China's energy needs, coal transfers and the ports sector

Pergamon

PII: SO016-7185(96)00035-8

Geoforum, Vol. 28. No. 1, pp. 39 53, 1997 1997 Elsevier Science Ltd

Printed in Great Britain. All rights reserved 0016-7185/97 $17.00 + 0.00

China's Energy Needs, Coal Transfers and the Ports Sector

DANIEL TODD

Department of Geography, University of Manitoba, Winnipeg, Canada R3T 2N2

Abstract: Much rests on ports in China, for to them is attached the burden of proving the soundness of relying on interior coalfields for energy supply. Shortcomings on their part are likely to plunge China into an energy crisis, to say nothing of setting back efforts aimed at overcoming regional disparities. Sweeping statements of this kind invite justification, and that is the object of the paper. Beginning with an overview of the country's sharp regional divisions, the paper goes on to show how the mismatch in energy supply and demand makes insistent the development of Shanxi province as a coal producer, promising, in the process, the amelioration of regional disparities. Realisation of that promise is dependent on rail-port infrastructure, the configuration of which is explored in detail. The port of Rizhao, a terminus of the rail-port system, is selected for particular attention. ~ 1997 Elsevier Science Ltd

Key words: China, disparities, coal, transport, infrastructure, ports

Introduction

Ports can make or break not just the regions containing them but distant hinterlands which are compelled to use them. In recognition of this truism governments have accorded ports pride of place in regional development strategies, frequently designating them as the growth poles necessary for uplifting the material well-being of enlarged tributary areas. Culti- vating ports for regional improvement, vital as it is, should not blind us to the other key role played by ports: the promotion of aggregate national development. Once development takes a firm hold of a country this role tends to become subdued, overshadowed by more pressing concerns. Yet it remains a cogent factor in national competitiveness (Jansson and Shneerson, 1982; Frankel, 1987). Its importance can neither be overlooked nor exaggerated, however, for countries still grappling with the problems of embedding development. Developing countries, as Hoyle (1973) pointed out, are acutely conscious of

the fact that their chances of advancing trade-induced growth depend heavily on the presence of adequate port facilities. To put it plainly, the want of ports dooms their export-promotion strategies to failure while the existence of inadequate por ts-- those with poor cargo-handling facilities and feeble hinterland connect ions-condemns them to slow growth at best. Promoting an export-led growth policy without attending to the ports is bad for a country; investing in ports without addressing the hinterland links is worse, since it runs the risk of either choking off the flow of export cargoes or connives at the formation of ports as export platforms severed from regions desperately in need of economic stimulus. Not surprisingly, then, proponents of regional well-being in developing countries have joined and made common cause with those advocating export-led growth in pushing for enhanced port facilities because both parties realize that ports and their attendant hinterland connections, besides being indispensable to aggregate development, hold out the prospect of

39

40 Daniel

steering aspects of that development to specific regions. Nowhere is this view more prevalent than in China, the developing country that lends itself most to considerations of infrastructure provision given that it combines strong economic growth with serious disparities in the spatial distribution of the beneficiaries of that growth.

While China's ports are rightly acclaimed for render- ing possible the country's stellar performance in export-led growth, their role in ameliorating chronic regional disparities is far less discernible. In fact, if the evidence furnished by the Special Economic Zones (SEZs) in Guangdong and Fujian provinces is any- thing to go by, it would appear that the booming ports have done more to accentuate interregional differences than to mitigate them (Fan, 1992; Yamanouchi, 1989). This blemish on their record can be blamed directly on the limited infrastructure connecting them to hinterlands beyond the coastal provinces; an infrastructure falling alarmingly short of what is required. Remedial steps are being taken to overcome the weak links, but that process is both enormously expensive and lengthy. In the meantime the policy of nurturing the coastal regions in the name of fast national development will continue. The chief means of nourishment, coal to provide energy, is to be supplied from domestic sources, but sources far from the coastal markets.

Coal is earmarked not simply as the lifeblood of the economic boom areas shouldering the burden of national development, but its extraction is envisaged as the salvation for these lagging areas far removed from the coastal bonanzas. The growth paths of the export-oriented coast and the domestically inclined interior together depend on the installation and operation o f an effective transport infrastructure combining rail links from inland coalfields to the coast and onward coastwise shipment to final markets. Central to that infrastructure are ports, both existing ports revamped to fit new needs and newly-created ports conceived to fill. voids in the patchy network currently in place. This domestic or coastwise trade function of the ports operates in tandem with their export-platform function, but while it impinges on almost all ports worthy of the name, it does not affect all ports equally. Some ports, by virtue of location, site attributes and appreciable throughputs envisaged for them, will take on the trappings of specialist coal ports; others will handle coal as an adjunct, albeit an important adjunct, to their main general cargo

