On January 17, 2011, Shanghai International Shipping Institute (SISI) released the China Shipping Prosperity Report for the fourth quarter of 2010, unveiling a bleak outlook for China’s shipping industry development in 2011 as weighted down by uncertain development of global economy and substantial rise in operating costs, etc. China’s port and shipping enterprises hold higher expectations on China’s economic and trade growth than on global growth. It is estimated that the overall operation environment for shipping transport enterprises will deteriorate in the first quarter of 2011. The operational performance of shipping service enterprises will allow no optimism, forming a contrast to port enterprises which will keep improving though with a weakened intensity.

China’s shipping industry will be enveloped in the shadow of a downturn in 2011

According to SISI’s China Shipping Composite Index (CSCI), the Leading Composite Index (LCI) saw a decline of 0.12-1 point for seven consecutive months from its peak in November 2009, before climbing back amidst fluctuations from July 2010 and reaching 100.65 points in November. According to the time difference between LCI and CCI (Coincident Composite Index), China’s shipping industry in 2011, represented by CCI, will surely be enveloped in the shadow of downturn.

Fig. 1: Tend of China Shipping Composite Index

The overall development of port and shipping enterprises will improve slightly in 1Q11.

According to SISI’s China Shipping Prosperity Index (CSPI) and Confidence Index (CSCI), the operating costs of China’s shipping enterprises are expected to rise significantly in the first quarter of 2011 under the impact of the rising labor and fuel costs. However, the overall development is considered slightly promising as enterprises holding sufficient current funds.

Fig. 2: Predication on China’s shipping prosperity

The overall development of shipping transport enterprises may deteriorate. The indicators for the first quarter of 2011 presented a mixed picture. Despite a decline in space utilization, the current shipping capacity and the willingness to invest in enterprise capacity continued to rise over the previous period. The problem of overcapacity is expected to become further intensified in the future.

Fig. 3: Prosperity of monitoring indicators of shipping transport enterprises

Affected by the continuous rise in shipping capacity and operating costs, most shipping transport enterprises are pessimistic about the industry in the first quarter. The confidence index of shipping transport enterprises is expected to break the demarcation line for the first time since the first release of the index, reaching 89.00 points and entering the depressing interval. It is estimated that the overall operation and macro economic situation may deteriorate in the first quarter.

Fig. 4: Shipping Transport Enterprise Confidence Index

Port enterprises will continue to improve but with weakened intensity. Most indicators will witness varying declines in the first quarter of 2011. Except for the continuous rise in operating costs, all other indicators will improve as a whole. The prosperity and confidence indices are expected to decrease somewhat, but sill in the thriving interval.

Fig. 5: Prosperity of monitoring indicators of port enterprises

Among surveyed port enterprises, about 59% expected a sound development of China’s port industry in the first quarter of 2011, while about 38% anticipated a plain performance. The confidence index of port enterprises will reach an estimated 154.80 points, a noticeable decline of 19.70 from the present level, but still in the rather thriving interval.

Fig. 6: Port Enterprise Confidence Indexmonitoring

Shipping service enterprises will face multiple pressures. The overall performance of indicators will be not optimistic in the first quarter of 2011. The business reservation and business volume are expected to decrease. In addition, business costs will continue to rise, with charges lowered slightly, translating into a decline in enterprise profitability.

Fig. 7: Prosperity of monitoring indicators of shipping service enterprises

Affected by this, the prosperity index of shipping service enterprises will break the demarcation line, dropping to a depressing level of 99.67 points. However, the comprehensive production and operation will remain thriving as enterprises holding sufficient current funds.

Fig. 8: Shipping Service Enterprise Prosperity Index

In general, port enterprises are directly related to China’s economy and trade, and greatly influenced by China’s economic and trade development; while shipping transport enterprises and shipping service enterprises are mainly affected by global economy and market. The confidence index of port enterprises are higher than that of shipping transport enterprises and shipping service enterprises, reflecting to some extent a higher expectation held by China’s port and shipping enterprises towards domestic economic and trade growth than towards global economic and trade development.

Fig. 9: Comparison chart on shipping enterprise confidence indices

For more details, please refer to China Shipping Prosperity Report for 4Q11.
http://www.sisi-smu.org/cspi/CSPI_Article.asp?ClassID=111
Contact: Mr. Zhou Dequan, 021-65853850 to 8039 (Ext.)