chinese ports, foreign trade containers accounted for 60% of the total. The global trade situation had a greater impact on foreign trade containers. Region-wise, the Bohai Rim area posted minor increases. The Yangtze River Delta and Pearl River Delta areas maintained slow and steady growth. The rapid growth of container throughput in Guangzhou Port boosted the container throughput growth in the Pearl River Delta area.

The container throughput of Port of Hong Kong fell again in 2019. Since 2018, Port of Hong Kong, a transit hub for China-U.S. trade, has been struggling to sustain the boom of its shipping industry. Since February 2018, the container throughput of Port of Hong Kong has been falling for 23 months in a row. On the one hand, the ports in its neighbor Guangdong province are enhancing infrastructure, with their channel, terminal and berth capacities on a rise. On the other hand, ports in China are also enjoying more convenience in customs clearance for trade activities and a higher degree of openness to international trade. In addition, Port of Hong Kong does not

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hold an advantage in terms of port logistics and operations cost, which has gradually weakened Port of Hong Kong’s role as a transit point for seaborne trade. Impacted by the sluggish foreign trade in the Chinese Taipei region, the container throughputs of all major ports in the region declined. The fast growth ports in China are also competing with them for sources of cargoes. As a result, the growth momentum of major ports in the Chinese Taipei region in terms of container throughput has been relatively weak.

In 2019, benefiting from the higher degrees of trade openness of emerging developing economies such as ASEAN, the container throughput growth of ports in the Southeast Asia region outperformed the Asia's average and the global average as well. However, amid the trade depression worldwide, its growth rate slowed down year-on-year. Specifically, Singapore, affected by the sluggish global trade, witnessed negative growth in total foreign trade value for months. Port of Singapore handled 37.2 million TEUs of containers throughout the year, the growth rate dropping by 7.1 percentage points to 1.6%. Thailand's ports were adversely affected by the economic downturn and the decline in commodity exports, and the port production situation was depressed. The container throughput of Port of Kelang hit a record high in 2019, with a rise of 10.3% year-on-year to 13.58 million TEUs. Relying on the support from the Ocean Alliance members, the Port of Kelang registered an increase in the number of served routes. In addition, the intra-Asia trade growth, the transit hub plan, and the port's success in attracting several large polymer resin companies to establish local distribution centers in the Port of Kelang Free Trade Zone were also contributors to the growth of the port.

The growth rates of container throughput in both Japan and Korea declined. Affected by the sharp declines in exports of auto parts, steel and finished vehicles, Japan's container throughput growth fell by 5.8% year-on-year into the negative range. The global economic downturn and other unfavorable factors including the falling prices of semiconductors and petroleum products resulted in weak exports of Korea. In 2019, Korea's total export value decreased by 10.3%, of which semiconductor export value fell by 25.9%. Against this backdrop, the container throughput of ports in Korea was 23.57 million TEUs, a year-on-year rise of 0.03%, or a decrease of 6.6 percentage points from that of last year.

Among the top 10 container ports in North America, the Port of Los Angeles, the container shipping gateway of the United States, and the Port of Long Beach, the trans-Pacific trading gateway, both fell into the negative growth range in terms of container throughput in 2019. In addition, driven by the historical exports growth of the polyethylene resin raw material, the Port of Houston recorded a container throughput of 2.99 million TEUs in 2019, a rise of 10.7% year-on-year, becoming the fastest growing container port in the United States. Boosted by the increased volumes of imported cargoes such as clothing, furniture, electronic products and other daily necessities, the container throughput of the Port of New York-New Jersey maintained a steady growth rate of 4.1%.

2018 APEC Port Development Report www.apecpsn.org 66 Table 3-4 Container Throughputs and Growth Rates at Ports in Asia Pacific Region in 2019 (Unit: 1,000 TEUs) 2018 2019 Port Growth Growth Throughput Throughput Rate Rate Major Ports in China 226530 4.6% 234900 3.7% Hong Kong, China 19600 -5.6% 18360 -6.3% Major Ports in Chinese 15320 2.8% 15300 -0.1% Taipei Major Ports in Japan 16020 0.1% 15090 -5.8% Ports in Vietnam* 18060 25.8% 19200 6.3% Major Ports in Thailand 9560 3.0% 9440 -1.2% Major Ports in Malaysia 24940 5.1% 26420 5.9% Port of Singapore 36600 8.7% 37200 1.6% Major Ports in the 7540 6.8% 7870 4.3% Philippines Major Ports in Korea 23570 6.6% 23570 0.0% Major Ports in the U.S. 44320 5.2% 44190 -0.3% Major Ports in Canada 6660 6.3% 6900 3.6% Major Ports in Australia 5100 8.4% 4740 -7.0% Port of Veracruz in Mexico 1180 5.4% 1140 -3.0% Port of Valparaiso in Chile 900 -15.9% 900 -0.5%

Note: Statistics for major ports in the economies in the table can be found in Table 3-5. "*" indicates projections. Source: Official websites of various ports or port associations in various economies

Table 3-5 Major Container Ports in Asia-Pacific Economies Included in Statistics

Economy Major Ports for Statistics Shanghai, Shenzhen, Ningbo-Zhoushan, Guangzhou, Qingdao, Tianjin, Xiamen, Dalian, Yingkou, Suzhou, Lianyungang, Foshan, China Nanjing, Rizhao, Yantai, Fuzhou, Quanzhou, Dandong, Tangshan, Beibu Gulf, Zhuhai, Haikou, Jiaxing, Zhongshan, Shantou, Weihai, Zhanjiang, Wenzhou

Chinese Taipei Kaohsiung, Taichung, Taipei, Keelung

Japan Yokohama, Tokyo, Nagoya, Osaka, Shimizu, Kobe Thailand Laem Chabang, Bangkok

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Kelang, Tanjung Pelepas, Penang Pulau, Johor, Kuantan, Bintulu, Malaysia Kuching, Miri, Rajang, Sabah

the Philippines Manila, Southern Luzon, Visayas, Mindanao

Korea Busan, Incheon, Gwangyang, Pyeongtaek-Dangjin

the United Los Angeles, Long Beach, New York & New Jersey, Savannah, States NWSA, Auckland, Virginia, Houston, Charleston, Baltimore

Canada Vancouver, Montreal, Prince Rupert, Halifax

Australia Melbourne, Brisbane, Fremantle

Source: Official websites of various ports or port associations in various economies

Figure 3-13 Container Throughputs and Growth Rates of Major Ports in Asia-Pacific Economies in 2018-2019

2018 APEC Port Development Report www.apecpsn.org 68 Figure 3-14 Throughputs and Growth Rates of Top 8 Container Ports in China in 2019

3. Rankings of top 30 ports in Asia-Pacific economies in terms of container throughput

In 2019, the top 30 ports in Asia-Pacific economies recorded a total container throughput of 370 million TEUs, an increase of around 2.1% year-on-year, the rate being 2.6 percentage points lower than the 4.7% in 2018. Among the top 30 container ports in Asia-Pacific economies, China-based ports took more than half of the seats, 17 in total, the United States took five, Southeast Asia also five and Japan, Korea and Canada one each. The rankings of around half of the top 30 container ports in Asia-Pacific economies changed from those of last year. The rankings of the top 12 ports, except Shenzhen Port and Guangzhou Port, which exchanged their rankings, and the Port of Busan and the Qingdao Port, which swapped their positions, all remained the same as last year.

Among the top 10 ports, Shanghai Port's container throughput in 2019 reached 43.31 million TEUs, an increase of 3.1% year-on-year, becoming the largest port in the world in terms of container throughput for 10 consecutive years. Ningbo- Zhoushan Port benefited from the increased sea-rail intermodal transport lines and recorded a surge in sea-rail intermodal transport volume, attracting a large amount of container cargoes for Ningbo-Zhoushan Port, which contributed to the 4.5% of container throughput growth of the port. Guangzhou Port benefited from the increased number of foreign trade container liner routes, and its container throughput rose by 5.7% year-on-year to 22.83 million TEUs, surpassing the Port of Busan on the ranking list. Qingdao Port benefited from the port resource integration in Shandong province and witnessed a growing number of shipping routes. Its container throughput growth reached 8.8%, and the port's ranking beat Port of Hong Kong on the list. The rankings of the other ports were stable. Specifically, Port of Kelang posted strong growth in container throughput driven by the increased local containers and containers for transshipment.

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The ports in the last 15 places on the list faced fierce competition, with their rankings changing significantly. The most striking move was made by the Beibu Gulf Port, which recorded 34.3% growth of container throughput year-on-year in 2019 and a rise of 11 places on the rankings. Such performance was primarily because the port flexibly adjusted its liner capacity allocation based on market demand, promoted the container transit business, and operated new trains of the new western land- sea corridor to drive the rapid development of container sea-rail intermodal transport business. These measures have effectively boosted the growth of container volume. The container throughput of the Port of Tokyo posted a sharp decline as a result of plunging exports of Japan. Dalian Port and Yingkou Port both recorded negative growth affected by the port resource integration and the merger of routes. In addition, except the Port of Savannah, which grew against the trend, all ports in the U.S. maintained the same rankings or fell slightly on the list.

Table 3-6 Rankings of Top 30 Ports in the Asia-Pacific Region in 2019 in Terms of Container Throughput (Unit: million TEUs)

Rankings Growth Port Economy 2019 2018 2019 2018 Trend Rate 1 1 ← Shanghai China 43.31 42.01 3.1% 2 2 ← Singapore Singapore 37.2 36.6 1.6% Ningbo- 3 3 ← China 27.53 26.35 4.5% Zhoushan 4 4 ← Shenzhen China 25.77 25.74 0.1% 5 6 ↑ Guangzhou China 22.83 21.53 6.0% 6 5 ↓ Busan Korea 21.91 21.66 1.1%

7 8 ↑ Qingdao China 21.01 19.31 8.8%

Hong Kong, 8 7 ↓ Hong Kong 18.36 19.6 -6.3% China 9 9 ← Tianjin China 17.3 15.9 8.8% 10 10 ← Kelang Malaysia 13.58 12.32 10.3% 11 11 ← Xiamen China 11.12 10.7 3.9%

12 12 ← Kaohsiung Chinese Taipei 10.43 10.45 -0.2%

the United 13 14 ↑ Los Angeles 9.34 9.46 -1.3% States

Tanjung 14 15 ↑ Malaysia 9.08 8.96 1.3% Pelepas

2018 APEC Port Development Report www.apecpsn.org 70 15 13 ↓ Dalian China 8.76 9.77 -10.3%

Laem 16 17 ↑ Thailand 7.98 8.07 -1.1% Chabang

the United 17 16 ↓ Long Beach 7.63 8.09 -5.7% States

New York- the United 18 18 ← 7.47 7.18 4.1% New Jersey States

19 20 ↑ Suzhou China 6.27 6.36 -1.4%

20 19 ↓ Yingkou China 5.48 6.49 -15.6%

21 21 ← Manila the Philippines 5.32 5.05 5.3%

22 22 ← Lianyungang China 4.78 4.75 0.7%

the United 23 24 ↑ Savannah 4.6 4.35 5.7% States

24 25 ↑ Rizhao China 4.5 4.01 12.1%

25 26 ↑ Foshan Port China 4.44 3.84 15.5%

26 37 ↑ Beibu Gulf China 3.82 2.84 34.3%

Northwest Seaport the United 27 27 ← 3.78 3.8 -0.6% Alliance States (NWSA)

28 23 ↓ P Tokyo Japan 3.67 4.57 -19.7%

29 29 ← Fuzhou China 3.54 3.34 6.0%

30 28 ↓ Vancouver Canada 3.4 3.4 0.1%

Note: "↑ " indicates upward movement, "↓" indicates downward movement, and "←" indicates no change. Source: Official websites of various ports

3.2.3 Major bulk throughput growth

The major bulk throughput in the world maintained slow growth overall in 2019. Due to the continued depression of global dry bulk shipping demand, the throughput growth of major dry bulk ports in the world continued to slow down. Cargo-wise, due to China's decreased demand for iron ore, the growth of global iron ore shipping volume lost steam. Grain exporters such as Argentina set caps on seaborne exports, which impaired the global grain trade volume. With the gradual adjustment in energy structure and the increasingly strict environmental requirements, the global

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coal import volume fell down. Specifically, the Port of Hay Point' coal throughput plummeted due to China's limits on coal imports from Australia, namely by 10.2 percentage points year-on-year into the negative growth range. Impacted by the hurricanes in Australia and the large-scale planned maintenance of the Port of Hedland, the annual iron ore throughput of Port of Hedland continued the low growth trend last year. The tailings dam bursting of Vale of Brazil dealt a heavy blow to the iron ore production. In addition, as China's soybean demand declined due to the African swine fever, China's soybean imports from Brazil declined by 12.8% year- on-year in 2019. Against this backdrop, the dry bulk throughput of Brazilian ports decreased by 5.1% year-on-year to 680.22 million tons.

In terms of liquid bulk, the international oil prices rose first and then fell with large fluctuations in the first half of 2019. The prices in the second half of the year continued the oscillation overall. Specifically, drop in Venezuela's crude oil production, OPEC's production trim plan, and the U.S.' plan to lift Iran's oil sanctions exemption in the first half of the year all fueled the international oil prices up. Later, as the U.S.' crude oil inventory rose and the OPEC announced the decision to postpone the production trim plan, the international oil prices fell quickly. In the second half of the year, the economic slowdown and other factors curbed the demand for crude oil. The OPEC's production cuts and the geopolitical conflicts drove up the crude oil prices, and the Brent crude oil prices fluctuated in the middle and low range as a result. Overall, the global crude oil supply and demand shifted from slight oversupply to a basic balance in 2019, and the seaborne trade volume of crude oil fell by 0.7% year-on-year.

1. Iron ore throughput growth of major ports in the Asia-Pacific region slows down

The iron ore trade market in the Asia-Pacific region was bleak in 2019, with the iron ore shipping volume dropping by 2.8% year-on-year. In terms of supply, among major iron ore exporters, Brazil's iron ore export volume slumped due to the mine mishap of the Vale of Brazil. Coupled with the impact of the traditional rainy season in Brazil on port operations, the growth rate of iron ore export volume of Brazil fell by 12.8% year-on-year in 2019, which was 14.6 percentage points lower than that of last year. The bad weather and the production cuts of Australian iron ore producers caused the iron ore export volume of Australia to drop. However, non-major iron ore exporters such as India posted surging iron ore export volumes driven by the high profits from ore price inflation. Its iron ore growth hit 54%, an increase of 88.8 percentage points over that last year. Among major iron ore importers, China's iron ore imports were restrained by the global iron ore supply shortage in the first half of the year. Its iron ore demand also fell in the second half of the year due to the steel demand growth slowdown and the growing effect of production limitations for the purpose of environmental protection. Due to the sluggish domestic manufacturing demand, Japan's steel production went downward under pressure, and its iron ore import volume fell by 3% year-on-year.

2018 APEC Port Development Report www.apecpsn.org 72 Source: Clarksons

Figure 3-15 Iron Ore Export Volumes of Major Iron Ore Exporters in the Asia-Pacific Region in 2013-2019

Source: Clarksons

Figure 3-16 Iron Ore Imports Growth of Major Iron Ore Importers in the Asia-Pacific Region in 2013-2019

Among major iron ore handling ports in the Asia-Pacific region, the Port of Hedland's iron ore throughput growth slowed down to 1.4%, a fall of 1.7 percentage points from that of last year, due to the hurricanes and the production down-regulation of Rio Tinto and BHP Billiton Group. Ningbo-Zhoushan Port stressed on improving and expanding its iron ore business system, and enhanced cooperation with world-class mines such as Vale of Brazil while continuing to build an iron ore distribution center in Northeast Asia, to ultimately secure stable development of its iron ore business. Qingdao Port actively explored the market and strengthened the ore blending and international transshipment to sharpen new edges in the dry bulk sector. In 2019, its iron ore throughput growth hit 5.3% against the market depression. Tangshan Port actively responded to the unfavorable market environment and took measures to develop new market and new customers. Its ore throughput increased by 2.3% year- on-year. Benefiting from the shipbuilding demand recovery, Korea's steel demand

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recovered to some extent in the first half of the year. Its total steel production of the year was the same as that of last year, and the iron ore import volume of Port of Pohang maintained a slight rise. The Port of Nagoya in Japan, due to the declining domestic car sales, housing construction and steel demand, remained in the negative growth range of imported iron ore throughput.