Todd

activities. In nearly all cases, however, the ports will not simply function as pure ports, exchanging coal between land and sea modes of carriage, but will assume the characteristics of industrial growth poles, using the energy minerals at hand to power assorted manufacturing activities. This paper focuses on the specialist coal ports, those that are instrumental in loading the coal from the energy-surplus interior which is bound for the energy-deficient southern and eastern fringes of China. In particular, it selects one port for detailed attention. The port in question, Rizhao in Shandong province, represents in miniature all the elements at work in the larger context: the intermodal transfer problem, interport division of labour, port traffic diversification, and the challenge of transforming the port into a viable growth pole. Above all, it underscores the importance of coal to an entire community.

Before the factors circumscribing Rizhao can be examined, however, it is necessary to come to grips with the larger context. That entails an appreciation of the regional dimension in China's coal production and consumption. It requires, moreover, an understanding of the disposition of the country's rail-port infrastructure and the forces compelling investment in coal ports. However, the overall energy situation--and the issue of regional disparities subsumed in it--is the first claimant on our attention, as related below.

Regional perspectives on the energy situation

The backdrop of regional disparities

The vexed question of regional disparities deserves an airing at the outset because it has a bearing on the energy situation. While lively debate continues about their form and intensity, the presence of severe regional disparities in China is universally acknowl- edged (Cannon, 1990; Li, 1990; Lo, 1990; Lyons, 1991; Tsui, 1991). Since time immemorial, the interior regions have trailed the coastal regions on most development yardsticks. The socialist government assuming power in 1949 judged such disparities 'irrational' and upheld the right of the interior to attain equality in development (Yang, 1990). Yet, despite qualified successes in the battle to overcome disparities, all the signs and portents point to a widening of the gap since the institution of the 'Open Door' (export-promotion) policy in 1979. Going 'all

China's energy needs

out' for national development is tantamount to accepting an alarming divergence in regional fortunes, with investment in the interior languishing at the same time as it is growing explosively in the coastal regions. On the reckoning of the state statistical agency, the coast's share of GDP, whittled down to 50.9% in 1978 as against the 62.4% of 1949, steadily regained lost ground to reach a 56.1% share by 1989. By another reckoning, that of differences in rural per capita incomes, the coastal belt enjoyed an average of 3677 yuan ($430) in 1994. By contrast, the central belt recorded 1707 yuan, less than half that of the coast, and the Far West registered an even worse 1328 yuan (Economist, 18 March 1995, p. 19). Across the board per capita GNP in 1992 stood at 2812 yuan for the fortunate coastal zone, 1601 yuan for the central zone, but a paltry 1391 yuan for the western zone (State Statistical Bureau, 1993).

Despite espousing rapid national development which disproportionately favours the coast, the central government is not indifferent to the deepening regional disparities that have come in its wake. As early as the Seventh Five-Year Plan (1986-1990) it was conscious of the need to stress the comparative advantage of the central belt in energy-mineral production, affirming that development there would occur as a result of coal shipments to the coast (China, 1986). It promises more of the same in the Ninth Five- Year Plan, but promises besides to encourage the relocation to the interior of labour-intensive industries displaced by technologically-intensive export activities in the coastal belt (China Daily, 7 October 1995). Best of all, it predicts that the continued strong growth of the coast on the basis of these new industries will suck in more and more energy materials, the supply of which is increasingly entrusted to Shanxi and its affiliated coalfields. In the government's opinion, the supplier regions will receive a fillip from this development sufficient to reverse their faltering economic prospects. Installation of an effective rail-port transfer system at government instigation will ensure that this complementarity in domestic trade is brought about. To grasp the full implications of this process let us examine coal supply and demand in detail.

Coal supply and demand

China is forced to rely on coal for about three-quarters of its energy consumption because oil has failed to live

41

up to expectations. In spite of producing more than 100 million tonnes of crude a year, China became a net importer of oil in 1994 and is likely to continue as such for the foreseeable future (Ryan, 1995). Rather than dissipate foreign exchange on mounting oil imports it prefers to tap its seemingly inexhaustible reserves of coal. In 1994 it produced a monumental 1.24 billion tonnes of raw coal, a hefty increment on the 620 million produced in 1981 when the 'Open Door ' policy was still in its infancy. All sectors of the economy-- to say nothing of residential users-mlepend upon coal to function. Industry relies on it inordinately, consum- ing, in coal equivalent terms, 328 million tonnes in 1990; an amount composing 53% of its energy needs (besides accounting for 65% of all coal entering into final energy consumption in that year). One-third of the energy needs of agriculture is met by coal, 34% of those of transport, and 47% of those of commerce. Residential usage, second only to industry in absolute coal consumption, turns to the mineral for no less than 80% of its requirements.

