China’s container traffic may decline in the first half of next year, as an economic slowdown damps demand for toys, furniture and textiles in Europe and the US, Citigroup Inc. said.
“The most severe global downturn in decades has brought China’s economic engine to a sudden halt,” analysts Ally Ma and Brian Lam said in a November 17 report. A slowdown in container volume may worsen for the rest of this year, leading to a traffic drop early next year before, possibly, a “mild” recovery in the second half, they added.
Traffic at Chinese ports has slowed as rising US unemployment, declining household spending and a lack of credit damps demand for Chinese-made goods overseas. Growth at the country’s largest container ports slowed to 5 percent in September and October compared with full-year traffic increases of at least 19 percent in the last four years, Citigroup said.
Ports in the Pearl River Delta have been hardest hit by the slowdown, with traffic at Shenzhen falling for two months in a row, the bank said. This has hit China Merchants Holdings (International) Co. Volumes at its West Shenzhen terminals, the company’s biggest profit generator, declined 11 percent in October compared with a 19-percent increase in the first half, Citigroup said.
Cosco Pacific Ltd., Asia’s third-largest container-terminal operator, was rated “sell” in new coverage, with a target price of HK$4.50. The company is “the most cyclical and vulnerable play in the China ports universe” as it derives more than half of earnings from leasing and making containers, Citigroup said.
Dalian Port Co. was rated “buy” as its oil-handling facilities may shield the company from slowing container volume, Ma said. Tianjin Port Development Holdings Ltd. was also a “buy” as the company’s parent is delaying construction of a new terminal, easing overcapacity concerns, she added.
“The most severe global downturn in decades has brought China’s economic engine to a sudden halt,” analysts Ally Ma and Brian Lam said in a November 17 report. A slowdown in container volume may worsen for the rest of this year, leading to a traffic drop early next year before, possibly, a “mild” recovery in the second half, they added.
Traffic at Chinese ports has slowed as rising US unemployment, declining household spending and a lack of credit damps demand for Chinese-made goods overseas. Growth at the country’s largest container ports slowed to 5 percent in September and October compared with full-year traffic increases of at least 19 percent in the last four years, Citigroup said.
Ports in the Pearl River Delta have been hardest hit by the slowdown, with traffic at Shenzhen falling for two months in a row, the bank said. This has hit China Merchants Holdings (International) Co. Volumes at its West Shenzhen terminals, the company’s biggest profit generator, declined 11 percent in October compared with a 19-percent increase in the first half, Citigroup said.
Cosco Pacific Ltd., Asia’s third-largest container-terminal operator, was rated “sell” in new coverage, with a target price of HK$4.50. The company is “the most cyclical and vulnerable play in the China ports universe” as it derives more than half of earnings from leasing and making containers, Citigroup said.
Dalian Port Co. was rated “buy” as its oil-handling facilities may shield the company from slowing container volume, Ma said. Tianjin Port Development Holdings Ltd. was also a “buy” as the company’s parent is delaying construction of a new terminal, easing overcapacity concerns, she added.