Coastal shipping slumps to historic low

China's coastal shipping sector declined to a historic low in the first half, with the benchmark China Coastal Bulk Freight ­Index (CCBFI) dropping below 1,000 points in June, and the sector is unlikely to see any ­obvious improvement in the second half, according to a posting on the website of the Ministry of Transport (MOT) on Thursday.

The latest reading of CCBFI was 968 on August 2, compared with a reading of nearly 1,100 in the same period of last year, according to data from industry portal chinaports.com.

Average freight from Shanghai to Qinhuangdao port in North China's Hebei Province has dropped to 27 yuan ($4.41) per ton in the first half, approximately the same level as that of the 1990s, while costs have risen around 10 times during the period, said the ministry.

Coal transportation accounts for a major part of China's coastal shipping, according to Chang Tao, an industry analyst at China Merchants Securities Co. But coal demand at present is not as robust as in the past years given a slowdown in power consumption.

In the first half, power consumption grew 5.1 percent year-on-year, 0.4 percentage points lower than the first half of 2012, data from National ­Energy ­Administration showed.

"On the other hand, coastal shipping capacity has been growing as some small shipbuilders are attracting new ship orders with low prices," Chang told the Global Times.

China's shipbuilders saw a 113.2 percent surge in new orders in the first half, data from the China Association of the National Shipbuilding Industry indicated.

Sluggish demand, excessive capacity as well as an overall sluggish condition in the ­international shipping sector are major reasons behind the industry's woes, and some small shipping companies may get phased out in the second half due to a capital crunch, said the posting of the ministry.

A slowdown in the international shipping is also hurting the sector. The Baltic Dry ­Index, a key index to measure international dry bulk shipping, has kept falling after a short rebound in July. Now the index stands around 1,024 points, compared with the reading of over 10,000 back in 2007.

"Some ships that used to ­focus on international routes may turn to coastal routes given the sluggish international market, which has further dampened the coastal shipping sector," said Chang.

In June, a traditional peak season for coal consumption, there were only 40 ships each day on average waiting for coal loading in the Qinhuangdao port, compared with 140 in a normal year, said the MOT.

The State Council recently released a series of measures to curb new capacity and weed out outdated capacity in the sector, which could help reduce capacity in the sector.

"Shipping companies in the sector are expected to get subsidies to dismantle old ships, which can help ease the supply glut," Zhang Yongfeng, an expert at the Shanghai International Shipping Institute, told the Global Times Thursday.

Zhang noted that a ­moderate rise in dry bulk and container freight is expected in the third quarter, but the sector will see no obvious improvement in the next two years.