India’s Knee Jerk Approach to China’s Maritime Dominance
The nationalist fervor prevailing in India is spilling into the maritime sphere and its nationalists visualise the 7,500 km coastline as a connecting artery with the world’s busiest shipping routes. It is perceived that China has invested heavily in Sri Lankan ports at Colombo and Hambantota. India’s maritime ambitions revolve around Vizhinjam Seaport project as a major link connecting Kerala with the country’s ocean economy. Currently 60 % of cargo vessels in the world are motherships with deep draught requiring deeper ports to drop anchor in and most of the cargo at Port of Colombo, Sri Lanka is destined for Indian ports. It has been estimated that half of the volume will be diverted to Vizhinjam seaport in its first phase. Hot on the heels of allegations against the Adani group it has acquired the right to operate it for 60 years. Th rail track network is being doubled for developing road and rail connectivity for low cost freight movement and also linking with the national waterway terminal in Kollam. The lack of an Indian domestic transshipment port compels inbound and outbound containers to take a detour to one of those regional hubs before heading to their final destination.
Strategic Advantage on Major Shipping Routes
Vizhinjam Port has an advantage as it will be 18 kilometres from the international East-West shipping route connecting Western Asia, Europe, Africa and the far east . Vizhinjam Port will be capable of handling megamax container ships of as much as 20,000 TEUs. The Indian Port of Kollam is 33 km and Kochi Port 130 km from the international shipping routes and on the other hand Port of Colombo is 50 kilometres away. Motherships berthing at Colombo port have cargo transferred from them to smaller feeder vessels which takes them to other countries. In the past motherships avoided India as its harbours weren’t deep enough to handle the vessels and docked instead at ports of Colombo, Dubai and Singapore. Vizhinjam navigational channel goes as deep as 24 meters in places. It is likely that Vizhinjam Port will divert motherships ferrying containers to other countries presently dependent on Colombo. The Vizhinjam Port is eying the international East-West shipping on the route between the Suez Canal and Strait of Malacca.
Adani Conglomerate International Outreach
The future deep sea port has been jointly developed and financed by Adani Vizhinjam Port Private Limited Group and Special Economic Zone Ltd. , the Central and Kerala State government. Adani Ports , India’s largest private sector port operator, has earmarked around $ 2.4 billion for the Vizhinjam Transhipment Terminal scheduled to be completed by the year 2030.The Adani Group is developing Israel’s Haifa port and plans to build a hub in Vietnam as part of its expanding global footprint. Excited by the magnitude of the project the Adani Group has set the process for the final phase of construction activities rolling even before completing the initial phase.
Draught
Vizhinjam Port draught of 20 meters gives it the distinction of being the country’s first automated port and deeper then Jawaharlal Nehru Port (Nhava Sheva) in Mumbai with a depth of 14 metres and Kochi Port draught of 13.8 metres. Such a draught will make it the deepest container transhipment port in India. Vizhinjam Port’s container terminal will have nine quay cranes (capable of shifting containers for a distance of 72 metres from shore) whereas the Vallarpadam terminal at Kochi , operated by Dubai Ports World, has four ship-to-port cranes.
Infrastructure Inadequacies
Transshipment refers to the action of transferring cargo from an original ship to a mother ship at a port on the way to the cargo’s final destination.The required length of the berth at Vizhinjam Port is 800 metres whereas presently it is 274 metres.The breakwater to protect the harbour from waves is designed to be 2.97 kilometres long and so far 2.39 kilometres have been completed. A 1.1 km stretch of the total 1.7-kilometre road linking the port with the highway is also pending.
Rehabilitation package on paper
The Kerala State government announced a rehabilitation package for fishermen who would lose their livelihood and ecosystem due to the port project which covers compensation for sea surges and coastal depletion as construction of the port may result in large-scale erosion of the beach , land acquisition and construction of houses, alternative livelihood, empowering women, education and geriatric care.
India’s Maritime Moves – Countering China
It appears India’s maritime goals are to secure international maritime trade currently dominated by China and in the next stage to become an alternative manufacturing hub by reducing logistics costs for cargo coming to and from the country. India’s Ports and Shipping Ministry attributes defective shipping connectivity as hindering India’s integration into the global value chain which is depicted by the fact that India’s container traffic is 17 million twenty-foot equivalent
units ( TEUs) in sharp contrast to China’s 245 million TEUs.The container stream is less then 10 % of China.
Maritime Business Parks Linked to Gulf
In another ambitious move the Ministry of Ports and Shipping is promoting trade opportunities at Nhava Sheva Business Park (NSBP) and its seamless cargo transportation, 2 million square feet of world-class infrastructure, pioneering port based Free Trade Warehousing Zones , dedicated digital trading platform, complete cargo ownership, streamlined regulations, zero import stamp duty for global suppliers , onsite Customs, 100% foreign ownership, tax benefits, re-exports and 66+ value-added services. The NSBP is linked to the Jebel Ali Free Zone. The motivation behind India’s commercial maritime policy appears to be of challenging the sway of China in cargo and container shipping.India’s policy makers seem increasingly insecure in the success of China Pakistan Economic Corridor and its global Belt and Road Initiative and China’s investment at Gwadar Port.
