[State-owned think tank] Shanghai Port Group: The secret of sustainable growth

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Under the premise of steady growth of the main business, Shanghai Port Group is actively promoting diversified business. In 2015, the container throughput of Shanghai Port completed 36.54 million TEUs, a year-on-year increase of 3.5%, reaching a record high. Ding Xiangming, vice president of Shanghai International Port (Group) Co., Ltd., said that the company has continuously deepened and promoted the "three major strategies" based on the "Yangtze River Strategy" and achieved positive results.


Source: Shanghai State Capital


Author: Jin Lin




In 2015, the container throughput of Shanghai Port completed 36.54 million TEUs, a year-on-year increase of 3.5%, reaching a record high. In fact, since 2010, Shanghai's annual container throughput has remained the number one in the world for six consecutive years.


Ding Xiangming, vice president of Shanghai International Port (Group) Co., Ltd., told Shanghai State-owned Assets that this year's target is 37 million TEU. “Compared with 2015, although the figures have not changed much, the pressure is not small.”


"The resources in the Shanghai area are very limited, and it is impossible to expand significantly. The rapid growth of the main business is unrealistic." Ding Xiangming told reporters that the company has continuously deepened and promoted the "three major strategies" based on the "Yangtze River Strategy" and achieved positive results.


Deepen strategy


The Yangtze River Strategy, Northeast Asia Strategy and Internationalization Strategy formulated by Shanghai International Port (Group) Co., Ltd. are continuously deepening.


Ding Xiangming said that the Yangtze River strategy is the basic strategy for the development of Shanghai Port and one of the most important strategies. The Yangtze River Basin is the most dynamic region of China's economy, with a total economic output accounting for a quarter of the country's total. This region has a large demand for logistics. "This is a win-win strategy that is conducive to regional economic development and to Shanghai Port itself. Through the Yangtze River strategy, it will expand the radiation range of Shanghai Port and serve the economic development of the Yangtze River Basin. At the same time, attract goods from the region to Shanghai Port. Transfer."


Ding Xiangming explained that the Yangtze River strategy is to expand the radiation and concentration of the ports along the Yangtze River by investing in port shipping logistics facilities along the Yangtze River. We put forward the development idea of ​​"point-line-face". "The so-called point is the port terminal. The line is the shipping. The surface is the radiation to the periphery."


For more than a decade, the Shanghai Group’s Yangtze River Strategy has achieved great results. Through continuous investment in the “Yangtze River Economic Belt” and careful cultivation of the hinterland of the goods, Shanggang Group invested in terminals and logistics in ports such as Yibin, Chongqing, Changsha, Chenglingji, Wuhan, Jiujiang, Wuhu, Nanjing, Jiangyin and Taicang. Assets, with a cumulative investment of more than 3 billion yuan, have formed a new pattern of competition and cooperation among the ports in the Yangtze River Basin. At the same time, a supporting feeder fleet was established. Based on the port's point and the Yangtze River shipping line, the Shanghai Port Group is expanding its deep hinterland within 300 kilometers along the Yangtze River to speed up the construction of a radiation-enabled logistics network.


It is understood that its Yangtze River strategy is constantly deepening. In 2015, the company defined the key points and deepening direction of the next phase of the Yangtze River strategy, further improved the investment layout of the Yangtze River Basin, signed a joint venture agreement on Chenglingji Port, and actively promoted the development of Nanjing Port, Jiujiang Port and Yibin Port.


As an investor in major ports along the Yangtze River, Shanghai Port Group actively participates in the adjustment of relevant ports. “The strategic layout of the Yangtze River has been basically completed, but each port has new changes and needs to be gradually adjusted.” Ding Xiangming explained that the company originally invested in Changsha Port in Hunan, and now Hunan has invested in Yueyang Chenglingji Port. Further integration. “Two ports, how to position and how to coordinate? It is necessary to integrate these two ports through capital as a link.” In addition, Chongqing’s main port area was originally Cuntan, and the Chongqing Municipal Government adjusted the layout according to the needs of urban development. Cuntan focuses on the development of the cruise industry and container transportation to the orchard port. "The old city of Jiujiang is undergoing renovation, and the port area should be adjusted accordingly."


The announcement issued by Nanjing Port recently stated that the listed company plans to issue a total of 106.04 million shares to the controlling shareholder Nanjing Port Group and Shanghai Port Group, and purchase the Nanjing Port Longtan Container Co., Ltd. (referred to as Longji Company), which is held by the listed company, totaling 54.71. % equity. “Different ports are being adjusted according to development, which means that our investment along the Yangtze River is constantly improving.”


The Northeast Asia strategy is mainly around the construction of Yangshan Deepwater Port. "This national strategy solves the problem of insufficient conditions of the original navigation channel in Shanghai. With the conditions of deep water, it can accommodate large container ships. With the construction and commissioning of the Yangshan deep-water port, the port plays a role in water and water transshipment and international transit. At present, the Yangshan Port International Transfer Ratio is nearly 10%, the water and water transfer ratio is over 50%, and the international hub port status is stable.


