“The Chinese will buy ports and infrastructure just about anywhere they possibly can,” said Norton Rose’s London-based global head of transport, Harry Theochari.
A $1 billion bid in January by Chinese shipping group Cosco, which is government-owned, for a 67 per cent stake in the Greek port of Piraeus, near Athens, highlights China’s eagerness to own more ports in Europe and Asia, Mr Theochari said.
“If you have control of a port, especially a box port for box [container] ships, you are at a huge advantage.”
China last year announced the so-called “Belt and Road Initiative” to build better trade routes, including infrastructure such as roads and rail networks, between Asia, Africa and Europe.
Secure network
The Chinese government has called on countries along the proposed routes to establish “a secure and efficient network of land, sea and air passages, lifting their connectivity to a higher level”.
Australian ports are among the infrastructure being targeted by the Chinese, with the privately held Shandong Landbridge Group paying $506 million for a 99-year lease for the Port of Darwin last year.
The lease has been controversial, raising questions about whether Landbridge Group has links to the Chinese military and whether the sale should have been reviewed from a broader national security perspective.
Another Chinese group, the state-owned China Merchants Group, considered buying ports and rail group Asciano before the Australian group became embroiled in a takeover battle between Canada’s Brookfield Infrastructure and a consortium led by logistics group Qube.
Newcastle paves way
China Merchants made its first infrastructure investment in Australia in mid-2014 when it teamed up with Hastings Funds Management to buy the Port of Newcastle in a $1.75 billion deal and subsequently signed a strategic partnership with Hastings.
The Qube consortium is the frontrunner to acquire Asciano after its $9.01 billion bid was recommended by the port and rail group’s board.
If the consortium succeeds, a Chinese sovereign wealth fund, the China Investment Corporation (CIC) will end up with a small stake in Asciano’s Pacific National rail haulage business, which moves commodities and bulk freight.
CIC is helping Qube’s consortium partners, Global Infrastructure Partners and the Canada Pension Plan Investment Board, pay for the proposed takeover.
CIC will not have a stake in Asciano’s Patrick container ports business, which Qube is planning to wholly acquire.
Despite declines in global shipping volumes, Mr Theochari said Australian container ports would remain attractive investments over the long term. “Most first-world countries will have fairly steady demand [for imported goods].”
The global shipping industry has been in recession, with the Baltic Dry Index – a London-based index that measures changes to the cost of shipping raw materials like coal and iron ore and wheat around the world – hitting all-time lows this year.
“The dry-box sector is going through the worst cycle it’s ever been through,” Mr Theochari said. “I’ve never seen the dry-bulk market suffering so much.”
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