To 'inflate' container numbers Shanghai allows free box storage

SHANGHAI International Port (Group) Co, mainland China's largest port operator by volume, has introduced a system whereby its largest clients are able to store their empty container boxes at its ports virtually for free in a bid to maintain the appearance of keeping container volume high, reports Dow Jones.

In this environment, the empty-container plan is said to allow Shanghai-listed SIPG to "inflate" its container throughput volume, which measures container volume handled rather than cargo loaded and unloaded, and cultivate goodwill with ailing clients, said the report. On the downside, the port operator loses out on storage revenue and handling fees, raising concerns about its earnings outlook.

The move comes as SIPG, the state-owned owner and operator of Shanghai's port assets, has been under pressure from Beijing's directive to develop Shanghai into an international shipping centre.

China's overall container throughput was down 11 per cent in the first four months this year, according to Credit Suisse, while heavyweight container shipping lines Cosco and China Shipping Container Lines have been reporting first quarter losses after turning profits last year.

A senior official with SIPG, who declined to be named, said there is on average around 700,000 empty containers parked at the company's ports at any one time.

SIPG is believed to have been offering the plan to its bigger clients since last November. To be eligible, container carriers must place a minimum number of containers at SIPG's ports in order to enjoy the free service. Eligible carriers don't have to pay storage fees for empty containers, and pay heavily discounted handling fees. An SIPG official, who declined to be named, said the handling fees just about cover its costs, the report said.

SIPG's free-storage service to select container carrier clients joins similar programmes at Dalian Port Co, Tianjin Port Co, and Ningbo Port Co.

(Source: News And Data)