Shanghai, Ningbo punished for violating anti-monopoly law

Four major Chinese ports have been found violating the anti-monopoly law: Shanghai International Port (Group) Co. Ltd., Tianjin Port (Group) Co. Ltd., Qingdao Port (Group) Co. Ltd. and Ningbo Zhoushan Port Co. Ltd. On 15 November 2017, China’s National Development and Reform Commission (NDRC) held a press conference, where Meng Wei, an NDRC spokeswoman, told about the anti-monopoly investigation conducted by the commission and the Ministry of Transport since mid-April 2017, which had revealed cases of restricted market competition and unfair trading practices damaging the interests of shipping companies, informs Xinde Marine News. The NDRC has ordered these ports to lower their container handling fees by 11-21% as from 1 January 2018.

The main examples of the revealed unfair practices include inducing the shipping companies to use tugboats, tallyings, shipping agents and other services provided by the ports’ own subsidiaries, thus dividing the market between the selected companies. Secondly, some ports charge higher handling fees for loading/unloading operations with local foreign trade containers than with international transit containers. Thirdly, many ports, taking advantage of their dominance in the relevant markets, impose mandatory services, unreasonable terms, loyalty provisions and other unfair trading conditions into the contracts with shipping lines.

Now the ports are ordered to open fully the market of tugging, tallying and shipping agency services as well as immediately abolish unfair contract terms.

Besides, the 4 ports will have to reduce their import/export handling charges for non-transhipment containers: Shanghai from the current CNY 595.5 to CNY 480 per TEU (-19.4%), Ningbo-Zhoushan from CNY 620.53 to CNY 490 (-21%), Qingdao from CNY 575 to CNY 480 (-16.5%) and Tianjin from CNY 530.3 to CNY 470.3 (-11.3%). According to the NDRC, this decrease in port charges could save around CNY 3.5 bln (USD 527 mln) on import and export logistics costs each year.

Following this news, Moody’s Investors Service has commented that the announced reduction of the handling tariff for import and export containers is credit negative for Shanghai International Port (Group) Co. Ltd., as it will negatively impact the Group’s profitability and cash flow generation from 2018 onwards. Moody’s estimates the fall in the Group’s container handling revenue by CNY 1-1.5 bln (up to USD 226 mln) in 2018, resulting in a lower gross profit margin of 52%-53% for this business segment when compared with the 57% achieved in January-June 2017. However, this will not have an immediate effect on SIPG’s A1 issuer rating, the ratings outlook currently remains stable, notes Moody’s.

Shanghai International Port Group is the dominant player in the port of Shanghai, which is in turn the largest container port globally by throughput volume. The company handled 29.9 mln TEU in the first 9 months 2017.