Source: Official websites of various ports

Figure 3-17 Iron Ore Throughputs and Growth Rates of Major Iron Ore Handling Ports in the Asia-Pacific Region

2. Coal throughput growth of major ports in Asia-Pacific region displays differentiation

Major coal ports in the Asia-Pacific region continued to record import and export trade declines in 2019. In terms of demand, Japan's coal import volume was on a decline against the high coal inventory, and it was gradually restoring its nuclear energy production and maintaining the facilities. Coal power generation was adversely affected in the face of the increasing competition from nuclear power, and Japan's coal import volume fell by 1.1% year-on-year. In view of the accelerated energy structure transformation, as well as the recovering nuclear power generation and the temporary shutdown of some coal-fired power plants, Korea's coal import volume in 2019 decreased by 3.7 percentage points year-on-year. The coal shortage in domestic power plants sustained the strong momentum of India's coal demand, and its import volume rose by 6.7% year-on-year to 250 million tons. Due to the shortages in its coal market, China's domestic coal prices rose, buoying the demand for imported coal. China's coal import volume remained strong, up by 7.6% year-on- year to 260 million tons. In terms of supply, the coal export volume of North America plunged. In 2019, the North America region recorded a coal export volume of 120 million tons, down by 11.5% year-on-year. Specifically, the massive reserves of the cheap natural gas in the United States dealt a heavy blow to the traditional coal market, as the shale gas business boomed, and the United States recorded a coal export volume of 84.2 million tons in the whole year, down by 19.7% year-on-year. In

2018 APEC Port Development Report www.apecpsn.org 74 addition, Indonesia's performance was in stark contrast to the U.S.' Benefiting from the rapid growth of China's and India's coal imports, Indonesia's coal export volume posted a high growth rate of 7.7%. Australia continued low growth in coal exports in 2019, due to the prolonged effect of the mountain fires, as well as China's limitation on Australia-exported coal which greatly extended the customs clearance process of coal products.

Source: Clarksons

Figure 3-18 Coal Export Growth Rates of Major Coal Exporting Economies in Asia- Pacific Region in 2013-2019

Source: Clarksons

Figure 3-19 Coal Import Growth Rates of Major Coal Importing Economies in Asia- Pacific Region in 2013-2019

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Among major coal handling ports in the Asia-Pacific region, the throughputs of Qinhuangdao Port and Huanghua Port both decreased year-on-year due to such factors as the weak coal demand in South China, the impact of imported coal on the domestic market, the increased share of clean energy, and the fact that part of the cargoes on the Mongolia-Hebei Line went to Inner Mongolia instead. The two ports' coal throughput growth dropped by 6.7% and 2.7%, respectively. In addition, as the supply of cargoes shrank, the Tianjin Port, which features poor railway connectivity, posted a decline in throughput. This contributed to the overall drop of shipping volume of the port. In the year, the port recorded a coal throughput of 74.34 million tons, a fall of 12.7% year-on-year. Benefiting from the increased shipping volume on the Mongolia-Hebei Line as well as the Datong-Qinhuangdao Railway and QiananBei-Caofeidian Railway, the cargo volume arriving at the Caofeidian Port Area increased steadily, pushing Tangshan Port's coal throughput growth to 13.1% year-on-year, with 290 million tons of cargoes handled.

Source: Official websites of various ports

Figure 3-20 Coal Throughputs of Major Coal Handling Ports in Asia-Pacific Region

3. Liquid bulk throughputs of major ports in the Asia-Pacific region

The international oil price followed an inverted V curve in 2019. Due to geopolitical tensions and other factors, the international crude oil market exhibited wide fluctuations, but oversupply remained the overall trend. With the development of renewable energy, and especially due to the resolute implementation of production trim agreements by major oil producers such as Saudi Arabia and Russia since 2019, international oil prices have followed an upward trend from the low point at the end of 2018. Brent crude oil futures prices once hit a record high. Then with the international trade disputes intensified, the global economic data performing poor, and the oil demand running sluggish among other adverse factors, the oil prices tumbled down all the way. In the later period, the geopolitical tensions in the Middle East led to significant fluctuations in international oil prices, and this situation

2018 APEC Port Development Report www.apecpsn.org 76 continued until the end of 2019. Besides, the world's energy structure is changing. The "OPEC +" led by Saudi Arabia and Russia continues to play a regulating role in the oil market. However, with the U.S. upgrading its shale oil technologies and the pipeline laying progress in shale oil sites gaining speed, the U.S.' crude oil production capacity will further increase, helping it wield a stronger influence on the international oil market, against a reduced impact of OPEC in the market.

Among major liquid bulk handling ports in the Asia-Pacific region, China increased its demand for imported crude oil due to the high production of its domestic refineries and rising crude oil processing volumes, posting strong growth of crude oil import volume. In addition, as crude oil quotas were relatively sufficient, and newly commissioned integrated refining-and-chemical facilities were fully operational, China's ports completed 510 million tons of crude oil imports throughout the year, an increase of 9.0% year-on-year. The increasing arriving volumes of foreign trade cargoes fueled a general increase in port throughput, with Dalian Port and Ningbo-Zhoushan Port recording 32.4% and 13.6% of growth, respectively. Primary contributors include the operation of two privately owned refineries, namely Hengli Petrochemical and Zhejiang Petroleum & Chemical Co., Ltd, which boosted the growth of seaborne crude oil imports of ports. The steady development of local refineries in Shandong province secured the steady throughput increase of Qingdao Port, with the port's crude oil throughput rising by 9.4% year-on-year to 100 million tons. With shale oil technologies upgrading and pipeline laying progress in the shale oil sites gaining speed, the United States recorded oil production rises for three consecutive years, which further consolidated its status as the world's largest crude oil producer against production cuts in Saudi Arabia and Russia. Canada, the second-largest oil exporter in North America, experienced a decline in oil export volume due to fluctuations in oil prices, surging oil inventories and shortages of oil pipelines.

3.2.4 Development of top 10 container ports

1. Shanghai Port

Shanghai Port recorded a container throughput of 43.31 million TEUs in 2019, a year-on-year increase of 3.1%, becoming the world's largest container port for 10 consecutive years. Specifically, the container throughput of Yangshan Port in Shanghai stood at 19.81 million TEUs, a rise of 7.6% year-on-year, and the port's share in the total container throughput of Shanghai Port reached a new high of 45.7%. Yangshan Port is located near the Yangtze River Delta and its business stretches to all of China. With an advantageous geographical location, the port is now called by more than 70 routes, covering six continents and three oceans. In 2019, Yangshan Port opened a number of new routes such as those to the U.S. east coast and Europe. At the end of 2019, the Chile–China direct route, "Cherry Express", will be moved to Yangshan Port. The dense seagoing routes have shortened the distance between China and the rest of the world. While increasing the numbers of routes, major shipping companies are also enhancing capacity to

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answer to market needs and developments. In the past two years, more than 50 new container ships above 20,000 TEUs were put into operation one after another. On July 20, 2019, the 23,000-TEU class MSC Gulsun ship, the world's largest container ship, berthed at Yangshan Port, making the port one of the few in Asia to be capable of berthing ships of this deadweight class. Larger container ships and denser routes have both contributed to the huge throughputs. Shanghai Yangshan Port is a transit hub for international containers. In 2019, the port handled more than 10 million TEUs of containers for waterway-waterway transshipment, a rise of more than 9.5% year- on-year. Cargoes shipped by waterway and highway gather at the port to be loaded to huge ships or ships running on branch routes and then carried to across the world. Meanwhile, Yangshan Port also provides natural gas transfer services to Zhejiang province and has established an emergency mutual supply security mechanism for natural gas with Jiangsu Province, as an important part of the interconnectivity effort of the Yangtze River Delta.

2. Port of Singapore

Port of Singapore faces the Strait of Malacca on its northwest and holds the shipping route between the Pacific Ocean and the Indian Ocean, with a prominent geographical advantage. Port of Singapore seized the development opportunities of container shipping and actively expanded its container terminals to develop transit business, which helps it quickly grow into a world-class container transit hub. Currently, Singapore Port has established partnerships with more than 600 ports in 123 economies across the globe, and operates more than 200 routes to all parts of the world. Its high-density and comprehensive routes ensure Port of Singapore's status as an international transit hub port. However, confronted with the changing layout of shipping alliances and the fierce competition among regional ports, Port of Singapore has been under threat to hold its market status. On the one hand, Port of Tanjung Pelepas and Port of Kelang, which are also located in the Straits of Malacca, are constructing and upgrading port facilities in stages, trying to compete with Port of Singapore for cargoes of transshipment in Southeast Asia. On the other hand, Chinese ports in East Asia are developing rapidly. The cargo throughputs of Shanghai Port and Ningbo-Zhoushan Port successively surpassed that of Port of Singapore. Finally, the trend of container terminal automation initiated by the Port of Rotterdam in Europe has spread worldwide, and the automated terminals of multiple ports have been built and put into use. Port of Singapore, the world's second- largest container port, recorded a container throughput growth of 1.6% in 2019 to 37.2 million TEUs, the highest level since 2010. But the rate was still 7.1 percentage points lower than the 8.7% growth rate in 2018. Nevertheless, with its high reputation among international shipowners and ship operators, Port of Singapore remains among the top choices for ship registration in the world. In 2019, the total tonnage of ships flying the Singapore flag rose from 90.9 million tons in 2018 to 97.3 million tons, an increase of about 7%.

3. Ningbo-Zhoushan Port

In 2019, Ningbo-Zhoushan Port recorded a container throughput of 27.53 million

2018 APEC Port Development Report www.apecpsn.org 78 TEUs, a rise of 4.5% year-on-year, marking the second consecutive year that the port ranked third worldwide in terms of container throughput. In 2019, the advantages of port integration in Zhejiang province further showed. Ningbo- Zhoushan Port played a major role, with the container throughput of its Chuanshan Port Area exceeding 10 million TEUs for three consecutive years and became the second single port area in the world to record more than 10 million TEUs of container throughput. The container throughput of Meishan Bonded Port Area rose by more than 15%. The cargo throughput of ore companies in the province exceeded 100 million tons for three consecutive years, and the cargo throughput of Zhoushan Port Company crossed the 100 million tons mark for the first time. Ningbo-Zhoushan Port handled more than 800,000 TEUs of sea-rail intermodal transport containers in 2019, consolidating its status as the largest port in South China in terms of sea- rail intermodal transport volume, and ranking second on China's sea-rail intermodal transport ports list. The operation of the Chuanshan Port Railway Station is of great significance for Ningbo-Zhoushan Port to promote the development of sea-rail intermodal transport.

4. Shenzhen Port

Shenzhen Port is located in the southern part of the Pearl River Delta and is adjacent to Hong Kong, China. The port has two sub-ports each in the east and the west, and its business extends to domestic coastal ports and ports in other parts of the world through the Hong Kong Urmston Road. Shenzhen Port has 10 port areas, namely Shekou, Chiwan, Mawan, Yantian, Dachan Bay, Shayuyong, Xiadong, Dongjiaotou, Fuyong and Neihe. Shenzhen Port has opened a total of 239 international container liner routes, covering 12 largest shipping areas in the world and leading to more than 300 ports in more than 100 economies. To further improve the structural system of Shenzhen Port's waterway-railway intermodal transport and cross-border transportation, Shenzhen Port launched 14 sea-rail intermodal transport routes to eight provinces and municipalities, and signed combined port agreements with 18 inland river terminals and six inland dry ports. It also opened 60 barge routes on the South China Public Barge Express Line to cover 52 terminals in the Pan-Pearl River Delta to expand the port's hinterland reach. In 2019, the port handled a total of 25.77 million TEUs of containers, rising by 0.1% year-on-year, the rate being 2 percentage points lower than that of last year. Specifically, its foreign trade container throughput was 23.82 million TEUs, down by 1.4% year-on-year, and its domestic trade container throughput was 1.95 million TEUs, up by 23.67% year- on-year.

5. Guangzhou Port

Guangzhou Port maintained steady growth of production in 2019, handling a total of 22.83 million TEUs of containers throughout the year, a year-on-year rise of 6.0%. In 2019, the Nansha Port Area opened the route to the east coast of the U.S. for the first time, and added new routes such as the one to North Europe. Guangzhou Port had eight new foreign trade container routes in the year, bringing the total number of its routes to 217, including 111 foreign trade ones. Guangzhou Port has become

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an important hub in the Greater Bay Area to reach out to Africa, the Mediterranean and other parts of Asia. Presently, the port has established overseas offices in North America, Singapore, Vietnam and other places, and set up 36 inland river port offices covering main cargo sources of the port. In addition, the port has also opened around 100 water barge routes covering the entire Pearl River–Xijiang River Basin. Guangzhou Port Group operates 67 "shuttle bus" branch routes, realizing river-sea intermodal shipping across the port. The agglomeration effect of its port and shipping businesses has driven the development of Guangzhou's water leisure industry. The Nansha International Cruise Terminal of Guangzhou Port has opened nine routes to and from Hong Kong, China, Japan, Vietnam, the Philippines and other economis, with 12 destinations of cruise tours, becoming one of the cruise ports in China to have the most routes to Southeast Asia. Nansha Port Area has normalized seven-day customs clearance practices, and the customs continuously optimize the customs clearance process for key cargoes such as waste paper, fruit, and wood. The port facilitation measures have been recognized by more and more customers.

6. Port of Busan

Founded in 1876, Port of Busan is the largest port in Korea and the sixth-largest container port and second-largest cargo transshipment port in the world. Since the commissioning of the Gyeongbu Line in the early 20th century, the port has been developing rapidly and has become a hub for land, sea, and air transportation in Korea, playing an important role in Korea's foreign trade. In 2019, the Port of Busan was connected to all parts of the world at a frequency of 268 voyages per week, including 46 to China, 73 to Japan, 50 to Southeast Asia, 15 to Europe, 13 to the Middle East, 41 to North America, 12 to South America, eight to Russia, seven to Australia, and two to Africa. Port of Busan is currently building a world logistics center through constructing a new port, establishing logistics bases, and renovating the Busan North Port among other efforts. Specifically, the port intends to build the Busan North Port into a transit hub in Asia and Busan New Port into a global transit hub. In 2019, the port recorded a total container throughput of 21.91 million TEUs, an increase of 1.1% year-on-year, the rate being 4.4 percentage points lower than that of last year. Since the container throughput of Port of Busan exceeded 20 million TEUs for the first time in 2017, it has set record highs for three consecutive years, though not achieving the set target of 22.5 million TEUs. Although the transshipment container volume failed to reach the projected target, the port has maintained an average annual growth rate of 6% for two consecutive years.

7. Qingdao Port

Qingdao Port recorded a container throughput of 21.01 million TEUs in 2019, an increase of 8.8% year-on-year, and achieved a historic leap by becoming a new member in the 20-million-TEU "league" of global container ports. Qingdao Port is connected to 173 container routes, and its route density ranks first among ports in North China. The port added 10 new foreign trade container routes, including six directly leading to ASEAN and Middle East regions. All of the container routes of the global top 20 shipping companies call at Qingdao Port. Million-TEU container

2018 APEC Port Development Report www.apecpsn.org 80 ships of six companies called at the port in 2019. In addition, the transshipment container volume of Qingdao Port increased by 50% year-on-year, and four foreign trade branch routes such as CML Weihai-Qingdao branch route were opened. After the establishment of Shandong Port Group in particular, a number of new domestic foreign-trade routes have been opened from Weihai, Rizhao, Lanshan, and Binzhou to Qingdao. A "seaborne branch line layout with Qingdao Port as the hub port, and including Rizhao Port, Yantai Port, and ports in Bohai Bay centering on their respective hinterlands" has been established. The number of its inland river ports rose from 10 to 15, and the number of sea-rail intermodal transport trains increased from 40 to 47, with the port's container volume exceeding 1 million TEUs, a year-on- year rise of 20%.

