30 Июля 2014

From:	John Keir, Ross Learmont Ltd
Email:	 john.keir@telia.com 
Date:	30 July 2014

Feast or famine.

The Summa Group has announced more details of its plans to develop the port of Zarubino in the Primorye region. In the initial phase of development, three Chinese partners are offering cargo flows of up to 17 million tons per annum, which would require the construction of specialised facilities to handle grain, bulk fertilisers, general cargo plus a separate container terminal. More than half the initial cargo flows of some 10 million tons, would be in the form of grain. However, the Chinese are also indicating a flow of up to 5 million tons of water, though it is not clear how much would be shipped in bulk and how much would be bottled. The volume of water passing through Zarubino is projected to grow to 40 million tons per annum by 2025. In addition, the Chinese side is talking of one million cars per annum plus 40,000 teu through Zarubino.

In its press release, Summa refers to an annual cargo flow 100 million tons via Zarubino. At first glance, this figure seems almost too incredible to be taken seriously. Summa had just returned from a visit to North Korea, where they intend to build a cargo handling facility, which would give both North and South Korea better access to the Transiberian Railway and the landbridge to Europe. Did the celebration in Korea get out of hand and did someone enter by mistake an extra “0” when typing the cargo flows to be used in the press release? Actually, the figures are correct and if Summa can be accused of anything, it might be of understating the potential cargo flows from N E China.

This area is roughly the same territory that was referred to in the West as Manchuria and has a population of 107 million. Northeast China is the country’s traditional industrial base, focusing on equipment manufacturing. Major industries including the steel, automotive, shipbuilding and refining industries dominate the scene. In the southern part, warm summer weather permits the large-scale cultivation of maize, wheat, barley and soybeans. These crops are much in demand in the rest of China but the region’s relative geographic isolation has led the local government to seek access to the Russian ports in Primorye. Zarubino is especially prized, as it is less than 100 kilometres from the Chinese border.

In recent years. China has embarked upon a breath-taking programme to upgrade the rail network. Not content with minor upgrades, the China has gone all out for a major revamp of the rail system that has seen the construction of high-speed rail lines right across the country. One of these lines connects the major industrial centre at Changchun to the regional centre at Hunchun, which lies on the border with Russia. This new high speed line can handle passenger trains travelling at up to 250 km per hour, which will reduce journey times to Changchun to well under four hours. The Chinese could gladly connect Zarubino to their own high-speed network if they were ever granted permission. In order to maximise the full cargo potential of Zarubino and the other deepwater ports in southern Primorye, the local rail and road infrastructure would have to undergo a major upgrade.

Volkswagen has a major production centre at Changchun and, like other local manufcaturers and producers, the Germans are desperate to find a quicker access to the major trade lanes available via the Primorye ports. From here, VW could more quickly and more reliably supply both domestic customers in Southern China as well as the growing export markets in Asia. At present, all cargoes from the North East have to compete with other Chinese producers for access to ports in Dalian to get their products to an eager client base in Shanghai and further south. These local logistical problems can only become more acute, as China is negotiating a major agricultural project with Singapore, which will see a huge increase in exports to the island state. Occupying an area of only 700 square kilometres and with a population of over 5 million, Singapore is desperately short of a secure and reliable source of food and water to feed its growing population. To this end, Singapore has entered into a long-term deal with the authorities in N E China to develop the agricultural potential of the region.

The piece of land they have chosen in N E China is more than double the area of Singapore itself. The land has been carefully mapped and researched and is regarded as one of the most fertile areas in the whole of China. Equally important, the region has vast quantities of fresh water, which is just as vital to Singapore as a reliable food supply. The Chinese can make use of Singaporean capital and research and certification institutes to increase production and raise quality at N E farms to improve both domestic as well as export products. The maize, grain, soybeans and water can then be sold to vast, captive markets in China and S E Asia, where disruption to food supplies often leads to major social and political upheaval.

One of the major political benefits to accrue from this joint venture is the credence, which Singaporean quality control will lend to the Chinese government’s push for a safe food supply. By monitoring agricultural crops from field to supermarket, customers in China and Singapore can purchase produce, which can be tracked along the full length of the supply chain. All this points to a much higher level of containerisation as foodstuffs will be transported by various modes, including road, rail and sea on their journey to the dinner plate.

John Keir, Ross Learmont Ltd.
30 July 2014

Copyright ©, 2014, John Keir