YANGTZE RIVER World Report - The Upper Reaches Section Three: Upper Reaches a. Overview of the Upper Reaches I Companies are relocating westward to the Upper Reaches; examples include Hewlett Packard, APL and Maersk. I Upper Reaches container traffic is expected to grow more than four times 2009 throughput by 2015, a CAGR of 26.9 percent. I Three port groups are driving this growth: Sichuan Port Group, Chongqing Port Group and Shanghai International Port Group. I Financial crisis will expedite the westward movement as costs rise in coastal regions and as companies seek to cut costs. I Most Upper Reaches container movement is direct to Shanghai via either the Waigaoqiao or Yangshan terminals in Shanghai. I Upper Reaches infrastructure is being rapidly built up to support port growth, while rail intermodal is lagging several years behind and is not expected to represent a significant portion of Upper Reaches container movements until at least 2015. I Chongqing government will subsidize logistics companies which move into one of the development zones. n Container throughput along the Upper Reaches of Guangyuan Ankang UPPER REACHES the Yangtze River (from Yibin to Wanzhou) is 316 u 108 F anticipated to grow significantly as indicated by 212 massive capacity additions now in planning or Sichuan 210 Mianyang actual construction. From the central government in Deyang Beijing down to local city governments, a significant g River Chengdu n Nanchong Wanzhou westward migration of investment, manufacturing li Suining Jia 318 Yangtze River 209 and outsourcing is anticipated as supporting the 318 318 212 210 318 development and expansion of container terminals o River u T in the coming decade and beyond. The expected Leshan Neijiang ChongqingCho ongqionnggFulingqqinngng 1) Chongqing 321 Uppergrowth in Reaches terminal design capacity gives some 108 Chongqing River n Zigong i tze River M MunicipalityMnici ipapalia Overview ang a.indication Overview of of the the growth Upper in container volumes that Y Yibin 209 H Reachesmay be coming. From total TEU capacity2) Chongqing of Economic 1.9 Indica- Luzhou 319 tors You million TEUs in 2009 (when 526,151 TEUs were 321 b. Economic Indicators 3) Chongqing Port Development 210 Wu 326 c.handled Port Development in the Upper Reaches), planned4) Chongqing expansion Infrastructure De- tze River g d.Transportation Infrastructure velopment 209 Y is projected to bring capacity in the Upper Reaches Yan 326 u e. Strategic Cities along the Upper Reaches 5) Chongqing Logistics Land- Chishui Zunyi to nearly 7 million TEUs in 2015 and more than 1) Chengdu Overview scape Figure 3.1: Upper Reaches of the Yangtze River (Source: Jon Monroe Consulting) 12.5 million TEUs by 2020. For argument’s6) Leading Companies sake, Located if 2) Chengdu Economic Indicators in Chongqing 3)volumes Chengdu Port hit Development capacity by those years, it would mean that a CAGR of 53.8 percent by 2015 and 33.4 percent by 2020 will have4) Chengdu been Infrastructure achieved. Development 5) Chengdu Logistics Landscape In6) Companies spite of Located the in optimistic Chengdu projections, our estimated container throughput after reviewing port plans and capacity growth is more1) Yibin conservative Overview at 2.2 million TEUs by 2015. Given the nature of changes in the Yangtze River and elsewhere in developed2) Yibin Economic Indicatorsregions of China, such as in the Pearl River Delta, this appears to be a realistic number. Labor and land costs in the3) Yibin coastal Port Development areas are rising at the same time that the global financial crisis and resulting slowdown has forced companies 4) Yibin Infrastructure Development 5)to Yibin cut Logistics costs Landscape and re-evaluate their current supply chains. In the meantime, vessel services between ports on the Upper Reaches6) Leading Companies and Located Shanghai’s in Yibin Waigaoqiao and Yangshan terminals are improving, with both transit times and costs being reduced.1) Luzhou The Overview central government is acting quickly to incentivize companies to relocate and migrate to western areas along the2) Luzhou Yangtze. Economic Indicators Given the attention and support at this critical time, a large scale migration upriver may very well occur during 3) Luzhou Port Development 4)the Luzhou period Infrastructure of the Development 12th Five-Year Plan (2011-2015). Nevertheless, capacity will lead demand for a number of years, at least through5) Luzhou Logistics 2015. Landscape 6) Leading Companies Located in Luzhou The Upper Reaches 1 Summary YANGTZE RIVER World Report - The Upper Reaches The China central government recently enacted a relocation policy to provide incentives and financial support to companies willing to relocate inland from the coastal areas. The Upper Reaches of the Yangtze River is possibly the most attractive inland region considering both cost and accessibility given improved navigation for