8. Port of Hong Kong

Port of Hong Kong is a natural port and a shipping center in the Far East. Port of Hong Kong is one of the busiest and most efficient international container ports in the world and a major hub port in the global supply chain. Since 2018, Port of Hong Kong, a transit hub for China-U.S. trade, has been struggling to ensure the prosperity of its shipping industry. In addition, due to multiple factors such as weak global trade and the rise of inland river terminals, Port of Hong Kong recorded a container throughput of 18.36 TEUs in 2019, a decrease of 6.3% year-on-year. Its single-month container throughput dropped for 23 consecutive months in a row, and its ranking on the global container port list fell by one place at the same time. Main contributors include the following. On the one hand, the global economic slowdown and the U.S.-China trade disputes have led to fewer orders. After the industrial chain of the Asia-Pacific region completed the transfer, the logistics demand for re-export through Port of Hong Kong will be sharply reduced. On the other hand, the cost advantages of Guangzhou Port and Shenzhen Port among other ports around Port of Hong Kong have produced a huge impact on the latter's transshipment business.

9. Tianjin Port

Tianjin Port is located at the estuary of the Haihe River in Tianjin and the intersection of the Beijing-Tianjin-Hebei urban agglomeration and the Bohai Rim Economic Circle. It is the largest comprehensive and important foreign trade port in North China. As the maritime gateway of the Beijing-Tianjin-Hebei region, Tianjin Port recorded an annual container throughput of 17.3 million TEUs in 2019, an increase of 8.8% year-on-year, the growth rate continuing to lead the top 10 ports worldwide. Tianjin Port launched the "last kilometer" campaign to streamline transportation of entering cargoes at the port, and set up 35 marketing service outlets in the Beijing- Tianjin-Hebei region. It opened a new train to Gaoyi, Hebei province, to further cut cost and elevate efficiency of logistic services and promote high-quality regional economic development. More than 100 marketing service outlets have been deployed in the Beijing-Tianjin-Hebei region and "Three North" regions (Northeast China, North China, and Northwest China), and four new sea-rail intermodal transport trains have been put into operation. The port recorded an annual sea-rail intermodal transport volume of 568,000 TEUs of containers, a rise of 15.2% year-on- year.

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10. Port of Kelang

Port of Kelang is the largest logistics transshipment center in Malaysia and one of the busiest ports in the world. Port of Kelang has frequent trade contacts with 120 economies around the world and has established business partnerships with ports on 500 major routes. About 65% of the port's cargoes are for transshipment, and 35% of its cargoes come from the local markets. The container throughput of the Port of Kelang in 2019 reached a record high of 13.58 million TEUs in the past years, an increase of 10.3% year-on-year, reversing the declining trend in the past two years. The Ocean Alliance established by CMA-CGM, COSCO Group, Orient Overseas (International) Limited and Evergreen Marine transferred operations to Singapore in 2017, which impacted the performance of the container ports in Malaysia. However, since the third quarter of 2018, the container handling performance of ports in Malaysia has begun to post positive growth. This was primarily because Port of Kelang adopted relevant suggestions to actively strengthen port capacity building, improve container handling capacity, and enhance port competitiveness. Specifically, the suggestions are, first, to increase additional port capacity; second, to improve operational efficiency and ship turnaround time, and to promote regional distribution centers and value-added activities in free trade zones of the port; and finally, to cancel the non-tariff regulatory restrictions on transshipment trade, and to speed up digital development of port logistics.

3.3 Business Performance of Port Enterprises

3.3.1 Business performance of global terminal operators

The shipping market fluctuated in 2019 and the downside pressure on production and operation of global terminal operators increased. Meanwhile, the continued investment in larger ships and the ever-changing shipping alliances also resulted in increased competition among global terminal operators for cargo supply. Global terminal operators sought to explore opportunities by adjusting their assets and expanding the scope of services to achieve profit growth.

According to Drewry, the global terminal operators controlled around 62% of the total terminal capacity in 2018, slightly higher than the 61% in 2017. The terminal capacity share growth of global terminal operators will remain at 1.5% in the future, slightly lower than the industry's 1.9% growth. In general, due to factors such as overcapacity and increased investment risks, global terminal operators may augment cost management and monitoring and adopt a more stringent and prudent investment strategy in 2019. Global terminal operators have limited space for capacity increase overall and the market shares may change only by small margins.

2018 APEC Port Development Report www.apecpsn.org 82 Table 3-7 Trend of Changes in Productivity and Market Shares of Global Container Terminals

Average Annual Year 2018 2019 2020 2021 2022 2023 Growth Rate Global Productivity 694.6 710.8 728.9 741.7 747.3 749.6 1.5% Terminal Market 61.9% 61.7% 61.3% 61.1% 60.9% 60.9% — Operators Share Other Productivity 196.6 200.0 205.5 209.2 213.0 213.9 1.7% Privately- Market owned 17.5% 17.4% 17.3% 17.2% 17.3% 17.4% — Share Operators State- Productivity 210.2 217.5 227.7 234.4 238.3 238.3 2.5% owned Market 18.7% 18.9% 19.2% 19.3% 19.4% 19.3% — Operators Share Productivity 21.2 22.9 26.6 28.8 29.4 30.0 7.2% Others Market 1.9% 2.0% 2.2% 2.4% 2.4% 2.4% — Share Total Capacity 1122.5 1151.2 1188.8 1214.0 1228.1 1231.8 1.9% (million TEUs)

Source: Drewry, Global Terminal Operator Report

1. COSCO Shipping Ports in sound operations

Container terminals under the COSCO Shipping group witnessed increased ship calls by various shipping alliances. Coupled with the support from the group's parent company and the container volume contribution of the newly acquired terminals, COSCO Shipping Ports recorded 123.78 million TEUs of container throughput in 2019, a year-on-year increase 5.5%, and an equity throughput of 39.67 million TEUs, a year-on-year increase of 7.0%. Although its previous high-speed growth has ceased, COSCO Shipping Ports has been actively leveraging the synergy of its parent company and the Ocean Alliance to strengthen control and management over port businesses, recording a rapid increase in equity throughput in the year. In addition, COSCO Shipping Ports has accelerated the expansion of its terminal businesses and sold terminal assets that made smaller contribution to throughput and profitability to further streamline its terminal portfolios for higher overall quality of the portfolios.

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Data source: Annual report of CK Hutchison Holdings Limited

Figure 3-21 Container Throughputs and Growth Rates of COSCO Shipping Ports in 2014–2019

In terms of profitability, COSCO Shipping Ports has actively seized opportunities at home and abroad in recent years. With a strong financial position and a sustainable cash flow, it has maintained financial robustness and sustainability. In terms of profit, the company's annual operating income was US$1.03 billion, an increase of 2.7% year-on-year. Excluding the impacts from Qingdao Port International's one-time equity dilution and the new revenue and accounting standard on leases, the profit attributable to equity holders was US$350 million, a rise of 8.1% year-on-year, and the gross profit was US$270 million, a decrease of 7.1% year-on-year.

COSCO Shipping Ports accelerated the expansion of terminals to extend business coverage in 2019, and combined the port and shipping business to drive the industrial chain and further improve profitability. Besides, COSCO Shipping Ports continued to actively build a global terminal network by settling the acquirement of the Peru (Chancay) program. COSCO Shipping Ports will give full play to its resources and advantages and introduce ship companies and logistics industry chains to build a major gateway port in Latin America.

2. Business growth of China Merchants Port slows down

In 2019, China Merchants Port recorded a container throughput of 111.72 million TEUs in the year, a year-on-year increase of 2.4%, and an equity throughput of

2018 APEC Port Development Report www.apecpsn.org 84 41.7 million TEUs, a year-on-year rise of 1.9%. Although the throughput growth of China Merchants Port slowed down due to the weak global economy and increasing regional uncertainties, the company responded to the internal and external economic and trade complexity by speeding up home port construction and expanding the layout of overseas terminals, so as to enhance its professional capabilities and risk prevention. As a result, the company's business performance was overall stable.

Figure 3-22 Container Throughputs of China Merchants Group in 2014–2019

The port recorded annual revenue of HK$8.89 billion in the year. Affected by the sale of group's Shenzhen Chiwan Wharf Holdings equity last year, the annual revenue marked a year-on-year decrease of 12.4%. The profit attributable to equity holders of the company was HK$8.36 billion, a year-on-year rise of 15.4%. Meanwhile, the recurring profit of China Merchants Port fell by 3.1% year-on-year to HK$4.16 billion due to the decreased share of profits of associates.

China Merchants Port firmly seized the opportunities from the Belt and Road national initiative and the international industrial transfers in 2019, and focused on major global hub ports and the regions that have better economic development prospects to further improve its global terminal network. China Merchants Port invested US$468 million to purchase the mandatory convertibles issued by Terminal Link and provided it with a US$500 million shareholder loan to support TL to purchase the equity of 10 terminals under CMA CGM. The acquisition will further expand the investment opportunities of China Merchants Port in Asia, Europe, the Middle East and the Caribbean.

3. DP World profits decline

In 2019, DP World recorded 71.25 million TEUs of container throughput, a year- on-year decline of 0.2%. Due to the market uncertainty caused by geopolitical situations, coupled with the group's adjustment in its terminal business strategies, its low-margin cargoes fell, and the group recorded negative growth for the first time in the past five years. However, DP World has accelerated its pace of acquisitions,

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strengthened cost management and invested more rigorously and prudently to maintain profitability by focusing on high-margin cargoes.

Figure 3-23 Gross Container Throughputs of DP World in 2013-2019

In terms of profitability, DP World recorded a significant rise of 36.1% year-on-year in operating income in 2019, to US$7.69 billion, driven by the acquisition of the pan- Europe logistics platform P&O Ferries, the marine logistics operator Topaz Energy and Marine, and two terminals in Chile, as well as the acquisition of Peru's integrated logistics provider CAM and European container shipping company Unifeeder last year. The group's net profit attributable to its parent company's owners was US$1.19 billion, down by 8.7% year-on-year. The group's earnings before interest, tax, depreciation, and amortization (EBITDA) were US$3.31 billion, up by 17.7% year- on-year. The annual EBITDA margin was 43.0%, down by 6.7 percentage points.

DP World actively made up short slabs in its portfolios to explore the broader logistics segment in 2019. It launched digital initiatives to improve data transparency and visibility in the supply chain, and strengthened risk monitoring and cost management to improve profitability. In terms of global business development, DP World has signed agreements with the Russian Direct Investment Fund (RDIF) and other organizations, planning to develop the North Sea routes through joint ventures. Besides, DP World implemented its strategy of expanding seaborne logistics businesses and acquired the shipping logistics company Topaz Energy and Marine, further strengthening its capabilities in the logistics service sector and forming a business complement with P&O Maritime Services. In terms of port investment and construction, DP World and Maspion Group, a leading integrated corporation in Indonesia, have signed a preliminary agreement to invest US$1.2 billion to establish a container port and an industrial logistics park in East Java.

4. AP Moller-Maersk profits grow

In 2019, AP Moller-Maersk accelerated its transition to a diversified corporate group and further expanded its maritime transport business and logistics and service business. It forged a technical competitive edge through digital solutions to optimize

2018 APEC Port Development Report www.apecpsn.org 86 operating capacity and boost profit growth. Despite the sluggish market environment in the year, AP Mueller-Maersk increased profitability and cash flow by reducing the amount of interest-bearing debt and further deleveraging. The group's operating income reached US$38.89 billion, though slightly lower than last year's US$39.25 billion, recording a free cash flow of US$6.9 billion, a year-on-year rise of 35.3%.

Table 3-8 EBITDA Margin of AP Mueller-Maersk in 2019

Operating Income/billion US EBITDA Margin dollars

2019 2018 Growth rate 2019 2018 Growth rate

Shipping 28.42 28.37 0.2% 15.3% 13.3% 2.0% Logistics and 5.97 6.08 -1.8% 4.0% 3.1% 0.9% Service Terminal and 3.89 3.78 2.9% 28.4% 26.5% 1.9% Tugboat Container Manufacturing and 2.17 2.79 -22.2% 9.4% 5.8% 3.6% Others Inactive Business and Sectors Being -1.56 -1.75 10.9% 12.4% 7.8% 4.6% Divested Total on Consolidated 38.89 39.25 -0.9% 14.7% 12.7% 2.0% Statement

Source: AP Mueller-Maersk annual reports

In terms of terminal business, AP Moller-Maersk recorded a consolidated statement throughput of 11.8 million moves in the year, a year-on-year increase of 3.9%. Its terminal business managed to sustain steady growth benefiting from the increased throughput of Costa Rica's Moin Terminal and the increased customers in Los Angeles, as well as the synergy brought by the business integration of AP Moller- Maersk and Hamburg Süd, and the stable economic growth in Africa and the Middle East.

The terminal business of AP Muller-Maersk maintained a favorable momentum. On the one hand, the group improved the punctuality rate and customer experience and introduced online services and products, such as the online booking service of Maersk SPOT that supports freight locking and cabin reservations, to improve its seaborne shipping business performance and create a better customer experience. On the other hand, the group took the lead to offer digital and intelligent logistics services, and partnered with the JDA software group to enhance warehousing and distribution capabilities using the latter's warehouse management solution. This

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endeavor has streamlined the increasingly complex operations of customers on the supply chain while enhancing the group's own competitiveness. The group will continue to improve its operational performance and customer experience to lay a more solid foundation for future development.

5. ICTSI businesses progress steadily

In 2019, ICTSI recorded an equity container throughput of 10.18 million TEUs, a year-on-year increase of 4.5%. The company's port business revenue reached US$1.48 billion, a rise of 6.9% year-on-year. In general, the Philippines' international production and operation continued to maintain a stable and improving trend in the year. Despite the slower growth of throughput compared with the previous year, the company enjoyed significantly higher profitability through strict cost control and increased market share, with its net profit standing at US$260 million.

Source: ICTSI website

Figure 3-24 ICTSI Equity Throughputs in 2014-2019

ICTSI continued to follow its strategic guideline of investing in terminal acquisitions and expanding business scope in 2019, and increased investment and holding positions in overseas terminals to enhance its control over overseas terminals. In addition to announcement of purchasing a 30% stake in Port Moresby, Papua New Guinea, under Motukea International Terminal Ltd (MITL), ICTSI will also develop and operate the Port Sudan's South Port Container Terminal (SPCT) in the Republic of Sudan. It also improved terminal infrastructure and attracted large ships to increase port business volume. ICTSI started to expand its Contecon Manzanillo SA de CV (CMSA) in the Port of Manzanillo, Mexico, in a bid to improve the operational efficiency and production capacity of Port of Manzanillo to grow it into an important maritime trade gateway in the Pacific region.

6. PSA International posts sound business performance

In 2019, PSA International sped up its upgrading to a new type of port with

2018 APEC Port Development Report www.apecpsn.org 88 integrated digital systems while developing its own port businesses, and maintained sound production and operations. In terms of terminal business, the group recorded an annual container throughput of 85.2 million TEUs, an increase of 5.2% year- on-year. The newly purchased DCT Gdansk, the Halterm container terminal of the Port of Halifax in Canada, and the multi-purpose port operator Penn Terminals in Philadelphia were major contributors to the group's throughput growth.

Figure 3-25 PSA International Equity Throughputs in 2014-2019

PSA International continued to implement its strategy of building a global terminal network in 2019 and augmented investment in port assets. Besides, the group was committed to improving its terminal infrastructure and elevating the efficiency of production operations. The group's Bharat Mumbai Container Terminals (PSA Mumbai) had three new ultra-large Panamax terminal cranes. The operation of the new equipment will help increase the terminal's phase one capacity to 2.4 million TEUs. In addition, the group has also achieved results in improving supply chain efficiency and exploring new business models. The group signed a contract with SATS to offer sea-air interconnected services to enable seamless connection between cargo owners and logistics service providers, thereby lowering down shipping costs and shortening logistics cycles.

