Economic Analysis of Shanghai Port

GROUP MEMBERS:

• Li Zhou (043-867-118)
• Botao Lin (053-077-129)
• Mingwei Tang (038-307-138)
• Yihong Wu (014-113-138)

Introduction and Background:

1. Introduction: Shanghai port is one of the most famous ports in the world; it is also the world’s busiest trading port. Shanghai port’s foreign trade accounted for the major coastal port throughput of about 20% in China, government use Shanghai port to implement open-door policy and participate in the international economy. As statistics shown, Shanghai cargo and container throughput are among the top in the world in 2010.
2. Location: Shanghai port is located in the central China coastline. “Situated at the junction of the West/East transport route by the Yangtze River and the South/North route along the seacoast” (shanghai port).
3. Size: “Shanghai covers an area of 3,619.6km² at the mouth of the Yangtze.”(Ship technology )The total quay length of about 20 kilometers and has 293 thousand square meters of warehouses.”(Port profile). Shanghai Port is the largest port in China.
4. History: On November 17th 1843, Shanghai port was forced to operate by the Qing Government. A lot of foreign businessmen start swarmed into Shanghai. “They took notorious actions like appointment of foreign harbor master, designation of foreign vessel anchorages and berths, demarcation of apron waters, building of warehouses and yards, drug smuggling, human trafficking.”(Shanghai). This rampant phenomenon always occurs, but incompetent Qing government had no power to solve and prevent the phenomenon.

After the Qing government reforms its own institutions, Shanghai port consolidated the rights and began to focus on trade. In 1853, “Shanghai became the largest foreign trade port in China. After the 1870’s, Shanghai Port evolved into the shipping center in China where contemporary industrial clusters took shape at both sides of Huangpu River and Suzhou Creek.”(Shanghai).

At the beginning of the 20th Century, “Huangpu Fairway Bureau dredged and harnessed several sections of the Wusong Estuary and the Huangpu River so that 10,000-tonnage vessels might sail into the Huangpu River at high tide.”(Shanghai).Because a lot of investment development of the port, Shanghai port developed very rapidly. It facilitated the transport of goods; as a result China’s economy has improved dramatically.

Through more than half a century of endless efforts, Shanghai Port has become a one of the most modern and famous ports in a world. In the future, the Chinese government will continue the development of the port of Shanghai; it has become an important symbol of China.

Globalization:

Driven by open-door policy and economic globalization, the port became an important international connecting channel node. As an important port, Shanghai port is one of the most effected ports about international trade in the world. Therefore, China began to spend a lot of money and labor to develop the port of Shanghai. Under the influence of globalization, China is known as the world’s factory, most of the world’s low-cost products are made ​​in china. Moreover, Shanghai port not only maintains a good state, but it also has a perfect transportation system, as a result China developed close trading relationship with other countries. More and more international companies build factories or look for factories in China. This will stimulate the Chinese and the world economy.

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People witnessed the phenomenal growth of globalized Shanghai Port. Over the past decade, Shanghai’s throughput has increased more than two times of the original. In year 2008 to 2012, despite the economic crisis, China’s port economy is still in a rising state. Compared with neighboring countries: South Korea, Japan, Singapore, Shanghai port has a clear price advantage. This is also a reason why numerous companies choose Shanghai. Shanghai port cargo throughput currently still has steady growth of 4.9 percent average annual growth rate.

Since 2010, Shanghai is emerged as the world’s largest container port, and its containers throughput reached a record-breaking of 32.5 million TEU. Shanghai is a high efficiency, strong hinterland accessible world-class port.

Cultural Considerations:

Shanghai has different position in different times. In ancient times, from the Qin Dynasty to the Tang and Song dynasties, it gradually forms the edge of the center; from the Yuan Dynasty to the Qing Dynasty, it is in the prosperous city. In modern times, it is a Chinese mega-city. It is the largest port, the foreign exchanges base, the economic center, and most importantly one of the national cultural centers in China. Since 1949, it is still the Chinese mega-cities, China’s industrial base, the financial backbone of the 1990s in the forefront of reform and opening up in China.

Shanghai is located in the midpoint of the Chinese mainland coastline, the sea of the Yangtze River, where is on the “T” shaped intersection. After shipping developed into such geographical conditions on the advantages of the port, through the Huangpu River, the Grand Canal and the southern waterways dense spider web, Shanghai became the hub of the Yangtze River Delta foreign trade. Therefore, since the Ming and Qing Dynasties, Shanghai is one of the important foreign trade ports in China. After entering the modern history of the development of shipping and technology, the rapid development of oceanic trade, located in the Western Pacific hub of Shanghai route, ideal for port development and shipping trade of the world. Shanghai North and Tokyo, Osaka, Japan, the East and San Francisco, Los Angeles area, south of Hong Kong, Taiwan and Singapore, distances are relatively modest, after the opening of the Suez Canal, and the European transport more convenient. Remediation of the Huangpu River in the early 20th century road carried, increasing the port’s deep-water berths and shoreline, construction of a number to meet the needs of large shipping docks, warehouses and stacks, a large port of Shanghai as an international condition more perfect. Competitive factors – locally, regionally, and internationally.