containers. Inland locations elsewhere in China are landlocked with currently no efficient access to coastal ports with which to connect to overseas markets. Since 1997, more than 35 bridges have been built in the Upper Reaches to improve the transportation network and access to river ports from Upper Reaches land locked cities such as Chengdu. If China’s plans for port development are any indication of the future potential, the Upper Reaches cities like Yibin and Luzhou will be converted from sleepy river towns to bustling port cities. In 2009, container throughput of the Upper Reaches ports was 526,151 TEUs, but it is expected to jump to nearly 2.2 million TEUs by 2015. Key Upper Reaches Cities Four cities are highlighted in Figure 3.3 below as playing a critical role in the development of the Upper Reaches: Chengdu, Yibin, Luzhou and Chongqing. The large cities of Chengdu and Chongqing are obvious catalysts for Upper Reaches development – one being the provincial capital of Sichuan Province and the other being a standalone municipality located along the Yangtze River. Luzhou and Yibin are not as obvious though important nonetheless. Luzhou will play a key role in the new Luzhou-Yibin-Leshan Port Complex that is being coordinated and developed by the Sichuan provincial government. Though handling only 60,681 TEUs of throughput in 2009, the general port plan for Luzhou projects a container handling capacity of 3 million TEUs by 2020. Yibin is even more ambitious given its location Population 2009 GDP in even farther upriver from Luzhou and the fact it Key City in million billion RMB Importance has no container facilities operating today. Yet Chengdu 11.25 450.26 Capital city of Sichuan Province and intermodal hub of southwest China. Yibin Port officials project 4 million TEUs in spite Yibin 5.31 72.08 The westernmost emerging container port on the Upper Reaches of the Yangtze River. Gateway of south Sichuan. No. 1 in the economics index of of the fact that it only recently obtained approval south Sichuan and No. 4 of Sichuan. for the port project. In December 2008, Shanghai Luzhou 4.93 58.76 Currently, the only developed container port in Sichuan Province.The port International Port Group signed an MOU with hub of southeast Sichuan supporting the Chengdu economic corridor. Adjacent to Chongqing,Yunnan Province and Guizhou Province. Yibin city government to invest in Yibin Port which Chongqing 28.39 652.87 The largest population municipality among the four standalone municipalities ultimately will help Yibin manage this change. in China.The largest container port in the Upper Reaches of the Yangtze River. The commercial and industrial center of southwest China. The two most important cities in the Upper Figure 3.3: Key Cities of Upper Reaches (Source: Jon Monroe Consulting) Reaches that might be considered key to the development of this region are Chengdu and Chongqing. The approval in 2008 by the Ministry of Transportation of a new container port in Yibin may change the transportation landscape but has not done so yet. Luzhou Port is positioning itself to become a gateway to Sichuan Province, and thus Luzhou and Yibin will compete to shift cargo from Chongqing to their ports. It is unclear what impact they will have on the Chongqing port; however, it is not expected to be significant, as overall anticipated growth in cargo volumes in the Upper Reaches should provide ample opportunity for growth at all three ports. The terrain in the Upper Reaches presents the greatest infrastructure challenges of anywhere along the Yangtze River. High mountain passes create a logistical nightmare for the movement of goods within the Upper Reaches, while variable river water levels can complicate river transportation during the November to May dry season when water levels typically drop. Completion of the Three Gorges Dam in 2009 has made navigation along the Upper Reaches more consistent, but adequate precipitation in the Yangtze River watershed is required to ensure that water levels remain sufficiently high. When water levels do not reach sufficiently high levels, considered to be 175 m/574.1 ft above sea level, it could result in insufficient Figure 3.4: Fengjie City in the Upper Reaches (Source: Jon Monroe Consulting 2009) The Upper Reaches 3 Summary YANGTZE RIVER World Report - The Upper Reaches c. Port Development There are five ports in the Upper Reaches of the Port Draught 2008 TEUs 2009 TEUs 2008 tonnage 2009 tonnage Size Vessel Yangtze River. Three of these – Chongqing, Wanzhou Yibin -2 m/6.5 ft NA 70 7.72 mil 8.52 mil 1,000 ton and Fuling ports – are operated by the Chongqing Luzhou -3 m/9.8 ft 66,237 60,681 11.21 mil 11.64 mil 1,000 ton Port Group. The remaining two – Luzhou Port and Chongqing - 5 m/16.4 ft 434,797 416,400 14.71 mil 13.00 mil 2,000 ton Yibin Port – are operated respectively by Sichuan Fuling -5 m/16.4 ft 30,086 28,000 2.41 mil 5.50 mil 2,000 ton Changtong Port Co.