7. CK Hutchison businesses grow at a low rate

In 2019, the port and related services segments of CK Hutchison recorded a container throughput 86 million TEUs, up by 1.7% year-on-year. The increased uncertainties from trade tensions and the reduced cargo transshipment demand in Asia resulted in slow production growth of the company's port and related business segments.

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Source: CK Hutchison Holdings Limited

Figure 3-26 Container Throughputs of CK Hutchison Port and Related Service Sectors in 2014–2019

In terms of profitability, despite the throughput increase, CK Hutchison's operating income of port and related service sectors remained flat year-on-year because of depreciation of major currencies such as pound and euro. The company's strict cost control and franchise rights extension of part of its ports have reduced depreciation and amortization. Its segment operating income was HK$35.38 billion, an increase of 0.7% year-on-year, and its EBITDA rose by 0.1% year-on-year to HK$13.41 billion, accounting for 12% of the company's total profit.

Source: CK Hutchison Holdings Limited

Figure 3-27 Throughput and Profit Margin Variations of CK Hutchison Port and Related Service Sectors in 2015-2019

2018 APEC Port Development Report www.apecpsn.org 90 While focusing on improving productivity and cost efficiency, CK Hutchison actively sought opportunities to extend its global business reach in 2019, aiming to enhance the company's competitiveness. In terms of overseas deployment, CK Hutchison signed a long-term commercial agreement with the Quebec Port Authority and the Canadian National Railway to build and operate a new container terminal in Quebec, Canada, setting to create the most environmentally friendly and technologically advanced cargo handling facility in North America. CK Hutchison also spent US$240 million to start the second phase project of the deep-water container port project in Pakistan, which is expected to elevate the port's handling capacity to 3.2 million TEUs after completion. In addition, CK Hutchison has also established the world's largest ship-to-ship oil and gas inventory and supply center in the waters of Johor Port in Johor Bahru, Malaysia, to improve port transportation capacity.

3.3.2 Business performance of other major port enterprises in Asia-Pacific region

(1) Major port enterprises in China

Shanghai International Port (Group) Co., Ltd

Shanghai International Port (Group) rolled out measures precisely targeting the changes in the external environment in 2019 and adjusted its bulk business to give priority to the container business, which secured the growth of the port's main business. It also managed to improve its production and operation indicators overall for the year through improving operational management efficiency as well as transformation and upgrading. Specifically, the container throughput of the home port recorded 43.3 million TEUs, an increase of 3.1% year-on-year, and the cargo throughput of the home port was 540 million tons, a decrease of 4.1% year-on-year.

Figure 3-28 Container Throughputs and Growth Rates of Shanghai International Port (Group) Co., Ltd in 2013-2019

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Shanghai International Port (Group) Co., Ltd recorded an operating income of RMB 36.1 billion for the whole year of 2019, a drop of 5.1% year-on-year. Its net profit hit RMB 9.06 billion in the year, down by 12.5% year-on-year. However, the company actively widened financing channels to raise low-cost funds and improved its overall budget management to strengthen budget control. As a result, it continued to maintain a robust and favorable financial position. The group continued to optimize its strategic layout along the Yangtze River and consolidating its core interests to promote the construction of the Shanghai International Shipping Center. In September 2019, the group intended to acquire part of the Yangtze River terminal assets held by COSCO Shipping Ports through its overseas subsidiary, so as to take advantage of the synergy between Shanghai Port and ports along the Yangtze River, and ultimately strengthen cooperation between ports in the Yangtze River Delta. Shanghai International Port Group was also committed to leading the world to carry out intelligent port operations with the help of intelligent heavy truck technology in a 5G environment, to promote the port's transformation and upgrade to an automated and intelligent port. Through real-time monitoring, high-precision positioning, vehicle marshalling and other 5G applications, the group improved the operational efficiency of port terminals in logistics transportation, security monitoring and other aspects.

Ningbo Zhoushan Port Co., Ltd

Ningbo Zhoushan Port Co., Ltd recorded a cargo throughput of 810 million tons in 2019, an increase of 4.5% year-on-year, and a container throughput of 29.62 million TEUs, a rise of 6.0% year-on-year. Focusing on port logistics and capital management development, the company sped up integrated operations of ports in the province and achieved stable growth of various production and operation indicators for the year. In terms of container business, Ningbo Zhoushan Port company fully played out the advantages of integrated development of ports in Zhejiang province and continued to enhance port and shipping cooperation and market expansion. It promoted export projects cooperation between key customers located in Hangzhou, Xiaoshan and Shaoxing as well as northern areas of Zhejiang and the waterway-waterway transshipment business. In addition, the company constantly optimized its cargo collection, distribution and transportation network system and vigorously developed multimodal transport business for containers. Through sea-rail intermodal transport on inland rivers, it extended business reach to Shaoxing, Jinhua and Quzhou regions among others, and opened four new sea- rail intermodal transport trains with the annual sea-rail intermodal transport volume exceeding 800,000 TEUs.

2018 APEC Port Development Report www.apecpsn.org 92 Data source: 2018 annual report of Ningbo Zhoushan Port Group Co. Ltd.

Figure 3-29 Container Throughputs and Growth Rates of Ningbo Zhoushan Port Co., Ltd in 2013-2019

(2) Major port enterprises in Malaysia

MMC Group is the largest terminal operator in Malaysia. MMC Port Holdings under MMC Group primarily operates Port of Tanjung Pelepas, Johor Port, Penang Port and Kelang Northport in Malaysia. MMC Group runs international business in Saudi Arabia through Red Sea Gateway Terminal (the container port terminal in Jeddah Islamic Port).

In 2019, MMC Group recorded operating revenue of 3.19 billion Malaysian ringgits in the port and logistics sectors, an increase of 6.4% year-on-year, and its pre-tax profit rose by 11% year-on-year to 460 million Malaysian ringgits. The steady growth in the company's operating revenue and profit was primarily due to the sound performance of Port of Tanjung Pelepas and Johor Port. Specifically, the Port of Tanjung Pelepas registered an annual container throughput of 9.1 million TEUs, an increase of 1% year-on-year, and Johor Port posted a container throughput of 1 million TEUs, a rise of 10.8% year-on-year. In addition, the consolidation of Penang Port's revenue further boosted the stronger growth in the company's port and logistics sectors.

In 2019, MMC Group is committed to playing out the synergy of operations and costs to further improve its port and logistics performance. The Johor Port of the group signed a strategic alliance agreement on soft commodities with Access World. Under the strategic alliance, Johor Port and Access World will integrate resources to increase soft commodity arrivals and transaction volume at Johor Port. In addition, MMC Group's Port of Tanjung Pelepas (PTP) and Ramco Systems Limited (Ramco) also signed an agreement to upgrade the existing enterprise resource planning system (ERP) of Port of Tanjung Pelepas, thereby enhancing the digital operational efficiency and competitiveness of the port.

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(3) Major port enterprises in the United States

Ports America operates 35 container terminals at 22 ports in the United States, engaged in shipping business of containers, bulk, automobiles and other cargoes, and accounting for one-third of the container market share in North America. It is one of the major port enterprises in the United States. In 2018, Ports America recorded a total throughput of 8.9 million TEUs, a rise of 2% year-on-year, and an equity throughput of 3.7 million TEUs, a rise of 3% year-on-year. Specifically, the throughputs of the Port of New Orleans and Port of Houston container terminals operated by the Ports America in the United States recorded double-digit growth.

In recent years, Ports America has intensified construction of its terminal infrastructure to improve operational efficiency. At the Port of New Orleans, Ports America invested US$66.5 million in port infrastructure and equipment upgrading to ensure that it can meet the freight needs of customers worldwide more efficiently. On the other hand, Ports America has changed its operation strategy. In addition to stepping beyond traditional terminal business, the group actively seeks diversification of logistics supply chain services and constantly strengthens ties with cargo owners and other customers.

3.4 Review of Multimodal Transport Development of Ports

In recent years, the multimodal transport logistics service model has developed rapidly, and the advantages of the model have also been recognized by most ports and logistics companies. When market environment and cargo source conditions are determined, ports developing the multimodal transport can not only avoid the disadvantages and limitations of single-modal transport in terms of transport time, distance and cost, but also realize complementary advantages between multiple transport modes to enhance transport efficiency. To further attract cargoes and increase sources of profits while reducing environmental impacts, a number of ports in the Asia-Pacific region actively developed multimodal transport infrastructure and competed to build a multimodal transport service ecosystem in 2019.

3.4.1 Multimodal transport development of ports in North America economies

North America has advanced multimodal transport facilities. Its transportation network is strategically distributed in various regions and connected to various ports, forming a developed network of multimodal transport hubs. However, the capacity demand on trans-Pacific trade routes was weak, and the reduced container shipping volume in North America also caused its rail and truck freight volumes to fall. According to the intermodal market statistics released by the Intermodal Association of North America (IANA), the 2019 performance of North America suffered negative growth for the first time, recording 18.15 million containers and trailers throughout the year, the growth rate being 10 percentage points lower than that of last year. Specifically, the international container shipping volume fell by 2.2%, while the domestic container shipping volume declined by 4.5%.

2018 APEC Port Development Report www.apecpsn.org 94 Source: Intermodal Association of North America (IANA)

Figure 3-30 Intermodal Transport Volumes and Year-on-year Growth Rates in North America in 2013-2019

Intermodal transport of ports in the U.S.

According to the Association of American Railroads (AAR), the multimodal transport volume in the United States in 2019 stood at 13.7 million vehicles (including containers and trailers), dipping by 5.5% year-on-year. However, the sound management and operation in the economy sustained multimodal transport business as the main source of revenue for the U.S. railroads. The revenue from multimodal transport accounted for about 25% of the total railway revenue.

In terms of development trends, multimodal transport has been the fastest growing component of the U.S. rail transport sector over the past three decades. However, as its business sources showed, multimodal transport business growth in the United States was primarily out of the international trade needs of ports in North America. As the transport needs of the U.S. inland trade change, the construction of its domestic logistics and distribution centers also fueled the development of its multimodal transport business. Currently the United States has formed an intermodal transport promotion system that has strong soft and hard powers, featuring diverse development forms, advanced facilities and equipment, complete standards, smooth transport organization, and strong policy support. In view of the growing demand for transportation, the U.S. is still focusing on multimodal transport network construction and diversified, flexible services and functions when developing its multimodal transport business.

(1) New York-New Jersey Port

Port of New York-New Jersey is one of the busiest ports in North America and an important hub in the multimodal transport system of North America. Affected by

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the international seaborne trade in 2019, Port of New York-New Jersey recorded a total of 665,000 TEUs of sea-rail intermodal transport containers, an increase of only 3% year-on-year, underperforming the previous years. However, the Panama Canal expansion has led to a higher freight demand and a higher capacity of cargo collection, distribution and transportation for ports on the east coast of the United States. To meet the upcoming freight demand, Port of New York-New Jersey further improved its multimodal transport systems of ports, and extended the intermodal transport networks between ports and the west coast of the United States as well as inland areas of Canada by building railways and highway trunk lines.

Figure 3-31 Sea-rail Intermodal Transport System of Port of New York-New Jersey

The Port of New York-New Jersey further advanced its "freight plan" in 2019. Through strategic investment and advanced delivery facilities, the port modernized its railway and maritime infrastructure to protect the environment, while promoting the construction of regional multimodal transport systems and regional economic development. Meanwhile, the Port Authority of New York and New Jersey also planned to invest US$541 million to expand the Hudson River high-speed railway, and will install an automatic braking system in the Hudson River railway system to improve the railway operation efficiency. In addition, the completion of the Bayonne Bridge project in 2019 and the completion of the Express Rail facility at the Port of New Jersey have further elevated the flexibility and efficiency of the multimodal transport network of Port of New York-New Jersey.

(2) Ports of Los Angeles and Long Beach

Ports of Los Angeles-Long Beach play an important role on the west coast of the United States. The ports have been challenged by the competition from the Port of Vancouver in Canada for cargoes in the hinterland of the United States in recent years and a market environment where ports on the east coast of the United States are vying for multimodal transport resources through "full-waterway" channels. The

2018 APEC Port Development Report www.apecpsn.org 96 Alameda Corridor for cargo transport has also facilitated the integration and efficient connectivity of multimodal transport points at Ports of Los Angeles-Long Beach. The 32-km Alameda Corridor connects Ports of Los Angeles-Long Beach with the inland railway stations and depots, eliminating more than 200 parallel intersections and reducing the losses from traffic delays by 90%. This has not only eased port- city conflicts, but also promoted organic connection between railway hubs and port hubs. According to the Alameda Corridor Transportation Authority (ACTA), the Alameda Corridor handled a total of 5.02 million TEUs of containers in 2019, roughly accounting for 29% of the total throughput of Ports of Los Angeles-Long Beach.

To further enhance port competitiveness, Ports of Los Angeles-Long Beach continued to augment investment in multimodal transport infrastructure. Besides, they also utilized automation technological transformation and intelligent information system construction to enhance connectivity between ports and multimodal transport systems. Ports of Los Angeles-Long Beach received a US$14.5 million grant from the Maritime Administration under the U.S. Department of Transportation in 2019 to build the Terminal Island Wye Track Realignment project. The project will construct new rails and improve the triangular railway junctions, so that trains can enter and leave ports faster, thereby reducing locomotive idling and improving safety to ultimately elevating the railway operational efficiency across the port areas. In addition, the project will improve the railway access to the two bulk cargo terminals at the eastern end of Ports of Los Angeles-Long Beach and optimize the multimodal transport infrastructure at the ports to speed up the modernization of the multimodal transport system.

In addition, to bring out the best of in-port railway transport, Ports of Los Angeles- Long Beach introduced the On-Dock Rail transport mode to allow containers to be directly loaded onto trains at the terminal, so that the transport time and reloading cost can be significantly reduced. In addition to a depot serving train carriages, Ports of Los Angeles-Long Beach also have a dedicated container storage area to serve the 16 railway lines, including 13 for railway marshalling and three for arranging arrivals and deliveries of trains.

Figure 3-32 On-Dock Rail Transport at Ports of Los Angeles-Long Beacht

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Multimodal transport at ports in Canada

Canada is located at the crossroads between North America and China, Korea, Japan and other major Asia-Pacific economies. Its well-developed multimodal transport system has enabled rapid flows of cargoes to the Asia-Pacific region via ports in Canada. Canada's existing multimodal transport network combining sea, air, rail and highways has also sharpened the competitive edge of Canada's gateway channels to the Asia-Pacific region. With the advancement of the infrastructure construction for the Asia Pacific Gateway and Corridor Initiative (APGCI), the logistics convenience level of Canada's multimodal transport system is also increasing. According to the Railway Association of Canada (RAC), the sea-rail transport volume in Canada in 2018 reached 3.55 million units (containers/trailers), maintaining a favorable growth momentum.

Figure 3-33 Sea-rail Intermodal Transport Volumes in Canada in 2012-2018

(3) Port of Vancouver

Currently major ports in Canada, such as Port of Vancouver and Port of Prince Rupert, have provided intermodal transport services between terminals and railway stations for rapid transport across Canada and North America. Specifically, there are three container terminals at the Port of Vancouver. The Canadian National Railway (CN Rail), the Canadian Pacific Railway (CP Rail) and the BNSF Railway Company (BNSF) all operate rail and transport facilities at container terminals of Port of Vancouver. Meanwhile, Port of Vancouver extended the operating hours of the truck channel at container terminals, and set strict stipulations on the reserved positions of trucks at the port to enhance the efficiency of its multimodal transport service. Port of Vancouver cumulatively handled 142 million tons of cargoes in 2019, with its container throughput recording 3.4 million TEUs, an increase of 0.1% year-on-year.

To further enhance the cargo collection, distribution and transportation capacities of sea-rail intermodal transport, the Canadian government launched the Pitt

2018 APEC Port Development Report www.apecpsn.org 98 Meadows Road and Rail Improvements project in 2019 to mitigate the impact of the increasing rail and port trade flows on the Port of Vancouver. The project includes the construction of a new four-lane underpass and a new two-lane overpass to cross the railways at the entrance of the port's intermodal transport terminal, which can enhance the cargo handling capacity of the port while minimizing the interference to railway transport. In addition, the project will add a new side rail track (about 16,000 feet long) to CP Rail's existing rails for parking trains, so as to support the growing trade and transport needs of the intermodal transport terminals at the Port of Vancouver.