SWOT Analysis:

Strengths

1. Strong market leadership: in 2010, shanghai overtook Singapore to become the busiest and largest port in the world. “China’s Shanghai port has retained its title as the world’s busiest container port in 2013 with a total throughput of 33.6m teu, up 3.4% from 32.5m teu in 2012.（shanghai)”
2. Advantageous geographical location: Shanghai port located at the front edge of the Yangtze River Delta and near major global shipping routes. It’s one of major hub port in china and the china’s most important gateway for international trade.
3. The port of shanghai is equipped with world’s biggest crane, high-tech trials and one of most advanced control systems that any containable. Moreover, they have some of best container port operators in the business.

Weaknesses:

1) The port facilities cannot cope with such an increasing volume of exports and imports.

2. Small player compared to its competitors: there is no doubt that shanghai is busiest and largest port in the world. However, compare with other competitor, Shanghai port has low port productivity.
3. In time million tons of silt washed down the Yangtze River. Because of insufficient water depth, shanghai port is unable to accommodate big ship. (except Yangshan deep water port)

Opportunities:

1) Government support: The government pay attention on shanghai port. “The China (Shanghai) Pilot Free Trade Zone (PFTZ) officially launched and the existing Yangshan Free Trade Port Area will be included in the new zone.”(Free)

2) With the global expansion of business, more and more countries need to do the trade with china and import goods from china. Moreover, most “well know” brand’s majority of its goods are assembled or made in the Chinese mainland.

3) Deep-water port started operation：Shanghai Yangshan port is able to accommodate big ship.

Threats:

1. The competition is increasing. The port of shanghai will face increasing amount of competitors from neighboring port.
2. The rising fuel price and labor price.

Successful Factors:

The geographic of shanghai port is a key factor that lead to the success of this key seaport. Shanghai port located at the front edge of the Yangtze River Delta and near major global shipping routes. The shanghai port comprises a deep water port and a river port. “With a favorable geographical location, it made shanghai port becomes a key area of development for coastal trade during the Qing dynasty from 1644 to 1912.”(The world)

The policy of government is a key factor that leads to the success of this key seaport. In 1842, China opened port to foreign trade. Throughout most of the Chinese history, Shanghai port plays an important role in import and export trade. “In 1991, the central government allowed Shanghai to initiate economic reform.” As result of this policy, the port of shanghai has developed rapidly. In 2013, the China (Shanghai) Pilot Free Trade Zone officially launched and its first free trade zone is established in China. It definitely attract foreign investor investing in shanghai. With the global expansion of business, more and more countries need to do the trade with china and import goods from china.

Competitive Factors:

Shanghai Port is the world’s busiest container port in 2010. In 2010, Shanghai also took a quarter share of China’s foreign trade. China is the largest container market in the world today. Consequently Beijing is focusing attention on Shanghai and hopes it will be a world-leading international shipping and financial center by 2020. In its 12^th five-year plan, Beijing also emphasized the importance of the development of Hong Kong’s maritime industry. The ports are considered crucial gateways: Shanghai to the booming Yangtze River Delta region and Hong Kong to the hugely successful Special Economic Zones in the Pearl River Delta region of southern China. Shanghai’s proximity to the Yangtze River Delta is expected to contribute to significant growth in port traffic driven by exports. However, with the development of the Yangshan Port approximately 27 kilometers from the coast of Shanghai, the Port has established competitive transshipment capabilities. Asia’s dominance in world seaborne trade will require the continued development of ports and bonded areas to attract associated maritime services. Infrastructure is crucial but it is not the whole story: competitive strategies and collaboration through effective government policy will help shape the future success of individual ports. Although it has been suggested that the Port of Shenzhen may overtake the Port of Shanghai by the end of the decade, Shanghai’s increasing dominance in transshipment and more generally as a maritime center makes it a crucial comparator port to Hong Kong. This working paper will first identify the key features of the ports of Hong Kong and Shanghai. In order to identify disparities and opportunities, it will examine the regulatory framework of the Port of Shanghai, including incentives for the maritime industry.

