As indicated by China Shipping Prosperity Reports (2010 Review and 2011 Outlook) and (1Q11) released by Shanghai International Shipping Institute (SISI) on April 12, 2011, China’s shipping industry will allow optimism with a note of caution in 2011. The shipping transport enterprises will face higher pressures, showing a slump beginning followed by a rising trend.

In the first quarter of 2011, the development of China’s shipping industry remained almost unchanged over the previous quarter, but the prosperity status of the shipping transport sector worsened dramastically. According to the reports, China Shipping Prosperity Index reached a thriving level of 102.02 points, down 11.43 points over the previous period, approaching the demarcation line. When it came to the current development of China’s shipping industry, about 24.07% of shipping enterprises recognized a sound trend, while about 52.78% deemed it rather plain. China Shipping Confidence Index stood at 107.71 points, down 24.56 points over the previous period, indicating a thriving outlook.

Fig. 1-1: Prosperity indices of shipping transport enterprises in 1Q11

1. The shipping transport industry deteriorated at large, with worsened enterprise operation over the preivous quarter. According to 1Q11 China Shipping Prosperity Index, the prosperity index of shipping transport enterprises recorded only 84.47 points, decreasing by 15.17 points over the previous period and entering into the depressing interval. It was the first downtrend since the initial release of the reports in the fourth quarter of 2009. The confidence index of shipping transport industry registered 71.15 points, plunging by 39.6 points over the previous period and sliding into the quite depressing interval. The overall industry was in a recession and gradually deteriorated.

Fig. 1-2: Shipping Transport Prosperity Index

All monitoring indicators have deteriorated to different degrees over the previous period. The prosperity index of comprehensive operational performance fell into the depressing interval.

Fig. 1-3: Variations in prosperity indices of monitoring indicators of shipping transport enterprises over the previous quarter

Shipping transport enterprises faced increasing pressures in operation. With the decline in unit freight rates and rapid rise in operating costs, the profitability space for enterprises was seriously squeezed. According to China Shipping Prosperity Index, the prosperity index of freight rates amounted to 57.35 points, decreasing by 27.35 points into the quite depressing interval. The prosperity index of operating costs stood at only 29.40 points, down 27.30 points into the rather depressing interval, having stayed depressing for four consecutive quarters. Thus, the considerable fall in freight rates and continuous rise in operating costs brought soaring pressures to shipping transport enterprises in operation.

Fig. 1-4: Prosperity indices of freight, operating costs and profitability of shipping transport enterprises

The shipping transport market saw the risk of supply-demand imbalance. The willingness to invest in shipping capacity was still high despite the overcapacity in the shipping market. Although the space utilization fell significantly, enterprises continued to deploy additional shipping capacity. According to China Shipping Prosperity Index, the prosperity index of shipping space utilization was 67.45, at the quite depressing interval. The prosperity indices of enterprise shipping capacity and shipping capacity investment recorded 119.55 and 108.60 points, respectively, both at the thriving interval. In face of the extremely squeezed profit margins, the continuous investment in shipping capacity will intensify the risk of supply-demand imbalance in the shipping market.

Fig. 1-5: Prosperity Indices of Shipping Capacity Deployment, Space Utilization and Shipping Capacity Investment of Shipping Transport Enterprises

However, since most shipping transport enterprises are relatively abundant in current fund, they will continue to deploy shipping capacity for additional market share.

2. Prosperity conditions of port enterprises continued to improve

The port industry operated well as a whole. Port enterprises continued to improve their operating performance, but with a weakened intensity as weighted down by the global economy, trade and shipping transport industry. According to China Shipping Prosperity Index, the prosperity index of port enterprises reached 117.16 points, down 22.11 points over the previous period into the fairly thriving interval. The confidence index of port industry realized 149.10 points, down 25.40 points over the previous period into the quite thriving interval.

Fig. 1-6: Port Enterprise Prosperity Index

Though declining to different degrees over the previous period, most operating indicators of port enterprises stayed at the thriving interval. The prosperity indices of charges and operating costs saw slight increases. Meanwhile, the prosperity index of newly built berths and machinery investment descended by up to 64.75 points, but still at the rather thriving interval.