Trump Countering China’s Maritime Dominance
The US President Elect Donald Trump is poised to take on China’s perceived dominance in global shipbuilding as it is now second to South Korea . The stocks of South Korean shipyards staged a rally pursuant to President Elect Donald Trump professed intentions to strengthen relationship with South Korean shipyards. The US shipbuilding unions have been been demanding punitive action against Chinese shipbuilders that they accuse of receiving hidden and direct subsidies from the Chinese financial state apparatus . China’s shipbuilding industry is seen to be operating under the doctrine of Civil – Military Fusion whereby commercial ship exports are subsidised to shore up China’s military capabilities. The consequences of excessive dependence on external sources poses a risk often unseen until a maritime crisis occurs as is building up in the South China Sea and skirmishes of the Chinese Coast Guard and Philippine Coast Guard. The incoming Trump administration may introduce more regulation, tariffs, anti-trade positions and the world may witness national fleets carrying their own cargo and being provided protection by their navies. In the year 2000 China accounted for less than 10 % of global ship completion. In a decade China’s ship building industry surpassed both Japan and South Korea to become the world’s top shipbuilding nation and in the last year 18 months Chinese mothballed shipyards have been reopened, such as Rongsheng. Chinese shipyards dominated the container and bulk carrier sectors this year by securing 90 % of total container orders , 81 % of total bulk carrier orders, tanker sector at 72 % and gas sector ship building at 44 % of the global share.
European and Canadian Shipbuilding Industry
Data from Danish Ship Finance reveals that China now controls 42 % (24m cgt ) of the global yard capacity, distributed between 140 yards, and has secured 57 % of vessel capacity and it is expected that in the year 2026 around 70 % of bulk carrier vessels will be constructed in China. European and Canadian ship building industries have ganged up against the Chinese ship building industry with the Canadian Marine Industries and Shipbuilding Association seeking enacting of tariffs against Chinese origin vessels . Canada has already imposed a 100% surtax on Chinese manufactured electric vehicles, which the Canadian Marine Industries and Shipbuilding Association wants extended to Chinese built ships accompanied by express prohibition on any government entity from acquiring or leasing Chinese-built vessels.
SEA Europe, the association representing the European maritime technology industry, comprising shipyards and maritime equipment manufacturers, demanded immediate action from European policymakers to formulate a comprehensive European maritime industrial strategy claiming that China’s unfair commercial and trade practises , substantial price differentials of upto 40 % combined with advantageous financial incentives through state influenced Chinese banks has compelled European shipowners to acquire Chinese built ships. In reaction perhaps the US, Canada and Finland are actively inclined to build more polar icebreakers culminating in the so-called ICE Pact (Icebreaker Collaboration Effort) envisaged as a boom for shipyards in North America and Scandinavia.
China’s Foray into US Backyard
Credit ; BBC
Ports are essentially crucial logistic nodes in China’s 21st century Maritime Silk Road Route (MSR) grid and they were pivotal in construction of the far-reaching Belt and Road Initiative (BRI) which extended China’s economic and political influence globally. The BRI commenced in the year 2013 and presently serves as a physical infrastructure link between East Asia and Europe expanding to Latin America, Africa and Oceania . In order to consolidate the Maritime Silk Road Route and accompanying network the Chinese government embarked upon carbon emission efficiency for 39 major coastal ports in China.
Bolstered after the resounding success of China’s Belt and Road Initiative complemented by the China Pakistan Economic Corridor (CPEC) China and Peru launched South America’s first Chinese funded port in Chancay, Peru estimated to have a price tag of around $ 3.5 billion . The Chancay port and logistic complex is located 80 km north of Lima and is designed to operate as a significant hub for Chinese trade and ostensibly to promote trade connectivity between China and South American ports and hinterland. The megaport , owned by China’s Cosco Shipping Line , is touted to have the potential to establish parallel trade routes to bypass North American ports. Whilst US President Elect Trump emerged victorious on the back of election pledges of slapping tariffs upto 60 % on Chinese origin goods it consistently entrenches its maritime and trade and logistics footprint in South America to the chagrin of European, Canadian, South Korean and US maritime industries . Like the ambitious CPEC and BRI snags persist as transporting of agricultural commodities from Brazil to Peru’s coast involves traversing the Amazon River and Andes Mountain as the logistics are poor and there is no well developed rail or road infrastructure available .
Scientific Evidence Tariff War and EU Markets
Its debatable whether the amount of EU imports from China were affected by trade deflection or more by trade retrenchment. The net impact of US import tariff hikes on Chinese exports to the EU remained limited accounting for around 7 % of the change in total exports from China to the EU in the period 2017 to 2019. These effects are a sideshow in commercial terms as fundamental market forces driving EU-China trade are more significant than reverberations from the last US-China Trade War. The policy implications of US President Trump Elect last Trade War involved imposing of high tariffs on large swathes of Chinese products as in the previous round EU did not pre-emptively raise import barriers to prevent a flood of Chinese exports . Independent studies revealed that no flood of Chinese exports took place although Chinese exports to the EU adhered to pre – Trade War trends and no alarming instances of trade deflection were visible as the amounts of trade involved were marginal. Trade retrenchment resulting in lowering of Chinese exports to the EU can be interpreted as depicting that the net impact on the bilateral trade balance with China was negligible. The presumption that drastic US tariff increases presage significant Chinese-induced disruption on European markets is not tenable especially as European living standards are predicated on its openness to external trade. It remains unlikely that speculation about trade deflection will influence EU import policy in line with any US tariff raise directed against Chinese origin goods.
Authored by Nadir Mumtaz
Source/Credit ;
https://gcaptain.com/indias-new-mega-port-hopes-to-attract-the-worlds-biggest-ships/
https://splash247.com/china-stretches-lead-at-the-top-of-shipbuilding-stakes/
http://(Bloomberg) © 2023 Bloomberg
https://www.arabnews.com/node/2579370/world
https://www.bbc.com/news/articles/ckg79y3rz1eo
Scaling the extent of Chinese Trade Deflection and Trade Retrenchment into the EU during the first US-China Trade War Simon J. Evenett and Fernando Martin, 11 November 2024 – Global Trade Alert
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