There is a substantial body of academic research concerning interaction between ports: predominantly in the fields of economics, management and transport logistics and geography. It is perhaps only through such a broad spectrum of analysis that the overall competitiveness of a port can be properly assessed–it is impossible to attribute the success or demise of a port to a single factor. Moreover, modern ports are a complex agglomeration of stakeholders including terminal operators, regulatory bodies, logistics companies, shipping lines, and many more. Although it is the intention that the present working paper focus on two specific aspects of maritime competitiveness, namely governmental regulation and policies, the wealth of discourse on port competition and integration is instructive and reference will be made where relevant.

Process of the Seaport:

Our goods will ship to Canada from Shang Hai seaport. Our good is clothes. We are going to ship our good by container ship. We will use closed general cargo container. We decided to use FCL as our containerized service, because our goods have huge export volume. We are going to pick regional service routes as our trade routes, because we have sufficient volume to commitment of direct services between Shanghai and Canada. If we want to ship goods to Toronto, we will use Macro land bridge internationalism, because it saves time and money. We will sign clean bill of lading with master of the ship to indicating the apparent order and condition of the goods received on board.

Sustainability:

1. “Shanghai is the largest Chinese city by population and the largest city proper by population in the world.”(from)
2. “Shanghai is a global financial center, and a transport hub with the world’s busiest container port.”(from)
3. “Shanghai sits on the Yangtze River Delta on China’s eastern coast, and the main seaports area distributed along the Yellow River.” (shanghai) The Yangtze River and Huangpu River can provide fresh water for the seaport, and it is also ensures that the width of the ship into the territory and a lot of space ship anchor.
4. There are some data shows that Shanghai seaport has all kinds of harbor berths of 1140, and wharves line length is 91.6 km. Container throughput in the feeder container volume 2,026,000 TEUs, international transit boxes 785,000 TEUs, domestic container throughput of 3,137,000 TEUs. By the end of 2006, Shanghai seaport container liner route to reach 2106 flights per month, of which 498 flights are ocean routes.
5. In the first five months of 2013, Shanghai seaport handled 12.7 million TEU, but its biggest rival Singapore’s container volume was just 12.1 million TEU.
6. Because of the low labour costs, more and more manufacturers would love to set up factories in western China. Therefore, Shanghai expected the throughput’s average annual growth rate to be about 10% in the next five years.

Based on above six points, Shanghai is a big city that has great potential and sustainability of seaport in the future.

Financial Analysis:

Commodity description: clothing, T-shirt, fitted top in pima cotton jersey.

Price per piece/unit: 1.3 CAD.

Quantity of product: 10000 pieces.

Total weight of shipment Weight: 18kg/per carton*100 = 1800kg.

Total cube of shipment: 24m^3

Total Quantity: 100cartons.

Carton: 80cm*50cm*60cm

0.8m*0.5m*0.6m = 0.24m^3 0.24m^3*100 = 24m^3 = 20ft container

INCOTERM chosen: CIF and shanghai port as to incoterm 2010.

Port of loading: Shanghai

Port of destination: Montreal

Total export price: 13000CAD.

Total freight amount in Canadian dollars: ocean freight 1350CAD, inland freight 300CAD

Total: 1350 CAD.

Insurance premium (if applicable):0.8% war 0.08

Profit margin: 30%

Total/final export price (based on INCOTERM chosen):

13000*(1+15%-9%)/ (1+15%) +1650 = 13632.6087 CAD

13632.6087/ (1 – 1.1*0.0088 – 0.3) = 19748.24531 CAD

Citations

“About the Port of Shanghai.”Shanghai Municipal Transportation Commission. N.p., n.d. Web. 12Mar.2014.

“Port of Shanghai: Port Profile – Freight Statistics, Container Shipping — Dedola Global Logistics.”Freight Forwarder, Global Logistics, Supply Chain, Customs Broker – Dedola Global Logistics. N.p., n.d. Web. 12Mar.2014.

“Port of Shanghai.”Ship Technology. N.p., n.d. Web. 12Mar.2014.

“from Shanghai Pudong airport to the Westin Bund Center.”SHANGHAI. N.p., n.d. Web. 12Mar.2014.

“Shanghai.”Artistopia Music. N.p., n.d. Web. 12Mar.2014.

“Shanghai retains crown as world’s busiest container port in 2013.” Seatrade Global – Maritime News | Offshore News | Shipping News. N.p., n.d. Web. 25 Feb. 2014.

“free trade zone raises hopes-shanghai.” BBC News. N.p., n.d. Web. 9 Mar. 2014.

“PortArea .com | World Leading Port & Agent Center – Port of Shanghai.” PortArea .com | World Leading Port & Agent Center. N.p., n.d. Web. 25 Feb. 2014.

“WPS – Port of Shanghai review.” World Port Source. N.p., n.d. Web. 9 Mar. 2014.

“The world’s busiest, handles 736m tonnes every year.” Mail Online. N.p., n.d. Web. 9 Mar. 2014.