Accounting for a massive 324 million tonnes of the 1994 total, Shanxi province towers head and shoulders over all other producing regions (second ranked Henan managed 96 million). A fuller, if slightly more dated, grasp of mining regions can be elicited from Table 1. At the beginning of this decade, Shanxi alone turned out more than 26% of national output while the greater economic planning region of North China, to which it belonged, accounted for more than 37%. Of the other big regions, Northeast China came out first, with about 15% of the total; followed by the East (13%), Southwest (12%), South (11.5%) and Northwest (8%). Figure 1 summarizes the overall pattern.

Shanxi's paramountcy in the output pattern closely matched its share of national proven reserves (Table 2). However the correspondence between actual extraction and potential extraction (as denoted by proven reserves) was barely discernible in all other respects. Inner Mongolia, another constituent of North China, held title to 21% of the reserves (Song, 1992), but its 1990 output only amounted to 48 million tonnes or 4.4% of total production. By the same token, Shaanxi in the Northwest extracted a mere 3.3% of the total in 1990 but possessed no less than 16% of the reserves. In contrast, Henan in South China was responsible for 8.4% of the output despite holding just 2% of the reserves. Shandong in East China contributed 5.6% of the national output on the

42 Daniel Todd

Table 1. Rank order of coal producers

Rank Province (and region) 1990 output (million tonnes) % of national output

1 Shanxi (North) 286 26.5 2 Henan (South) 91 8.4 3 Heilongjiang (Northeast) 83 7.7 4 Sichuan (Southwest) 68 6.3 5 Hebei (North) 62 5.8 6 Shandong (East) 60 5.6 7 Liaoning (Northeast) 51 4.7 8 Inner Mongolia (North) 48 4.4 9 Guizhou (Southwest) 37 3.4

10 Hunan (South) 34 3.1 11 Shaanxi (Northwest) 33 3.1 12 Anhui (East) 31 3.0 13 Jilin (Northeast) 26 2.4 14 Jiangsu (East) 24 2.2 15 Yunnan (Southwest) 22 2.1 16 Xinjiang (Northwest) 21 1.9 17 Jiangxi (East) 20 1.9 18 Gansu (Northwest) 16 1.5 19 Ningxia (Northwest) 14 1.3 20 Beijing (North) 10 0.9

Source: Assembled from China Energy Statistical Yearbook 1991.

Table 2. Regional coal reserves and extraction potential

% of national proven Region and province coal reserve

NORTH: Beijing 0.26 Tianjin 0.05 Hebei 1.62 Shanxi 26.97 Inner Mongolia 21.05

NORTHWEST: Shaanxi 16.29 Gansu 0.91 Qinghai 0.45 Ningxia 3.25 Xinjiang 9.83

NORTHEAST: Liaoning 0.72 Jilin 0.23 Heilongjiang 1.91

EAST: Shanghai 0 Jiangsu 0.44 Zhejiang 0.01 Anhui 2.63 Fujian 0.11 Jiangxi 0.15 Shandong 1.77

SOUTH: Henan 2.11 Hubei 0.06 Hunan 0.32 Guangdong 0.07 Guangxi 0.23 Hainan 0.01

SOUTHWEST: Sichuan 1.00 Guizhou 5.14 Yunnan 2.43 Xizang 0.01

Source: Song (1992).

strength of reserves registering a paltry 1.77% of the national total. These discrepancies--the lack of corre-

spondence between production shares and shares of reserves--hint at the grave structural problem afflict- ing China: the spatial mismatch between coal supply

and demand.

Figure 2 presents us with an immediate overview of the mismatch. It shows that an elongated ring to the west of the coastal belt enjoys a net surplus in the balance between coal supply and consumption. It reveals

further that net deficits are endemic in the coastal belt. Shanxi is the cornerstone of the 'surplus' ring, but important outliers occur in Henan and Heilongjiang.

Foremost among the 'deficit' belt are Jiangsu, Liaon- ing, Shanghai, Hubei and Zhejiang. The transport system is left with the formidable task of transferring coal from the former group of provinces to the latter. Table 3 provides an indication of the magnitude of the task. In 1985, a year in which China's growth began to soar, the northern coastal tier of Beijing, Tianjin and

Hebei experienced a shortfall of 30 million tonnes of coal (Lu, 1993). The Northeast produced 24 million

tonnes less than it consumed, South China registered a shortfall of 22 million tonnes, but the gap was most

glaring in East China (centred on Shanghai), which needed 54 million tonnes over and above its own

production. Shanxi, with a surplus of 120 million tonnes, could meet most of these needs. This surplus is

China's energy needs 43

\ . \ XIZANG

\ .