Fig. 1-7: Monitoring indicators of port enterprises

3. Prosperity conditions of shipping service enterprises slightly improved

The shipping service industry was slightly improved over the previous quarter, with enterprise prosperity under steady development. According to China Shipping Prosperity Index, the confidence index of the shipping service industry reached the fairly thriving level of 115.05 points. The prosperity index of shipping service enterprise stood at 106.28 points in the thriving interval.

Figure 1-8: Shipping Service Enterprise Prosperity Index

The comprehensive operational performance of shipping service enterprises continued to improve, with most indicators showing promising trends. The shipping service enterprises realized a quite thriving comprehensive operational performance prosperity index of 145.95 points. Varying increases over the previous period were witnessed in most indicators of shipping service enterprises. The prosperity conditions of business reservation, trade volume, trade price, profit-loss variation, enterprise financing, payment default, and fixed-asset investment revealed a rising trend; while that of business costs, current fund and labor demand saw slight declines.

Fig. 1-9: Prosperity indices of monitoring indicators of shipping service enterprises

China’s shipping enterprises will usher in an improved prosperity in the second quarter of 2011.

The executives of shipping enterprises held relatively optimistic expectations to the overall performance of China’s shipping industry in the second quarter, with rising confidence in operation over the previous period. They expected an improved prosperity among shipping enterprises in the second quarter of 2011.

Fig. 2-1: Predication on China Shipping Prosperity Index in 2Q11

1. The development of shipping transport enterprises will improve slightly over this quarter
In the second quarter, the overall environment of shipping transport industry will continue to deteriorate over the first quarter, but the operational performance of shipping transport enterprises will improve slightly over the first quarter. According to China Shipping Prosperity Index, the confidence index of shipping transport industry reached 80.30 points, up 9.15 points over the previous period but still at the fairly depressing interval. The prosperity index of shipping transport enterprises record an estimated 110.51 points, up 23.04 points over the present period, leaping from fairly depressing to the fairly thriving.

Fig. 2-2: Shipping Transport Enterprise Prosperity Index

The shipping transport market will still be under intensives pressures. In spite of varying recoveries in comprehensive operational performance, space utilization and freight rates among shipping transport enterprises, the soaring operating costs and continuous deployment of enterprise shipping capacity will definitely lead to greater pressures on the shipping market. Being worried about the industry outlook, enterprises will maintain adequate current funds to avoid risks, which in turn causes continuous increase in enterprise assets and liabilities.

Fig. 2-3: Prediction on prosperity indices of monitoring indicators of shipping transport enterprises

2. The operational performance of port enterprises and the overall industry environment remain prosperous. According to China Shipping Prosperity Index, the prosperity index of port enterprises is estimated to be quite thriving at 114.83 points, down 2.33 points over the present period. The confidence index of port enterprises is forecast to be 150.65 points, up 1.55 points over the present period into the rather thriving interval.

Fig. 2-4: Port Enterprise Prosperity Index

Most indicators of port enterprises will continue to improve. Some indicators of port enterprises will see varying declines over the present quarter, but still at the thriving interval. The operating costs, assets and liabilities, port throughput, and berth utilization are expected to continue to rise. The charges tend to stabilize. A remarkable rise in enterprise profitability is therefore expected.

Fig. 2-5: Prediction on prosperity indices of monitoring indicators of port enterprises

3. The development of shipping service enterprises and the overall industry environment will continue to improve. According to China Shipping Prosperity Index, the prosperity index of shipping service enterprises will reach an estimated 117.73 points, up 11.45 points over this period into the fairly thriving interval. The confidence index of shipping service enterprises is forecast to move to 121.00 points, up 5.95 points over the present period into the quite thriving interval.

Fig. 2-6: Shipping Service Enterprise Prosperity Index

The monitoring indicators of China’s shipping service enterprises will continue to improve. Most monitoring indicators of shipping service enterprises will witness varying rallies as compared with the present quarter. With rises in both prosperity and confidence indices, shipping service enterprises will expect an all-around improvement. However, the indices of business costs and enterprise financing will remain depressing.

Fig. 2-7: Prediction on prosperity indices of monitoring indicators of shipping service enterprises