(4) Port of Prince Rupert

Port of Prince Rupert is directly connected to the CP Rail's continental rail network via a single-track railway. CP Rail also provides a "coast-to-coast" railway network for Port of Prince Rupert, so that the port can be effectively connected to all hub stations between East Canada and the Midwest of the United States. Boosted by the rapid development of sea-rail intermodal transport, the container volume at the Port of Prince Rupert has grown rapidly. The container throughput of the port in 2019 totaled 1.21 million TEUs, a surge of 16.8% year-on-year, with sea-rail intermodal transport volume accounting for around 83% of the total container throughput.

Figure 3-34 Sea-rail Intermodal Transport Network of Port of Prince Rupert

3.4.2 Multimodal transport development of ports in China

China's multimodal transport has presented a good momentum of development in recent years. China's domestic trade transport embraced rapid growth driven by the "bulk-to-containers" compaign, and its diversified multimodal transport

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business formats and services began advancing, fueled by new equipment and new technologies including dual-purpose road-rail vehicles, and intelligent rail systems. Meanwhile, China's railway system was in full swing to carry out multimodal transport business and gradually became a major player in the sector. The China- Europe trains and the new land-sea trade corridor have made the connections between ports and multimodal transport systems even closer, and many ports have also set multimodal transport as a breakthrough point of strategic significance for business innovation and market expansion.

Currently, China's sea-rail intermodal transport business is well developed in the Bohai Rim port group, including Dalian Port, Yingkou Port, Qingdao Port, and Tianjin Port. Meanwhile, Ningbo-Zhoushan Port in the Yangtze River Delta port group also relies on a developed intra-province sea-rail intermodal transport service network and recorded fast growth in sea-rail intermodal transport business for containers. Dalian Port has presently established an inland sea-rail intermodal transport network featuring "four centers, 12 depots, and 31 stations", centering on Shenyang, Changchun, Harbin, and Tongliao. Yingkou Port has built up the "Southeast Coast- Yingkou-Europe" multimodal transport corridor with "one pivot, four supporting points, and multiple branch points". Qingdao Port has formed a sea-rail intermodal transport logistics corridor that "covers Shandong, radiates to areas along the Yellow River, and extends to the Central Asia". Ningbo-Zhoushan Port has enhanced infrastructure construction and the operating capacity of its port-wide container railways is close to 1 million TEUs. According to the article "Container terminal multimodal throughput for China's main ports", the multimodal transport throughput of container terminals at China's hub ports in 2019 totaled 2.37 million TEUs, an increase of 43% year-on-year.

Table 3-9 Sea-rail Intermodal Transport of Container Terminals at Major Hub Ports in China in 2019

Sea-rail Intermodal Transport Terminal Company Volume in 2019 (1,000 TEUs) Container Terminal Company of Jinzhou Port 57.1 Company Limited Yingkou Container Terminals Co., Ltd. 146.8 Yingkou New Century Container Terminal Co., Ltd. 146.8 Yingkou Port Authority Group Co., Ltd. 718 Rizhao Port Container Development Co., Ltd. 61.4

Sichuan Luzhou Port Affairs Co., Ltd. 40.1

Ningbo Beilun First Container Terminal Co., Ltd. 427.9 NIngbo Beilun Third Container Terminal Co., Ltd. 161.1 Ningbo Zhoushan Port Company Limited Beilun 57.1 Second Container Terminal Company

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2018 APEC Port Development Report www.apecpsn.org 100 Ningbo Meishan-Island Interntional Container 101.8 Terminal Co., Ltd. Ningbo Port Company Limited Zhenhai Port Branch 9 Fujian Jiangyin International Container Terminal 41.7 (FJCT) Guangzhou Container Terminal Co., Ltd. 6.3 Yantian International Container Terminals Limited 204 Beibu Gulf Port Fangcheng Port Terminal Company 53.2 Limited Guangxi Qinzhou International Container Terminal 31.7 Co., Ltd. Beibu Gulf-PSA International Container Terminal 45.7 Co., Ltd. (BPCT) Zhanjiang Port International Container Terminal 45 Co., Ltd.

Source: Container terminal multimodal throughput for China's main ports, and Containerization

Ningbo-Zhoushan Port

In 2019, the sea-rail intermodal transport volume of Ningbo-Zhoushan Port exceeded 800,000 containers for the first time, an increase of 33.3% year-on-year, becoming the second largest port in China in terms of sea-rail intermodal transport volume. To promote multimodal transport construction, Ningbo-Zhoushan port continued to well plan and develop connectivity to stations and lines in its hinterland. It has constructed a sea-rail intermodal transport corridor connected to the inland and explored carrying out businesses in Longyou in Zhejiang province and Changsha among other cities out of Zhejiang province. It has also opened five sea-rail intermodal transport trains to Huzhou, Qianqing and other cities. As of now, Ningbo- Zhoushan Port has 17 sea-rail trains and multiple grouped lines, and its business covers 15 provinces (autonomous regions and municipalities) and 50 prefecture- level cities across China. Specifically, its Yiwu trains have realized normal operation of three trips per day, handling more than 10,000 TEUs of containers on average per month.

Beibu Gulf Port in Guangxi

Boosted by the new western land-sea corridor, the cargo transport business of Beibu Gulf Port in Guangxi province skyrocketed in 2019. According to statistics, the cargo transport volume of coastal railways in Guangxi province in 2019 totaled 66.11 million tons. Specifically, 56.66 million tons of cargoes were transported, an increase of 12.7% year-on-year. The sea-rail intermodal transport trains of the new western land-sea corridor transported 1.15 million tons of cargoes, a rise of 163% year-on-year. To crack the bottleneck for train transport development in the new

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western land-sea corridor, Guangxi Beibu Gulf Port and Guangxi Coastal Railway Company coordinated all resources and promoted key railway projects such as the Qinzhou railway container handling station, the Nanning-Fangchenggang Railway electrification, and the Tieshan Port Sinopec special railway line. After the first phase Qinzhou railway container center station was put into use in 2019, the port's annual container handling capacity hit 1.05 million TEUs and the daily handling capacity reached 20 trains. In addition, the Guangxi Beibu Gulf Port Authority and the railway company have also established a road-port joint office system to promote "seamless connections" between ports and railways through data sharing, reducing the average transfer time per train by six hours and supporting up to 30 train transfers in a single day.

Tianjin Port

Tianjin Port is an important part for China to create a land-sea hinge for domestic and foreign trade synergy, and a mutual openness landscape between the east and the west. Tianjin Port has established more than 100 outlets in its hinterland in China to link up its sea-rail intermodal network, so that cargoes can be exported in a more convenient and efficient manner. Currently, more than 40 dry ports have been deployed in the hinterland of the Beijing-Tianjin-Hebei region and "Three North" regions (Northeast China, North China, and Northwest China), and more than 30 sea-rail intermodal transport channels have been opened. The port is the only one in China to connect to three cross-border land bridge channels of Manzhouli, Erenhot and Alataw Pass (Khorgos). These efforts enable Tianjin Port to form a relatively complete "port + dry port + sea-rail intermodal transport" service system for the inland market. Tianjin Port completed the "last kilometer" project for transport of arriving cargoes in 2019. More than 100 marketing service outlets were deployed in the Beijing-Tianjin-Hebei region and "Three North" regions, and four new sea-rail intermodal transport trains were put to operation. The port recorded an annual sea- rail intermodal transport volume of 568,000 TEUs of containers in 2019, a rise of 15.2% year-on-year.

3.5 Review of Port Infrastructure Construction

In the wave of ship upsizing and international cooperation diversification, ports in the Asia-Pacific region have ushered in several construction booms in the past years. Specifically, the ship upsizing trend, the "automation" industry reform, and the renovation of old traditional facilities are the main drivers of port infrastructure construction. Despite the relatively vigorous investment and construction in the past years, the demand for new or expanded capacities of ports has declined. However, answering to the requirements of stimulating domestic economic growth and promoting foreign trade development, Southeast Asia, North America and other regions maintained high enthusiasm for port investment and construction in 2019.

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2018 APEC Port Development Report www.apecpsn.org 102 Figure 3-35 Distribution of Major Terminal Construction Projects in the Asia-Pacific Region in 2019

Region-wise, due to the continued strengthening of investment in the early stage and the gradual decline in international trade growth, investment in Asian ports has slowed down overall. But Southeast Asia and other regions have benefited from the favorable industrial transfer, and presented a stable construction pace. In Eastern U.S. and Canada regions, the increasing benefits from the Panama Canal expansion have driven up the number of terminal expansion projects.

Table 3-10 Construction of Major Terminals in the Asia-Pacific Region in 2019

Category Construction Port/Terminal Continent Economy North Port of Prince Rupert Canada America North Port of Montreal Canada America North Port of Vancouver Canada America North Expansion/ Port of Halifax Canada Container America Under- terminal North United construction Port of Jacksonville America States North United Port of Brownsville America States North United Port of Boston America States South Port of Paranagua Brazil America

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Singapore COSCO-PSA Asia Singapore Terminal Port of Haiphong Asia Vietnam Port of Chittagong Asia Bangladesh Port of Laem Chabang Asia Thailand Batumi International Asia Philippines Container Terminal Port of Mundra Asia India Port of Colombo Asia Sri Lanka Phase II of Tuas Port Asia Singapore North Port of Quebec Canada America North Port of Manzanillo Mexico America In plan North Port of Progreso Mexico America

Port of Tanjung Pelepas Asia Malaysia

Yangon International New Asia Myanmar Terminal

Dry bulk Port of Jawaharlal Nehru Asia India cargo Expansion/ Under-construction Asia China terminal Lianyungang Port Asia China Tianjin floating LNG Asia China receiving station

Under-construction Asia China

Ningbo LNG receiving Asia China station Tangshan LNG receiving Asia China station LNG Expansion/ Rudong LNG receiving terminal Asia China station Tianjin LNG receiving Asia China station Nantong LNG receiving Asia China station Bontang LNG terminal Asia Indonesia North United Golden Pass LNG America States 104

2018 APEC Port Development Report www.apecpsn.org 104 3.5.1 Construction of container terminals

1. Southeast Asian ports continue to enjoy high enthusiasm for development

With the expanded scale of international industrial transfer, Southeast Asia is becoming a hot spot of global investment. In particular, its special location on the main Eurasian trunk routes has explained the continued port construction heat in Southeast Asia. In order to further attract international investment and companies, many Southeast Asia economies including Indonesia, Malaysia, Vietnam, Thailand, and Myanmar have stepped up investment in infrastructure construction. Meanwhile, international organizations such as the Asian Investment Bank have also augmented support for Southeast Asia economies.

Specifically, Singapore and Indonesia posted the highest enthusiasm for investment and development. In 2019, the Port of Singapore officially kicked off the construction of the Tuas Port Area. The port area uses the full automation technology, and is expected to cost more than S$20 billion (about US$14 billion). A signing ceremony was officially held for the two new berths of the COSCO-PSA Terminal in Singapore, which project will elevate the terminal's capacity from the original three container berths to 4.85 million TEUs. DP World and Indonesia's Maspion Group signed an agreement to invest about US$1.2 billion in the East Java to build a container port and an industrial logistics park, aiming to create a modern and integrated industrial and trade logistics park, so as to contribute to a world-class logistics and trading environment in the local area and boost economic growth. The Malaysian government led the expansion of the port area of Kuantan, the largest port to the south of east coast. The project plans to develop a 1-km-long, 18-meter-deep shoreline and 47 hectares of landside port area to greatly boost the cargo and ship handling capacity of Port of Kuantan. In addition, the Malaysian government also provided great support to the construction of Port of Tanjung Pelepas, hoping it can gain an upper hand in the competition against Port of Singapore. The Vietnamese government approved the investments in No. 3 and No. 4 international container berths at Port of Haiphong, with investments valued at around US$300 million in total. The total length of the berth shoreline is about 750 meters, and the berths can accommodate fully-loaded 100,000-DWT ships. The first phase of the Hutchison Ports Thailand Terminal expansion at Port of Laem Chabang in Thailand kicked off, with the total project costing more than RMB 400 million (about US$58 million). After the expansion, the cargo capacity of the Port of Laem Chabang will be greatly improved. The Myanmar government attracted foreign investment from China, Japan, India and other economies to upgrade its port facilities, and the international comprehensive container berths in the No. 25 and No. 26 zones of Thilawa Special Economic Zone in Port of Yangon were officially put into operation. The project was also part of Port of Yangon's expansion plan.

2. Port construction in South Asia and West Asia progresses steadily

Although its port construction enthusiasm is less than that in Southeast Asia, South Asia still maintained relatively stable intensity of investment. The port operation

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efficiency in South Asia is lower than that in other parts of Asia. For this reason, South Asia has formulated a number of supportive plans and financial subsidies to support the development of local ports. In 2019, the Adani Group of India spent US$832 million to expand the Port of Mundra at the northern end of India's west coast to enhance the port's cargo capacity. Meanwhile, the group planned to build a new 24-hour container port containing nine large container berths in Vadhavan, 140 kilometers to the north of Mumbai. Sri Lanka actively introduced investments from countries such as Japan and India to jointly promote the construction of the eastern container terminal at the South Port of Colombo. The development of Pakistani ports was more rapid. With the support of CK Hutchison, Pakistani ports received US$240 million for port expansion. After the project is completed, the port capacity is expected to grow to 3.2 million TEUs. Compared with South Asia, the construction of ports in West Asia has relatively slowed down due to geopolitical tensions and weak foreign trade imports and exports. Specifically, the Abu Dhabi Port Authority of the United Arab Emirates planned to invest another 3.8 billion dirhams (about US$1.04 billion) to expand Khalifa Port to cope with possible trade demand rise in the future. About 1.6 billion dirhams of the investment will go to port expansion, and 2.2 billion dirhams will be used to develop the berths and port logistics areas in the south. After the expansion, the port's throughput capacity will increase from the current 2.5 million TEUs to 5 million TEUs.

3. Expansion momentum of ports in East U.S. remains

With the expansion of tensions the Panama Canal, more large container ships began directly calling at the more prosperous ports on the east coast of the U.S., which has contributed to the surging demand for port construction in Eastern U.S. According to PIERS, a leading provider of import and export data in the United States, the volume of cargoes imported from Asia on the west coast of the United States declined by around 3.2% in 2019, while the imported cargo volume on the east coast and the Gulf coast of the United States increased by 5% and 17.4%, respectively, fully embodying the important role of east U.S. ports. As a result, the demand of infrastructure upgrading and terminal renovation and expansion of ports on the east coast stayed robust.

On the east coast of the United States, the Port of New York-New Jersey invested US$500 million to upgrade and transform the Port Newark Container Terminal (PNCT), while striving to accelerate the port expansion and transformation. The AP Moller-Maersk terminal operator in the Port Elizabeth area invested US$200 million for upgrading port facilities. In addition, the Boston Harbor on the west coast of the U.S. was also undergoing port upgrading preparations, planning to spend US$215 million to build a new container berth, and invest another US$103 million in the second phase to build another container berth and additional storage space for freezers. Comparatively speaking, the Port of Jacksonville in Florida on the east coast made even higher investment in terminal upgrading and channel dredging. The U.S. government allocated around US$240 million for infrastructure construction and equipment upgrades at the Port of Jacksonville. As a result, the annual processing

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2018 APEC Port Development Report www.apecpsn.org 106 capacity of the port facility was further elevated to 700,000 TEUs. To better handle the new Panamax carriers of 14,000 TEUs, almost the whole Eastern U.S. area joined the wave of terminal upgrading and channel dredging. Specifically, the Port of Savannah expansion project costing US$970 million and the Port of Charleston renovation project costing US$560 million are still ongoing.

