Shipping duopoly faces shake-up with new zone
Shanghai is set to allow smaller players access to container business along the mainland coast
Major mainland shipping lines that now dominate the domestic container business are set to face competition from smaller rivals following the establishment of the Shanghai free-trade zone, which allows foreign-registered vessels owned by Chinese shipping lines to carry seaborne goods between Shanghai and the other ports along the mainland coast.
Analysts said that could bring an end to what they called a "duopoly" by China Shipping Container Lines (CSCL) and China Cosco on the interport business, which was previously opened only to Chinese-registered vessels.
Although all wholly Chinese-owned companies can register their vessels in China, few - apart from China Cosco and CSCL - actually did so because not only is the ship registration process lengthy and complicated, but vessels flying the Chinese flags are subject to many restrictions on their operations and financing, and the cargoes they carry are also liable to hefty duties amounting to 33 per cent of the value of the goods.
Many Chinese-owned vessels, as a result, are registered in jurisdictions such as Hong Kong, Panama or Honduras, which charge very little or no tax.
But with Shanghai opening its domestic shipping trade to non-Chinese vessels, the hundreds of small local shipping lines owning just a couple of vessels can now hope to take a slice of the cake.
"The opening up of the market would definitely bring challenges to CSCL and China Cosco, which have long dominated the sector, although the new rule also gives the two companies advantages in better deployment of their vessels," said Kelvin Lau, a shipping analyst from Daiwa Capital Markets.
