Dalian: Port overcapacity in China is an increasing threat as the economy slows down and regional development and parochial pushes for logistics primacy have been at odds with real growth rates for many years.
The latest city to be under the overcapacity spotlight is the northeast port city of Dalian, where a giant new port development is under scrutiny, and may be in trouble, having kicked off construction without getting official blessing from central authorities.
The new Taipingwan port of Dalian, which is currently under development, could intensify competition between Dalian Port and Yingkou Port, the top two ports in Liaoning, and potentially lead to overcapacity in port resources in the province, Chinese financial media Yicai has reported.
The construction of Taipingwan Port, which is located in the north of Dalian, started in October 2012, and will become a main port area in Dalian with annual handling capacity of 300m tons upon competition at the end of 2022. A 300m ton increase in the city’s port capacity is immense – last year’s throughput in Dalian was 428m tons. Total investment on the new project is estimated at RMB200bn ($322m).
Dalian Port Group has signed financing framework agreements for the project with a number of banks including China Development Bank, China Construction Bank, Everbright Bank and Deutsche Bank.
Zhao Licheng, sectary general of Dalian Logistics Association, has warned that since Taipingwan port area is located less than 100 km from Yingkou Port, the two ports almost share the same hinterland.
Liu Bin, chief director of the World Economic Research Institute at Dalian Maritime University, said that the current port infrastructure in the city and in nearby Yingkou is more than enough to digest the cargo demand in the region in the long term. “It is more important to add the value of the industrial chain,” he said.
It is also reported that the Taipingwan Port project started construction without getting approval from the authorities.
A senior official from Dalian Port confirmed that it still waiting for the approval for the project due to environmental issues and part of the construction has been suspended.
Yingkou Port notched up a 345m ton throughput last year.
Earlier this year, Hui Kai, president of Dalian Port Group, made a proposal to the central government that Liaoning should establish its own port group by integrating the port assets in the province, starting with the integration of Dalian Port and Yingkou Port.