4. Port construction enthusiasm in Canada continues to rise

With the continued growth of international trade and cargo volumes, Canadian ports maintained a positive construction trend in 2019. Specifically, Port of Halifax focused on large-scale expansion of the container terminals in the south of the port. After the expansion, the port will be able to handle ships of 14,000 TEUs and 15,000 TEUs at the same time. In addition, the port also planned to build a new berth or a new container terminal in Dartmouth to cope with the potentially fast-growing freight demand in the future. The Viau Terminal at the Port of Montreal also entered a new construction stage, which project will further expand the existing terminal capacity to 600,000 TEUs. Meanwhile, the Port of Quebec in eastern Canada was also preparing to build a new container terminal. The Quebec Port Authority signed a long-term commercial agreement with CK Hutchison and the Canadian National Railway to build a new container terminal called Laurentia. According to the agreement, CK Hutchison will build the terminal in Quebec City into a cargo port with the best environment and the most advanced technology, which will also serve as the gateway of CK Hutchison to the east coast of North America. The west coast of Canada featured a cooperative development model. Although the Port of Vancouver and Port of Prince Rupert are 500 kilometers away along the coastline, the two have partnered to strengthen infrastructure construction such as near-sea routes and terminals, connecting railways and roads. The partnership is expected to bring another 4 million TEUs of trade demand to the two ports.

3.5.2 Construction of LNG terminals

In view of the increasingly stringent environmental protection policies globally, the demand for clean energy is becoming more urgent. The sulfur restriction targeting the global shipping industry will take effect starting from 2020, and ports around the world will all invest in LNG and other clean energy terminals, vying to become a regional marine energy replenishment center. Although currently LNG-powered ships only take a small share, and even new LNG-powered ships are not entirely LNG- powered, ships that have not installed desulfurization equipment will be prohibited from carrying non-compliant fuel oil starting from March 2020 according to the International Maritime Organization (IMO) regulations. This will further reduce the demand for general fuel oil and create opportunities for clean energy such as LNG. Therefore, the construction of LNG ports in the Asia-Pacific region also saw a boom in 2019.

1. Sulfur restriction accelerates LNG terminal construction in China

The Maritime Safety Administration of China issued the Implementation Plan for

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Global Marine Fuel Oil Sulfur Restriction in 2020 in 2019, which stipulated stopping the use of desulfurizers. As a result, low-sulfur fuel oil or alternative energy sources such as LNG and methanol will become the best alternatives. In comparison, LNG fuel is more economical and environmentally friendly, and its application is increasing and being promoted as a result. Under the guidance of the government, ports in China are actively pushing forward LNG terminal development. Based on the current market structure, LNG will become the most promising alternative fuel for inland water shipping in China. With LNG's cleanness and other environmentally friendly characteristics, it is expected that the potential demand for marine LNG fuel in the Yangtze River Delta region alone will reach 500,000 tons. Meanwhile, Zhejiang Pilot Free Trade Zone established Zhoushan as the LNG refueling service center in the Yangtze River Delta region, focusing on LNG imports, storage, distribution, shipping and refueling businesses. In particular, Baiquan, Liuheng, Qushannan and Xiaoyangshan LNG receiving stations will be built. LNG receiving stations at other ports in China will also be put into production one after another.

Table 3-11 LNG Receiving Stations under Construction in China in 2019

Station Complete Scale Capacity Name Time

One floating storage regasification unit (FSRU), two 30,000-cubic-meter LNG 2.2 tanks, one 160,000-cubic-meter storage Tianjin million tanks, 266,000-cubic-meter LNG cargo 2021 floating LNG tons/ ship berthing and unloading terminal. year Four new 200,000-cubic-meter LNG tanks planned for the second phase

Three 160,000-cubic-meter LNG tanks, Shanghai 3 million and 215,000-cubic-meter LNG terminal. Yangshan tons/ 2020 Two new 200,000-cubic-meter LNG tanks LNG facility year planned for the second phase

Three 160,000-cubic-meter LNG tanks, 3 million Ningbo LNG and 266,000-cubic-meter LNG terminal. tons/ 2021 facility Expansion of three 160,000-cubic-meter year LNG tanks planned for the second phase

16 160,000-cubic-meter tanks, and one 6.5 Tangshan 270,000-cubic-meter dedicated terminal million 2020 LNG facility for LNG carriers. Four new LNG tanks tons/ planned for the third phase year

One 266,000-cubic-meter LNG carrier 6.5 terminal, three 160,000-cubic-meter Rudong LNG million tanks, and one 200,000 tank. Two new 2021 facility tons/ 200,000-cubic-meter LNG tanks planned year for the third phase

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2018 APEC Port Development Report www.apecpsn.org 108 One 266,000-cubic-meter terminal, and 6 million Tianjin LNG four 160,000-cubic-meter LNG tanks. tons/ 2021 facility Five new 220,000-cubic-meter LNG tanks year planned for the second phase

One 150,000-cubic-meter LNG carrier 1.15 terminal, two 50,000-cubic-meter tanks, Nantong million and one 160,000-cubic-meter tank. One 2019 LNG facility tons/ new 160,000-cubic-meter LNG tank year planned for the third phase

Two 150,000-cubic-meter tanks, one 266,000-cubic-meter unloading terminal 3 million Zhoushan for LNG carriers. Two new 160,000-cubic- tons/ 2021 LNG facility meter tanks planned for the second phase, year with the receiving capacity expanded to 5 million tons/year

2. North America welcomes LNG terminal construction boom

According to the statistics of new projects announced and planned, North America will see a large number of new small LNG liquefaction terminals from 2019 to 2023, with their capacity expected to reach 7.88 million tons a year or 47% of the increased total LNG capacity globally. There are currently three terminals in the U.S. Gulf of Mexico planning to build LNG berths. North America has set an annual record for LNG project approval. In addition, there are two other projects in the Gulf Coast area, namely the fourth liquefaction chain of Freeport and the Driftwood LNG project. Specifically, Energy Transfer, one of the largest pipeline operators in the United States, signed a framework agreement with Shell Group. The agreement made a final investment decision for further developing a large natural gas export facility in Lake Charles, Louisiana, to export the rich and low-cost natural gas of the United States to the rest of the world. Upon completion, the terminal will have a liquefaction throughput capacity of at least 16.45 million tons per year to supply the products to China and other markets in the world. Meanwhile, Qatar Petroleum and Exxon Mobil, the largest oil company in the United States, will also jointly invest more than US$10 billion to build an LNG export terminal called Golden Pass in the United States, aiming to open up a new export channel for the large amount of low- cost natural gas in the United States.

3. Southeast Asia speeds up LNG terminal construction

With the rapid economic development and increasing population in recent years, the demand for energy in Southeast Asia is also urgent. However, the Southeast Asia region has limited resources, and they need to rely on the import trade to meet the rapidly growing LNG consumption demand. According to the data released by

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the International Energy Agency (IEA), Southeast Asia's demand for natural gas is strong, and the area is expected to become a net importer of natural gas after 2020.

Southeast Asia also responded positively to this trend by constantly accelerating the construction of local LNG terminals. In 2019, Thailand invested US$1.3 billion to start an LNG port construction project, which will be jointly developed by Gulf Energy Development PCL and Thai National Petroleum Corporation (PTT). It is expected that the initial annual capacity of the port will be 5 million tons. Meanwhile, India is also actively promoting the construction of domestic LNG terminals. It is expected that India will build 17 new LNG terminals from 2019 to 2023. The Indonesian Bangtang LNG tank terminal has also been officially contracted. After the project is completed, LNG will be tanked and shipped in containers to various islands to relieve the natural gas supply pressure on island residents in northeast Indonesia.

3.6 Review of Intelligent, Green and Safe Port Development

With the continuous advancement and development of informatization in 2019, the Asia-Pacific ports continued to head for intelligence and digitization. Driven by big data, 5G technology, blockchain technology, and cloud computing technology, port construction highlights technological innovation even more as information construction gained speed. Smart port construction has become a new engine for the development of the industry.

3.6.1 Intelligent port development

1. Port digitalization

Currently, the digitization process of most ports in the Asia-Pacific region is at a stage where the internal digital dispatching platform is used to supervise, control and provide feedback to traditional businesses, so as to improve the energy efficiency of port production. A port digital system can be divided into two categories. One is developed by terminal operators, such as the CMPort of CMHI, the TOPS of Shanghai International Port Group, the n-TOS of Ningbo-Zhoushan Port, and the ITOP of Dalian Port. Such platforms are highly targeted and customized to businesses of the companies. Due to the extensive business experience accumulated by terminal operators, such platforms feature short periods of early commissioning and testing, and can be applied to ports quickly. But they have shortcomings in interface versatility and scalability. The other category is provided by third-party suppliers, such as the Navis system of the U.S.' NAVIS, and the Tideworks system of the U.S.' Tideworks. Such platforms feature high universality, standardized external data interfaces, and better compatibility with new automated ports.

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2018 APEC Port Development Report www.apecpsn.org 110 Table 3-12 The Functions and Features of Scheduling Platforms in Major Ports in Asia-Pacific Region

Port Operator/ Digitalized Third-Party Scheduling Features Service Provider Platform

The system is composed of the Container Terminal Operating System (CTOS), the Container Depot Operation Management System (BTOS), the Container Depot Operation Management System CMHI CMPort (DTOS), and the Container Freight Station Management System (CFSS). In addition to a complete digital solution for terminal operations, the system also adopts a modular design which enables a higher level of flexibility and scalability.

The system is composed of the VSS for vehicle load distribution, the VPS for ship planning, the EDI for data exchange, the VMS for ship monitoring, the YMS for yard monitoring, and the Shanghai Port TOPS TPS for container truck scheduling. An advantage with the system is that it has a graphical load distribution tool that supports interactions with external data flows. But a disadvantage is that it does not support container tipping prompts.

The system has a unified management and control platform to unify business models, EDI business processing, information services of logistics information networks, appointment services, index standards and basic code. Meanwhile, it Ningbo- has intelligent algorithms to input data in advance n-TOS Zhoushan Port according to the reservations of container entry and pickup to predict the workloads of entering and exiting containers at terminal gates, so as to independently analyze the reasonableness of site arrangements and assist depot personnel in planning arrangements.

The system can realize intelligent planning of berths, real-time monitoring of operations such as loading, unloading and moving containers. It Dalian Port ITOP enables graphical operation interfaces for gantry cranes, quay cranes and trailers and has external data interfaces. The system has been connected to the "Port Pass" system.

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Data of the system is usually processed via a universal interface. The system supports digital terminal operating systems for visualization and operation on multiple devices, and graphical American Navis crane sequencing, berth scheduling, and batch NAVIS system management of crane shifts. It also supports custom berth scheduling programs, and the graphical interface can provide 360-degree real- time views and record the monitoring images of cranes, ships, and berths in real time.

The platform supports real-time filtering and sorting of data and consolidation of all cargo data for processing, such as cargo categories, cargo U.S. Tideworks Tideworks damage, and dangerous cargo information. It is company system integrated with a financial and accounting system and supports electronic data exchanges for external data interactions.

2. Port intelligentization

Singapore strengthens its status as an international shipping center by optimizing its operations using intelligent technologies. For example, its Tuas Port will leverage big data analysis to optimize operations for faster and more effective customs clearance. According to the MPA-PSA Port Technology Research and Development Programme (PTRDP) initiated by the Maritime and Port Authority (MPA) of Singapore and PSA International, Singapore will enhance the R&D in the fields of port interconnected community systems and automation and robotics technologies, and deploy a vehicle team composed of 30 automatic guided vehicles (AGVs) at the Pasir Panjang terminals, including automatic depot cranes and terminal cranes. Meanwhile, the Ministry of Maritime Affairs and Fisheries of Korea released the Intelligent Development Plan for Import and Export Logistics centering on ports of sea-land logistics intersections to apply the fourth industrial revolution technologies such as IT to logistics transport services. This move is expected to improve the logistics efficiency and thereby enhance Korea's competitiveness in the import and export logistics sector.

In addition, Shanghai Port launched the "Shanghai Yangshan Deep-water Port Intelligent Heavy Truck" project in 2019. The project joined the efforts of Shanghai International Port Group, SAIC Group and China Mobile, and achieved unmanned intelligent container transshipment in the Yangshan Port Logistics Park, Donghai Bridge, and Yangshan Phase I Terminal for the first time. This also marked the first commercial application of 5G + unmanned container trunks on the global scale. Unlike AGVs running on enclosed roads within the port, unmanned container trucks running on roads outside the port area face complex challenges such as from various non-operating vehicles and strong crosswinds. To address this issue, unmanned trucks are equipped with multiple range radars and cameras to utilize an L4 unmanned driving system to intelligently identify real-time situations in road sections. Meanwhile, Qingdao Port, China Mobile and Huawei jointly completed the 112

2018 APEC Port Development Report www.apecpsn.org 112 5G + MEC (edge computing) solution. In the solution, gantry cranes are connected to the 5G network covering the Qianwan Port Area of Qingdao Port to achieve remote control of quay cranes, so as to elevate port intelligence levels.

3.6.2 Green port development

1. GPAS program progress in 2019

To cope with the increasingly serious global energy crisis and environmental deterioration, APSN started to commit to promoting green port development in the Asia-Pacific region from 2011. Drawing experience from the green port and shipping certification system implemented by advanced economies in Europe and the Americas, APSN developed a green port assessment system adapted to the diversity of economic and social development levels in the Asia-Pacific region, namely the Asia-Pacific Green Port Award System program (GPAS).

The Forum on Digital Innovation and Port Connectivity hosted by the APSN and co-hosted by the National Port Authority of Peru was held in Cusco, Peru, in 2019. About 120 representatives from government authorities, port shipping companies and research institutions in 12 economies in the Asia-Pacific region participated in the forum and exchanged ideas on the trends of supply chain digital innovation and digital innovation practices of ports. As reviewed by the GPAS Expert Committee and deliberated by the APSN Board of Directors at the forum, seven ports from five economies in the Asia-Pacific region were awarded the title of "APSN Green Port " in 2019. They are Laem Chabang Port(Thailand), Lianyungang Xin Su Port Terminal (China), Port of Taichung (Chinese Taipei), Qingdao New Qianwan Container Terminal (China), Sapangar Bay Container Port (Malaysia), Terminal International del Sur S.A (Peru) and Terminal Portuario Peru LNG Melchorita (Peru).

2. Green development measures of Asia-Pacific ports

With the global shipping emission reduction and port pollution control requirements tightening, ports in the Asia-Pacific region continue to enhance green construction and adopt various policies and systems to achieve energy conservation and emission reduction along with ecological port development. In 2019, the Port of Los Angeles released the 2019 Green New Deal Pathway, promising to reduce greenhouse gas emissions by 50% by 2025 and achieve zero greenhouse gas emissions by 2050. It also adopted the Vessel Speed Reduction Program (VSRP) organized by 28 shipping companies, requiring ships to slow down when entering or leaving the port to help reduce ship emissions. The port also signed a five-year cooperation agreement with Port of Malmoe in Copenhagen, defining key cooperation areas including sustainable energy development, green terminal equipment and technology promotion, and active engagement in global environmental protection. The New York State Energy Research and Development Authority (NYSERDA), the Empire State Development (ESD) and the New York State Department of Transportation (DOT) reached an agreement, announcing the provision of up to US$200 million to upgrade port infrastructure in various states in the United States to support the ever-

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developing offshore wind power industry. Port of New York-New Jersey took the lead in implementing the Paris Agreement and developed a greenhouse gas (GHG) emission reduction plan, promising to reduce greenhouse gas emissions by 35% by 2025 and by 80% by 2050.