The acquisition of part of the equity of Jinjiang Shipping by Shanghai Port Group is also regarded as the implementation of its “Northeast Asia Strategy” and “Yangtze River Strategy”. On July 13, last year, Shanghai Port Group issued an announcement. The board of directors agreed to acquire a total of 79.2% of the shares of Jinjiang Shipping in cash. The corresponding purchase price does not exceed 1.94 billion yuan. Shanghai Port Group became the actual controller of Jinjiang Shipping. The acquisition of Jinjiang Shipping's equity will have a positive impact on the company's increase in feeder transportation business and increase container throughput.


At the same time, after the Shanghai Port Group acquired part of the equity of Jinjiang Shipping, the shipping business will have synergies. Shanghai Haihua Steamship Co., Ltd., a wholly-owned subsidiary of Shanghai Port Group, is mainly engaged in the operation of container liner services. It also covers shipping agents, freight forwarding, container transportation in the Yangtze River Coastal Line, container leasing, crew service and other services, and establishes Shanghai as the center. , a container liner service network that radiates to ports in Japan, Taiwan, Hong Kong, Vietnam, Thailand and other countries and regions. From the perspective of Japan's route share, the capacity is more than 10,000 TEU. After acquiring part of the equity of Jinjiang Shipping, Shanghai Port Group can use this to integrate the near-ocean routes starting from Shanghai, ranking first in the Shanghai-Japan offshore route with a market share of approximately 31%.


International expansion


In the context of the “Belt and Road”, the international strategy of Shanghai Port Group has received much attention. At present, Shanghai Port Group is actively seeking overseas investment, construction or operation of container terminals. Shanghai Port Group hopes to become a global terminal operator by continuing to implement domestic and international terminal investment and mergers and acquisitions.


In May 2010, Shanghai Port Group successfully acquired a 25% stake in Maersk Group's Zeebrugge terminal in Belgium, becoming the second largest shareholder of the company. At the same time, the Shanghai Port Group is stationed in some senior management personnel including the deputy general manager and actually participates in the daily operation of the terminal. Ding Xiangming introduced the progress of the project to the reporter. Due to the overall situation of the European economy, the shipping company adjusted the route and affected the operation status of the port. "However, the situation is getting better."


In March last year, Shanghai Port Group won the bid for the Israeli Haifa New Port and obtained 25 years of operation rights. According to the data, Haifa New Port is expected to be put into operation in 2021.


Ding Xiangming introduced that this is a “green land port” project, which is a new port project. "The infrastructure construction is completed by the Israeli side, that is, the part below the surface of the pier such as piling. After the completion of the basic part, we will hand over to us for follow-up construction and operation."


Ding Xiangming introduced that Shanghai Port Group has clear international goals and expectations. First of all, the Group's vision is to become a global terminal operator with a global network and layout of port operators. In business, it forms radiation to both international and domestic markets. "I hope that we can promote the international operation and control system through internationalization." He explained that this system includes investment system, business management and control system, and personnel management and control system.


The internationalization process of the Shanghai Group is both positive and cautious. "No matter whether it is the strategy of the National Belt and Road Initiative or the needs of the Group's own development, it is necessary to actively promote the internationalization strategy. However, the global port market is also facing structural adjustment and there is a situation of regional overcapacity. Therefore, We are very cautious in the choice of the port. We cannot invest in investment, but we should consider it around the expected goals.” Ding Xiangming analyzed that projects with insufficient regional economic development are either “too high cost and no economic requirements”. The items are not suitable."


“There are two specific requirements for the selection of investment projects.” First, economic requirements require economic returns. "Of course, under the strategic premise, the requirements for economics can be chosen." The second is the requirement of security, focusing on the entire political economy, legal environment and social environment of the region and country where the investment project is located. “Including the safety of investment assets and the safety of management expatriates.” The process of project identification is also very strict, including due diligence, project evaluation, feasibility analysis, demonstration, and strict decision-making procedures for listed companies.


In terms of operating model, although the current Israeli project is a Hong Kong operation, “this is not our long-term model. The model we hope to adopt is a joint and cooperative model.” The joint object will be based on the characteristics of each project. The choice is to choose local port authorities or logistics companies as the main partners to better utilize local resources.


In the management of international projects, Shanghai Port Group also has a mature system. “We have strict board management procedures, and major issues require board decisions. In the later stages of benchmarking management and audit management, there are corresponding systems and arrangements to ensure the safety of investment projects.”


It is understood that under the premise of steady growth of the main business, Shanghai Port Group is actively promoting diversified business. "At the same time as the port business grows, the cost is also increasing, which constrains the growth of the company's profits." Ding Xiangming introduced. “In the future, diversified business will reach 40% or even 50%.”


“Diversity” is mainly to develop related industries such as port logistics and port finance. “Including business diversification, logistics chain extension, etc., including the introduction of logistics finance, financial leasing and other financial services. In addition, the company has invested in Shanghai Bank, invested in the formation of shipping insurance companies, financial leasing companies, etc. The company hopes to further develop through diversification Improve business efficiency and achieve sustainable development.” It is understood that the net profit of Shanghai Port Group’s mothers exceeded 6.5 billion yuan last year, and the target for this year is 6.8 billion yuan.


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