A global slowdown? ! Where do China's two most powerful terminal operators go from here?

Recently, China Merchants Port and COsco Shipping Port have released financial results for the first half of 2023.

China Merchants Port (00144.hk) achieved operating income of HK $5.805 billion in the first half of 2023, a decrease of 10.80% year-on-year; Profit and recurring profit attributable to equity holders of the Company decreased to HK $3,351 million and HK $3,325 million respectively, representing a decrease of 30.5% and 33.2% year-on-year; Basic earnings per share were 83.69 HK cents, down 34.4 per cent from a year earlier. Container throughput of 66.5 million TEU, up 0.3% year-on-year; Completed bulk and general cargo throughput of 270 million tons, an increase of 0.2%.

Cosco Shipping Port (01199.hk) achieved operating income of $689 million in the first half of 2023, down 2.2% from the same period last year; Net income attributable to shareholders of listed companies was $150 million, down 15.4% from the same period last year.

During the period, the total throughput increased by 2.2% year-on-year to 64,572,872 TEUs, of which the total throughput of the holding terminal company decreased by 6.0% year-on-year to 14,731,490 TEUs; 

Total throughput of non-holding terminal companies increased by 4.9% to 49,841,382 TEUs.

Cosco Shipping Port said in the earnings report that since 2023, the world economic recovery has been weak, and major economies have tightened monetary policies to curb high inflation, which has exacerbated the contraction of global demand. The global manufacturing purchasing Managers' Index (PMI) of new export orders continues to be in the contraction range, and the downturn in global trade will inevitably affect the growth of China's import and export. Despite the pressure, China's foreign trade is characterized by strong resilience and vitality. Under the action of various measures to stabilize foreign trade, China's share of global exports remained basically stable in the first half of 2023.

It can be said that in the context of a complex and severe external environment and a slowdown in global trade and investment, the operation of COSCO shipping port is still commendable.

According to the General Administration of Customs statistics, the total value of China's goods trade in the first half of the year was 20.1 trillion yuan, up 2.1% year-on-year. Among them, the export was 11.46 trillion yuan, up 3.7% year-on-year; Imports were 8.64 trillion yuan, down 0.1% year on year.

In the face of complex and difficult external environment, COSCO Shipping Port with the leading position in the global port operator industry, the first half of the production and operation of COSCO shipping 

port remained stable.

Similarly, in China Merchants Port, after a new round of personnel adjustment, the corporate strategy is also destined to continue and fine-tune the policy of travel in the future.

Feng Boming, Chairman of the Board of directors of China Merchants Port, said at the recent performance conference: "In the first half of 2023, China Merchants Port actively responded to the global economic downturn and shrinking demand with the general tone of seeking progress while maintaining stability, and continued to focus on endogenous growth and innovation and upgrading. In the complex economic and trade environment, the container and bulk cargo business increased steadily in the first half of the year, and the market share of major regions also increased. China Merchants Port's home port construction, scientific and technological innovation, market expansion, operation management, deepening reform, comprehensive development, performance and other aspects have achieved results, laying a good foundation for high-quality development."

In addition, Lu Yongxin, managing director of China Merchants Port, also said that the global economic uncertainty increased in the first half of 2023 and the economic recovery was weak. Affected by factors such as continued geopolitical friction, high inflation and high inventory inhibiting consumer demand in developed countries, interest rate hikes in Europe and the United States slowing down the growth of investment and expansion in emerging markets, and a new round of tussle between China and the United States in the high-tech field, global port growth has slowed down overall.

Although the strategy of China Merchants Port and COSCO Shipping Port in the strategic layout of the port is different, the track is the same, and the same is backed by the Chinese economy and global trade.

From the perspective of shipping development status and trend, in the first half of 2023, the contradiction between supply and demand in the consolidated shipping market has intensified, the volume of consolidated cargo has declined slightly, the supply of shipping capacity has accelerated, the newly built container ships have entered the centralized delivery period, the freight rate is at the bottom after the rapid decline since the second half of 2022, the freight rate of Europe and the United States has fallen below the average in 2019, and the profit expectations of shipping companies have been significantly lowered. The consolidation market pattern is facing adjustment. In the long run, the concentration of the international shipping market will remain high, and the development trend of large-scale ships, operation alliance, intelligent and low-carbon shipping, and full-process logistics will continue, which will have a long-term and far-reaching impact on port development, especially on the international hub port to further improve the service level and build an efficient, convenient, resilient and green gathering and distribution system. The development of new forms of logistics has put forward higher requirements.

From the development of the port industry itself, in the first half of 2023, affected by the slowdown of China's import and export growth, China's port throughput growth is under pressure. In the long run, the uncertainties of global economic growth are increasing, China's economic growth and exports are still resilient, the global industrial chain and supply chain continue to reshape, and the port industry will inevitably be affected. The alliance of shipping companies and the upsizing of ships will further highlight the status of hub ports, reduce the dependence of non-basic ports, and intensify the all-round competition of international hub ports. The synergistic effect of multimodal transport between ports and hinterland will be strengthened, and a stable competition and cooperation relationship between ports will be established to jointly promote the high-quality development of port integration in the region. The development of new business forms of port and shipping logistics is booming, and the port has a large space for the development of new business forms such as digital platform business, e-commerce logistics, new trade, and clean energy supply. The application chain of new technologies in the field of port and shipping logistics will be further expanded, relying on 5G, artificial intelligence, cloud computing, Internet of Things, big data, blockchain and other new generation information technologies, will further enhance the level of digitization and automation of ports, create a scientific and technological innovation ecosystem, promote the construction of a digital ecosystem of ports and shipping, and empower the high-quality development of the port industry.

In other words, whether it is the Chinese port as the main battlefield or to go out as the latest strategy of China Merchants port, COSCO shipping port, will face the impact from the international market and geopolitical pressure, the future port for Europe and the United States and other developed countries mergers and acquisitions will no longer be easy, to Africa, India, South America and other emerging markets port investment logic is becoming a new trend.

With the ups and downs of the global economy, the two port operating companies can only actively grasp the opportunities of emerging markets, regional markets and third countries represented by RCEP, and explore the investment opportunities of key hub ports and core supply chain resources behind the terminals. Improve the management level, cultivate the construction of echelon talents, incorporate green and low-carbon into the values of operation management, deepen the digital intelligence into the whole chain of operation management, and accelerate the pace of digital transformation; Continue to promote the construction of smart ports, strengthen the deep integration of artificial intelligence and traditional terminal business, and promote the large-scale application of unmanned card collection operations; Strive to build a green and low-carbon port, and promote the use of green and low-carbon projects such as photovoltaic; Only by promoting the iteration of terminal equipment, accelerating the pace of green, low-carbon and smart transformation, and creating a green terminal benchmark, can we truly become an excellent international port operator.

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