The Maritime and Port Authority (MPA) of Singapore will work with Shell to develop clean fuel technology. The two sides signed a memorandum of understanding (MoU), agreeing to jointly develop solutions to reduce emissions and explore more environmental protection solutions for port operations, and support the research and development of automation applications to enhance the green and environmental development of Port of Singapore. Ports in Tokyo Bay renovated and developed the surrounding areas during port area construction, including building marine parks, coastal landscapes and green space to create a high-quality port area with a pleasant environment and ecological harmony. Meanwhile, the pollution prevention and control of ports in China has been further upgraded. In 2019, the Maritime Safety Administration of China issued the Implementation Plan for Global Marine Fuel Oil Sulfur Restriction in 2020, further expanding the emission control areas of ships. After the adjustment, the ship emission control areas cover the Chinese coastal waters as well as inland river waters such as the Yangtze River trunk line and the Xijiang trunk line. The plan also stipulated to establish a control and monitoring experimental area at the Pearl River estuary, requiring international navigation ships to use fuel oil with sulfur content of no more than 0.50% m/m after entering waters under China's jurisdiction from 2020, and ships to use fuel oil with sulfur content of no more than 0.10% m/m after entering China's atmospheric pollutant emission control areas of inland rivers. In addition, China also promoted transport restructuring to improve the comprehensive transport network. In 2019, the Haolebaoji–Ji'an Railway was completed and opened to traffic, opening a new channel for "transporting coal from north to south", and the proportion of highway transport for bulk cargoes such as ore and coal of 17 major ports in the Bohai Rim and the Yangtze River Delta areas decreased from 67.9% in 2017 to 51.4 %, while the proportion of railway and waterway transport increased from 31% to 42%. Ningbo-Zhoushan Port explored operations in Longyou in Zhejiang province and Changsha outside the province, and opened five sea-rail intermodal transport trains such as to Huzhou and Qianqing, which has effectively reduced pollution emissions from logistics and freight channels.

3.6.3 Safe port development

With the rapid development of international trade, the rise in port cargo volumes and the gathering of logistics personnel have both increased potential safety hazards for port production. Therefore, all economies are attaching more importance to safe production at ports, and many even began to promote the construction of safe ports. Safe and orderly production and operation are recognized to be more important than economic production activities of ports.

1. Ports in Asia strengthen safety system development

Port safety usually focuses on terminal operation site management, hazardous

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2018 APEC Port Development Report www.apecpsn.org 114 cargoes safety management, filling station safety management in port areas, and employee occupational health management. Although all of these aspects are main factors for the recurrence of port production and operations, it is not enough to implement incident-oriented safety management only. In particular, in addition to modular management based on incident types, comprehensive vertical management over safety incidents should be enhanced. In 2019, China's General Office of China's Ministry of Transport implemented the Special Campaign for Port Operation Safety Rectification of Hazardous Cargoes, focusing on rectifying hidden safety hazards in port production processes, clarifying the responsibility of port enterprises as the main liable party for safety, and requiring the establishment of a comprehensive safety production system. Against this backdrop, Tianjin Port and other ports have been actively promoting grid-based and visual-based management of safety production, by checking and correcting hidden dangers to ensure safety and inspection effectiveness. They also improved their systems which acted as the foundation, and set up a working mechanism that values on-site and process management to promote systematic management of production safety.

2. Technology boosts port safety in the U.S.

Unlike the Asia region which is strengthening institutional construction and preventive measures, ports in the United States are vigorously improving their information supervision technologies and have adopted these technologies to strengthen production safety. In 2019, ports including the Port of New York-New Jersey and Port of Los Angeles in the United States augmented investment in safety technologies and adopted real-time monitoring means among others in port areas to improve identification of and speed up responses to potential safety hazards. In particular, leveraging the 5G technology, port authorities are actively developing more sensing and monitoring systems to improve the safety of port production and operations.

3.7 Review of International Port Organizations Development

In recent years, the shipping industry's attention to reducing pollution and greenhouse gas emissions has reached an unprecedented height. The IMO's sulfur restriction and carbon emission reduction targets have also created high challenges to the development of the port and shipping industry. Port safety and green development have increasingly become a top focus of development among international ports. To boost sustainable development of ports, international organizations such as the International Association of Ports and Harbors (IAPH) and the European Sea Ports Organisation (ESPO) have launched diverse initiatives and activities to promote healthy development of ports.

1. International Association of Ports and Harbors

The International Association of Ports and Harbors (IAPH) is currently the world's largest non-profit NGO for ports, representing 180 ports in 90 economies and 140 port-related departments. With enhancing global port ties and promoting port industry collaboration as its vision, the IAPH helps solve common problems of global ports and improve port service capabilities.

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The International Association of Ports and Harbors (IAPH) and PortXL signed an agreement in 2019 to establish an innovative investment platform (ALAS) of ports for the World Ports Sustainability Program (WPSP). On the platform, PortXL provides innovative startup and extension solutions and acts as an exchange channel and cooperation platform for ports and companies in the fields of information management and energy technologies among others. Meanwhile, as optimization of ship berthing strategies at ports also helps reduce greenhouse gas emissions and improve port productivity, the International Association of Ports and Harbors (IAPH) also made the "Task Force Port Call Optimisation" proposal to promote port-ship information and data exchanges so as to improve the transparency and management efficiency of ship information.

In addition, considering the possible safety risks brought by green port construction, the IAPH has developed clean energy safety testing tools (IAPH Tools). For the purpose of compliance with emission reduction requirements, the filling of alternative energy sources such as ammonia and methanol as marine fuel may pose a safety threat to ships and ports. Therefore, the IAPH Clean Marine Fuels (CMF) Working Group has established an open data sharing platform and corresponding checklists and certification tools for ports to assess safety of clean energy sources. The testing tools will help ports carry out clean energy refueling business, while improving the safety and efficiency of port operations.

2. European Sea Ports Organization

The European Sea Ports Organization (ESPO) is a port organization within the European Union, which coordinates the interests of ports in the form of council, participates in the formulation of EU shipping policies, protects the statuses of EU member states and all EU economies, and offers technical advice and financial support for specific port projects.

In October 2019, the ESPO announced the top 10 environmental priorities for EU ports at the GreenPort Congress in Oslo, Norway. Specifically, air quality was listed as the primary environmental consideration for three consecutive years, becoming a key determinant of public acceptance of port activities in the next few years. Energy consumption and climate change followed closely, and 80% of European ports will consider the impacts on the climate and energy when developing new infrastructure projects. In response to the changes in air quality, energy consumption and climate change, governments and relevant organizations in various countries formulated a series of policies and measures in 2019, such as development of onshore power supply (from renewable energy), provision of alternative low-carbon and zero- carbon fuels, and incentives that encourage sustainable low-carbon transportation and optimize docking measures at ports. In addition, the European Commission promulgated the comprehensive environmental policy European Green Deal in December 2019, announcing to reduce carbon emissions by 55% by 2030, that is, a 10% rise over the currently agreed target, and promising to achieve net zero-carbon emissions by 2050. The deal has provided clear targets for low-carbon operations of European ports and logistics transportation.

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2018 APEC Port Development Report www.apecpsn.org 116 Figure 3-36 10 Environmental Priorities of European Ports in 2019

3. American Association of Port Authorities

The American Association of Port Authorities (AAPA) represents more than 130 public port authorities in the United States, Canada, the Caribbean and Latin America. Through a series of policies and initiatives, it helps ports improve services, ensure long-term port development, and enhance port contribution to communities and socio-economics. In 2019, the AAPA focused on port infrastructure investment, port environment and ecology, port policies and other aspects.

To ensure sustainable development of coastal ecosystems of ports, the AAPA has vigorously promoted projects such as emission reduction, habitat protection and water environmental protection. Specifically, to reduce the pollution caused by the use of fossil energy, the AAPA launched the Environmental Protection Agency (EPA) program and the Diesel Emission Reduction Act (DERA) program in 2005. In 2019, the AAPA again introduced the Clean Truck Programs. By renovating or replacing depot equipment and tugboat equipment, and installing shore power and marine power generation equipment among other means, the program strives to improve ports' multimodal transport capacities and reduce pollution caused by road traffic. In addition, in consideration of the supply security of alternative energy sources and the threat that emergencies pose to port operations (terrorism, man-made or natural disasters), the AAPA actively publicizes the role of ports in the National Action Plan for Energy Efficiency of the United States and advocates federal government funding to support ports to develop efficient alternative energy and install supporting facilities, such as solar and wind energy systems and HVAC equipment.

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Chapter 4 Review and Comment on Major Shipping and Port Events in the Asia-Pacific Region in 2019

4.1 Review and Comment on 10 Major Shipping Events in Asia-Pacific Region in 2019

1. China and U.S. reach phase one economic and trade agreement

The statement on the phase one China-U.S. economic and trade agreement was announced on December 13. Both sides recognized that expanding China-U.S. trade cooperation was conducive to optimal allocation of resources and economic restructuring of both economies. As the two parties reached a phase one agreement, the United States promised to cancel some of the planned or implemented tariffs imposed on China-exported products, and will increase the tariff exemptions for Chinese products exported to the United States, to ultimately reverse the rising trend of additional tariffs to a decline. This is the consensus reached by both sides on the tariff issue in the first-phase agreement.

Since March 2018, the China-U.S. trade frictions have intensified, producing far- reaching economic and trade impacts on China, the United States and the world at large. The trade pattern in the Asia-Pacific region has changed, as the U.S. exports to China fell sharply, and the exports from China to Latin America and Australia (resource-rich regions that are closely related to China's economic growth) also remained bleak. Europe has become China's first export destination, and China's exports to ASEAN economies (especially Vietnam) and Africa have retained high growth. The phase one China-U.S. economic and trade agreement will help the global economy and trade to recover and promote healthy development of the shipping industry.

2. Forty-six economies sign Singapore Convention on Mediation

Forty-six economies including China, the United States, Korea, India and Singapore signed the "United Nations Convention on International Settlement Agreements resulting from Mediation" (also known as the "Singapore Convention on Mediation") on August 7, 2019. The Singapore Convention on Mediation was formulated by the United Nations Commission on International Trade Law (UNCITRAL) over a four- year period and was reviewed and adopted by the General Assembly of the United Nations in December 2018. It aims to address cross-border implementation of the settlement agreements reached through international commercial mediation.

In addition to litigation and arbitration, the Singapore Convention on Mediation has further improved the mediation system for resolution of international commercial disputes, strengthened the international rule of law in the settlement of commercial disputes, and highlighted the value of multilateralism. Meanwhile, the signing of the convention has further enhanced international maritime laws and maritime arbitration rules and complemented the current international mediation legal framework, which will contribute to forging harmonious international economic relations.

3. Merger of Hyundai Heavy Industries and Daewoo Shipbuilding

Korean shipbuilding giant Hyundai Heavy Industries (HHI) and Korea Development

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2018 APEC Port Development Report www.apecpsn.org 118 Bank (KDB) signed a formal agreement to acquire Daewoo Shipbuilding & Marine Engineering (DSME) in March 2019. According to Clarksons, the new company after the merger of Hyundai Heavy Industries and Daewoo Shipbuilding will have a 21.2% share in the global shipbuilding market. This may be the world's largest shipbuilding company.

Korean shipbuilding is a cornerstone industry of economic growth and job creation in Korea. However, the competition with peers in the past few years has resulted in recession and ship oversupply across the industry, which has aggravated the sector. With this merger, Korea's local shipbuilding industry will carry out reform led by two major players, as so to better compete with peers.

4. Getting to Zero Coalition was founded

The Getting to Zero Coalition was announced at the 2019 UN Climate Action Summit in New York on September 23. It will be committed to promoting the decarbonization of the international shipping industry. The alliance is made up of leading companies in the maritime, energy, infrastructure, and financial sectors, and received strong support from decision makers in government authorities and intergovernmental organizations.

Around 80% of global trade volume is transported through international shipping, and the annual greenhouse gas emissions from such activities account for 2% to 3% of the global total. If no measures are taken, greenhouse gas emissions are expected to increase by 50% to 250% by 2050. Shipping promotes global trade development, but decarbonization measures are also necessary. The establishment of the Getting to Zero Coalition will signal a greater step forward toward the shipping industry's goal to achieve zero carbon emissions.

5. Global Shipping Industry Chain Cooperation Initiative released

Representatives of 14 companies and industry organizations, including COSCO Shipping, Maersk Group and Evergreen Marine, jointly launched the "Global Shipping Industry Chain Cooperation" initiative on November 6, 2019. The initiative covers the following four points: First, jointly support trade and shipping facilitation, and promote the sustainable growth of trade. Second, jointly promote the sustainable development of the industry, avoid disorderly competition and inefficient investment, and improve the efficiency of resource allocation. Third, improve the customer service level to stay true to the essence of shipping services. Fourth, jointly respond to development challenges and develop response schemes that conform to the direction of industrial development and reflect the interests and concerns of all parties.

Currently, shipping industry, as the main carrier of world trade, bears more than 80% of the world's trade volume, being a main driver of economic globalization. However, it is also faced with unprecedented impacts from internal and external factors such as protectionism, geopolitics, information technology boom, and environmental protection. It has become difficult for individual enterprises or industries to cope

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with such challenges own their own, and industrial-chain-based operations and cooperation have become a general trend recognized by all.

6. Four shipping giants established digital container shipping alliance

Four shipping giants, namely A.P. Moller-Maersk, Mediterranean Shipping, Hapag- Lloyd and Ocean Network Express (ONE), established the Digital Container Shipping Alliance (DSCA) on April 10, 2019, striving to develop common digital information technology standards to improve efficiency of liner companies and customers. DSCA is headquartered in Amsterdam, the Netherlands. A.P. Moller-Maersk, Mediterranean Shipping, Hapag-Lloyd and ONE rank first, second, fifth and sixth, respectively, globally in terms of capacity, which translates into the alliance's nearly 50% share of the world's total capacity.

The biggest pain points in the shipping industry are the many departments and processes involved, and the less uniform data standards between departments. One of the first DCSA's projects is to establish industry standards to address the lack of common bases for technical interfaces and data, so as to promote the standardization, digitization and connectivity of container shipping, and coordinate information exchanges between shipping companies, customers and third parties. Through ship-sharing agreements, shipping companies can transport their cargoes using ships of others enterprises.

7. Nine companies sign the GSBN agreement

Nine port and shipping companies formally signed the Global Shipping Business Network (GSBN) service agreement with CargoSmart, a provider of shipping management software solutions, on July 12, 2019. Signatories included CMA CGM, COSCO Container Lines Co Ltd, and COSCO Shipping Ports, Hapag-Lloyd, CK Hutchison, Orient Overseas (International) Limited, Qingdao Port Group, Port of Singapore Authority and Shanghai International Port Group. According to the agreement, the signatories promised to jointly establish a non-profit joint venture (GSBN) dedicated to the digital transformation of the shipping industry. They will invest resources and fully support the preparations for GSBN establishment, including the approval of regulations, competition laws and antitrust laws required to establish the GSBN. CargoSmart will provide software solutions and services for GSBN after its establishment. GSBN, meanwhile, will provide a collaborative data platform for shipping supply chain parties, and stay committed to accelerating technical innovations and developing solutions by providing reliable and secure data.

After establishment, GSBN will offer more transparent and visible information for freight transport with reliable data. On the basis of a data management framework, GSBN will also lead the development of user cases, data access APIs and application development blueprints. GSBN will be established in a unique form of non-profit joint operations, and set up an open and transparent mechanism to promote the transformation of global supply chains. The GSBN platform strives to fairly recognize the values that data providers bring to technical solutions, and seek

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2018 APEC Port Development Report www.apecpsn.org 120 a balance of interests between data providers and data users.

8. China introduces new policy on crew tax cuts

The executive meeting of the State Council of China on November 20, 2019, decided, based on international practices, to include salaries and income of ocean- going crew members who sailed on ships for more than 183 days a year into the taxable income at 50% of the amount from January 1, 2019, to the end of 2023, as part of the effort to promote the maritime industry development and meet the fast- growing needs both at home and abroad for marine products. According to data from China's Ministry of Transport, as of the end of 2017, there were more than 1.48 million registered crew members nationwide, the number ranking first in the world. In 2017, 139,000 seafarers were dispatched to overseas areas, ranking second in the world. In the same year, the number of seafarers with a certificate of competency and qualification was 300,000. According to a previous survey of Status Quo of Seafarers' Labor Relations by Chinese Seamen and Construction Workers' Union, Chinese seafarers spend an average of seven to eight months on board. As a result, most seafarers sailing abroad are covered by this preferential policy.

More than 90% of China's foreign trade transport is conducted by shipping every year. Seafarers are direct practitioners of shipping activities and are a special group, with their occupations highlighting international, mobile and technical characteristics. They spend about eight months a year on the sea, working and living in small, enclosed and bumpy cabins, far away from land and families. They are the only professional group that follows mandatory international labor standards set by the International Labour Organization (ILO).

9. SoftBank leads investment in digital freight forwarding Flexport

Flexport received a US$1 billion investment from SoftBank on February 21, 2019. Other investors included Flexport's existing investors Founders Fund, DST Global, Cherubic Ventures, Susa Ventures and SF Express. Flexport's valuation will hence reach US$3.2 billion.

Currently, the freight forwarding industry still falls to the relatively traditional shipping service category. Flexport's financing will further promote the modernization of the freight forwarding industry. All participants in global trade, including importers, exporters, shipping service providers, airlines, warehouses, trucking companies and customs, will be gathered on the same platform through digital means, so that everyone can easily participate in global trade and have an unprecedented high- quality experience in the freight forwarding industry, which is an epoch-making step for the freight forwarding industry.

10. China and Russia signed the cooperation agreement on Arctic shipping cooperation

China and Russia signed the "Joint Statement on Developing Comprehensive

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Partnership and Strategic Interaction Entering a New Era" on June 5, 2019. The statement mentioned promoting Sino-Russian sustainable development cooperation in the Arctic region, expanding the Arctic waterway development and utilization and cooperating in the Arctic region's infrastructure, resource development, tourism, ecological and environmental protection on the basis of respecting coastal rights and interests. In response to the Sino-Russian joint statement, COSCO Shipping and Novatek, Sovcomflot and Silk Road Fund inked the "Agreement in respect of the Maritime Arctic Transport LLC" in St. Petersburg, Russia, on June 7.

The signing of the agreement is an important measure for China and Russia to jointly promote the sustainable development of the Arctic and actively participate in the commercial operation of the Arctic waterway. The agreement will create new opportunities and inject new vigor to joint development and utilization of the Arctic routes by companies from both economies. According to the quartet agreement, all parties will establish a long-term partnership to provide joint development, financing and implementation of full-year logistics arrangements for the shipping activities from the Arctic zone of the Russian Federation to the Asia-Pacific region, and organize the freight of cargoes between Asia and Western Europe via the Arctic shipping routes.

4.2 Review and Comment on 10 Major Port Events in Asia- Pacific Region in 2019

1. COVID-19 pandemic undermines port development in the Asia-Pacific region

The novel coronavirus outbreaks have impacted all the economies in Aisa-Pacific region. Against the backdrop of the global manufacturing contraction, trade volume declines, and unclear China -U.S. trade relations, the pandemic dealt a blow to Asia's port industry.

In terms of pandemic-related policies, China's ports subject to more restrictions were mostly located in Hubei province. Meanwhile, due to the rollout of policies to extend container exemption periods, reduction of demurrage charges and terminal storage charges at ports across China, it is expected that China's ports will face certain pressure on revenue and profitability in the short term. The United States, Singapore, Malaysia, Australia and other economies issued 14-day temporary policies to control direct calls to Chinese ports for operations. However, due to the difficulty to unify the pandemic prevention policies and measures among the economies in the Asia-Pacific region in the short term, the development and impact of the pandemic are still uncertain.

Before the pandemic ceases, ports remain at the forefront of international fight against the pandemic. Because the COVID-19 was primarily transmitted through contact between people, it was more effective to reduce the labor intensity of terminal workers by using automation and semi-automation technologies, in addition to minimizing personnel contact and controlling dense-populated places from a procedural perspective, to ultimately stop the spread of the pandemic. Affected by the pandemic, ports in the Asia-Pacific region may improve ports' risk responses

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2018 APEC Port Development Report www.apecpsn.org 122 by strengthening automation equipment development and information and communication technology application.

2. Ports in the U.S. make joint appeal for port maintenance tax

The American Association of Port Authorities (AAPA), together with more than 100 ports and related organizations in the United States, wrote to the House of Representatives and Senate regarding the source of Harbor Maintenance Tax (HMT) in June 2019, calling on the U.S. government to implement legal regulations as soon as possible to determine an HMT source solution, so as to reduce port charges and enhance the competitiveness of U.S. ports. As the U.S. government threatened to impose 25% tariffs on China-to-U.S. cargoes worth US$300 billion starting from 2018, more worries and opposition were heard in the United States. Several major ports wrote to trade representatives, warning that the U.S. tariff policies and China's countermeasures would pose a major and long-term threat to the economy and result in lasting damage to the U.S. west coast economy as a whole.

Ports, as a main gateway of trade, are not only subject to the implications of trade policies and taxation systems, but their own taxes and management fees also affect port competitiveness. Given the current wide stretch of logistics networks, main considerations of carriers and shippers for port selection include the availability of port equipment, the convenience of cargo collection, distribution and transportation, and whether the cargo handling charges are low. The collection of port maintenance tax increases the logistics cost of carriers and shippers, and reduces ports' price competitiveness as well.

3. China reduces port charges

To further streamline and standardize service charges of port operations and enhance the sense of burden reduction among companies, China's Ministry of Transport, together with the National Development and Reform Commission of China, revised and issued the Administrative Measures for Port Charge in March 2019. The revision reduced cargo port fees, port facilities security charges, pilotage dues, and tugging fees for domestically shipping ships, with reductions in the four items subject to government pricing and referential pricing by 15%, 20%, 10%, and 5%, respectively, and reduced the number of service charges for port operations from 15 to 11.

The Ministry of Transport and the National Development and Reform Commission of China have rolled out a series of port price reform policies since 2014. The service charges for port operations have been trimmed from 45 items to 11, and the nearly 200 clauses in two regulations and nine regulatory documents on port charges were streamlined to 50 clauses. With the port charging items and clauses trimmed and three rounds of reductions of port charges, companies' logistics costs have been further reduced. In view of the current significant improvement in overall charges of import and export processes, "precision cost reduction" should be implemented to reduce the import and export compliance costs. It is more critical to scientifically analyze the charges of all import and export processes, pin down the problem, cut the cost of institutional transactions, streamline the formalities, optimize the process

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to reduce the logistics costs of import and export companies in the real sense, and strengthen the promotion and guidance of charging policies.

4. Ports of Los Angeles-Long Beach sign MoU

To respond to the competition from neighboring ports and strengthen the cooperation between the two ports, Ports of Los Angeles and Long Beach discussed the signing of a memorandum of understanding (MoU) in 2019, and submitted the final advice on the MoU to the port committees of the two ports. The MoU primarily approached cooperation enhancement of the two ports in terms of services at onshore transshipment points, predictability of cargo transshipment, connectivity of the supply chain, development and training of labor resources, network security and evaluation indicators. In addition, the two ports will seek to track the following four main indicators: ship's long-term compliance with the shipping schedule; the length of cargo stay at the terminal; the truck turnaround at the terminal; and the time spent for transferring cargoes from the ship to the train, so as to increase the operational efficiency and cargo transport predictability of the two ports.

The Ports of Los Angeles and Long Beach have commenced partnership since 2013 under an agreement of the U.S. Federal Maritime Commission (FMC). The agreement aimed to establish and implement the following strategies: improve port- related transport infrastructure, improve cargo transport efficiency and port handling capacity, improve safety levels, and reduce air pollution caused by ports. However, because Ports of Los Angeles and Long Beach are managed by two different port authorities, lacking binding laws and regulations, the cooperation between the two ports has long been limited. The signing of the MoU was primarily in response to the competition from ports on the east coast of the U.S. east coast and hub ports in Canada. The participation of stakeholders and the cooperation of port authorities will constitute the basis for cooperation between the two ports in view of the production pressure.

5. Pilot application of 5G technology at ports

With the information technologies evolving and the intelligent process gaining speed, port construction is attaching more importance to technological innovation and application. Qingdao Port in China and Huawei signed a strategic cooperation agreement in June 2019, pledging to jointly develop an intelligent industrial zone, 5G and cloud computing technologies to contribute to the digitization of Qingdao Port. Through R&D, Qingdao Port's automated terminal has successfully achieved 5G-based automatic control of quay cranes, supporting grabbing and transporting containers through wireless network connections, making the port the world's first to enable 5G-powered remote crane operation control and land-side fully automated container collection in the real production environment. It is estimated that this system can save 7,000 hours a year for the container truck drivers of Qingdao Port. The world's first 5G + AI intelligent port operation adopting the technologies and solutions provided by SAIC's 5G intelligent heavy trucks was successfully completed at Shanghai Yangshan Port in August 2019. Through the 5G-V2X Internet of

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2018 APEC Port Development Report www.apecpsn.org 124 Vehicles technology, the pain point of autonomous vehicle application at ports has been resolved. In addition, Shanghai Zhenhua Port Machinery Co Ltd, China Mobile, Vodafone and Huawei jointly released the 5G Smart Port White Paper in October 2019, which provides an in-depth interpretation of the 5G technology application in port automation and intelligent transformation.

AI, machine vision and other related functions will be used in scenarios such as intelligent monitoring of port personnel, container truck/container monitoring and identification, and AGV guidance and control in the future port intelligence process. These functions will require a high uplink speed and capacity, ultra-low latency, data isolation and other network conditions. 5G technology features high bandwidth, low latency and high reliability among others. The application of 5G technology can reduce the cost of port intelligence development, operation and maintenance, and improve the stability of communication networks at ports, which can help port equipment and production system synchronize and improve ports' operating efficiency and intelligent level.

6. Hyundai Merchant Marine 'shifts' to build new port network in the Asia-Pacific region

Against the backdrop of increasingly fierce competition in the international shipping sector and the ship upsizing trend, ZIM expanded its strategic cooperation with the 2M alliance starting from March 2019 to cooperate on some Asia–U.S. west coast and Asia–Mediterranean routes to cut operating costs and achieve scaled economy. Hyundai Merchant Marine (HMM) and THE alliance confirmed the cooperation details in July of the same year and gained the approval of the regulator to officially launch a new 10-year cooperation model from April 2020. After the agreement takes effect, various shipping alliances will adjust the existing shipping networks and capacity layouts, which will also bring new changes to the port route landscape in the Asia-Pacific region. After Hyundai Merchant Marine shifts its alliance, the 2M Alliance will lose the shipping services in seven ports in the Asia-Pacific region: Busan–Los Angeles, Kaohsiung–Long Beach, Kaohsiung–Oakland, Gwangyang–Los Angeles, Laem Chabang–Los Angeles, Laem Chabang–Oakland and Shanghai–Los Angeles. Meanwhile, the frequencies of shipping services between four ports will decrease: Busan–Long Beach, Busan–Oakland, Vung Tau–Long Beach and Vung Tau–Oakland. On the other hand, with Hyundai Merchant Marine joining, the THE alliance's port services in the U.S. west coast market will further increase: Busan– Long Beach, Busan–Oakland, Hong Kong–Long Beach, Hong Kong–Tacoma, Incheon–Los Angeles, Incheon–Tacoma, Kaohsiung–Long Beach, Gwangyang–Los Angeles and Gwangyang–Tacoma. In addition, the frequencies of shipping services between more than ten ports will also increase by one to two voyages.

In the new shipping network, ports in the Asia-Pacific region will not only compete with the surrounding ports, but will also be challenged in service capabilities. For example, ports such as Shanghai, Ningbo-Zhoushan, Tacoma, Los Angeles, and Oakland will receive more ship arrivals, resulting in congestion and cargo collection, distribution and transportation challenges. The problem may impact the decision-

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making of alliances regarding the ports of call in the future. Because ports on the west coast of the U.S. rarely received ultra-large ships before, they may trigger a new round of upgrading of infrastructure and cargo collection, distribution and transportation systems to attract cargo sources and occupy a favorable position on U.S. west coast routes. Besides, the cooperation and competition between ports will also become more frequent and fierce.

7. Hong Kong terminal operators form Hong Kong Seaport Alliance

Hong Kong International Terminals (HIT), Modern Terminals Limited, COSCO-HIT and Asia Container Terminals Limited (ACT) announced the establishment of "Hong Kong Seaport Alliance" on January 8, 2019. The alliance will provide 23 container ship berths through an operations coordination team and the shared terminal operating system, the number accounting for 95% of the berths at Kwai Tsing Container Terminals.

In recent years, Port of Hong Kong’s business has continued to contract due to increased competition from neighboring ports and its throughput capacity limitation. The establishment of the Hong Kong Seaport Alliance can better help Port of Hong Kong integrate internal resources and cope with the integration wave of the container shipping industry, as well as the pressure from the rapid development of ports in Southeast Asia and the Pearl River Delta of China in recent years. However, since the alliance controls most of the production capacity of Kwai Tsing Terminals, there exists a possibility of monopoly and rising freight costs.

8. Korean government issues Second New Port Construction Basic Plan

The Korean government released the Second New Port Construction Basic Plan for 2019-40 in August 2019. This is the second basic plan formulated by the Korean government more than 20 years after its formulation of the first basic plan in 1997. The plan envisions that Korea will build 119 new terminals at 12 ports across the country by 2040, covering an area of 39.56 million square meters. Meanwhile, the Korean government announced that it will invest 41.8 trillion won (US$35.2 billion) for the expansion of 12 domestic ports. Specifically, Port of Busan alone will receive 13.6 trillion won (US$11.4 billion), to build 21 additional berths for handling 25,000- TEU super-large container ships.

Previously, Korea, as an important gateway for the maritime industry development in the Asia-Pacific region, has been nagged by shortages of port infrastructure for many years. With the advancement of port infrastructure construction, Korea now has large ports such as Port of Busan, Port of Gwangyang, Port of Pyeongtaek, and Port of Incheon. Meanwhile, to conform to the ship upsizing trend and cargo volume rise due to trade growth, as well as to realize the strategic goal of building a global transit hub port, Korea also remains committed to such measures as expanding advanced port facilities and equipment, dredging and deepening waterways, and building Busan New Port to further elevate the attractiveness of Korean ports in the Northeast Asia region.

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2018 APEC Port Development Report www.apecpsn.org 126 9. China speeds up construction of world-class ports

China's Ministry of Transport, along with other ministries, issued the Guiding Opinions on Building World-class Ports (hereinafter referred to as "Opinions") on November 6, 2019. The Opinions eyed high-quality development, and set forth 16 port development indicators from five aspects: safety and convenience, intelligence and greenness, economic efficiency, strength of support, and advancedness worldwide. Moreover, the Opinions also clarified the key areas and short slabs of port development from the six aspects: comprehensive service capabilities of port, green port construction, smart port construction, integrated and open development, safe port construction, and port governance system, clarifying the development direction and tasks of China's ports to contribute to construction of world-class ports.

China is currently in a stage of transformation to build a modern economic system and elevate industry development to the mid-to-high-end on the global value chain. Creating world-class ports is the need for China to build a first-class industrial system, and a dominant trend of China's port development as well. After development in the past years, China has witnessed the emergence of a number of world-leading ports in terms of throughput and port companies with international competitiveness, and already has the foundation for constructing world-class ports. However, most ports in China still have gaps in terms of service functions and efficiency.

10. Ports in Asia-Pacific region compete to develop port industrial parks

With the development of extended port services in recent years, port areas have not only provided market space for logistics trade, but also laid the ground for developing port-related industries. Many ports in the Asia-Pacific region are competing to develop port industrial parks to meet the value-added service needs in international logistics and enhance the economic benefits of regional industries. The Ministry of Maritime Affairs and Fisheries of Korea released the port hinterland zone promotion plan in 2019, aiming to develop high-value-added industries and implement a model featuring global supply chain procurement, processing and value-added services. The Maspion Group in Indonesia also signed an agreement with DP World, planning to invest about US$1.2 billion in Indonesia's East Java area to build a container port and an industrial logistics park, aiming to create a modern and integrated industrial and trade logistics park to attract logistics activities to ports.

Port industrial parks center around ports, rely on economic hinterlands, and comprise a variety of comprehensive and open industrial systems. Port industrial parks, as main representatives of port-industry-city concerted development, not only constitute a basis for interconnection of industries, cities and ports as well as free flows of elements and optimal allocation of resources, but also can further optimize port functional zoning and industrial layout, so as to strengthen the driving role of regional ports in the global industry chain. Therefore, establishment and development of port industrial parks in the Asia-Pacific region are both an inevitable requirement and trend for port development.

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