N~t surpjus regi_or3_s.

"TtANJtN

SHANGHAI

oooo,,, > 2 0 0 mi l l ion t o n n e s

Net deficit regions

>20 million tonnes ~ H A t N A N " ~(~ ~c~ ~,, ~a

Figure 1. Coal production and consumption by big region, 1990. Source: Assembled from China Energy Statistical Yearbook 1991.

Table 3. Coal production and transfer, 1985 and 2000

Situation:

Production Consumption Region (m. tonnes) (m. tonnes)

Transferred in() out( + ) (m. tonnes)

1985 Shanxi base 257 130 ~- 120 Beijing, Tianjin, Hebei 71 101 30 Northeast 147 171 24 East 127 181 54 South 131 153 22 Southwest 95 88 7 Northwest 43 41 2 Total 871 865

2000 Shanxi base 600 150 + 450 Beijing, Tianjin, Hebei 90 195 105 Northeast 240 315 75 East 200 390 190 South 160 235 74 Southwest 140 148 8 Northwest 70 60 10 Total 1500 1453

Source: After Lu (1993).

44 Daniel Todd

\ \

• \ XiZANG \

Net surplus regions

'LJ }SU

)SHANGHAI

. . . . . . . >200 million tonnes

Net deficit regions

>20 mi)lion tonnes AINAN

Figure 2. Regional coal shortfalls in China. Source: Assembled from China Energy Statistical Yearbook 1991.

expected--and needs-- to grow to 450 million tonnes by the year 2000 in order to accommodate the growing shortfalls of the deficit regions. In the meantime, the situation worsens. The coastal tier of Beijing, Tianjin and Hebei together with the neighbouring Liaoning registered a shortfall of 70 million tonnes in 1994; an amount which paled in comparison with the deficit of 106 million tonnes registered by East China.

It is clear from these volumes that the country can ill afford to divert coal for export; it will be hard pressed to meet domestic needs notwithstanding the huge and increasing coal output. Yet some coal has been set aside to earn foreign exchange, and exports will grow in tandem with the increasingly pressing need to acquire hard currency• In 1987 over 13.1 million tonnes were exported and they grew slowly but steadily thereafter. Generally, 3 tonnes of steam coal are exported for every tonne of coking coal. In 1992- 1993 coal exports levelled off at about 20 million tonnes (contrast this with the 130 million exported by

Australia in the first ten months of 1994 or the 86 million exported by Britain at its peak in 1923)• Japan was the leading customer, buying 6.3 million tonnes in 1993. South Korea (taking 5 million tonnes) and Hong Kong (acquiring 2.2 million) were other good customers. A slight upturn was evident by 1995, with preliminary figures standing at 24.4 million tonnes. These tonnages are expected to climb to the 30 million mark by 2000. Exports, then, constituted just a tiny fraction of coal output, a fraction far smaller then their share in pre-communist days (7.7% in 1930, for example) when the industry was both small and fragmented.

C o a l t r a n s f e r in a g g r e g a t e

These volumes, both for internal redistribution and export, belie the sheer difficulty of shifting the coal from mine mouth to power station; a difficulty that stretches the transport system to the utmost. Before


Capital city Q Cities / " ~ (~) Coal Ioaaing ports /- ~_~..~

( ~ Coal-discharging ports £. . , "~.

• " " - Major rail lines for coal . , ~ . . . ~ Ha transport . ) "-4_.

- - Other railways / ' - - 'Qinhuan¢/" . jdao~,,.

Datong . ' ~ Tianji,l~Jin~ou'~ -- "~'" " - . I " "" " " ' ~ BEIJING \ / ~ ' ~

Hu,~ \

Shijiazhuang ~ Taiyuan

\ \

%'* ° '~t.

V .w~ " . I S heny'a"ng )~gkou Dalian

)Oingdao ~hijiusuo/Rizhao

L. .~ '

Shanghai I Ningbo

L ' ~ ~-. - . hantou .,-.. v . a ~ I ~,...- G u Hong Kong

"~ -~" " Zhanjiang

0 300 600 I I I I I I t

9 0 0 K M I I I

f , ?

Figure 3, China's coal transfer infrastructure. Source: Zhang (1995).

J

45

discussing the strains it is important to appreciate the scale and scope of the infrastructure involved in coal transfer. Figure 3 displays the railways and ports inducted into that operation. Since more than 40% of the freight tonnage hauled by the railway system revolves round coal, it is not surprising that the country's major rail arteries are also pressed into service for moving coal. The main line from North China to Guangzhou is one of these, as is the trunk line from the North through Nanjing to Fuzhou. For example, coal accounts for over half of the total freight moved on the Beijing-Guangzhou and Beij- ing-Shanghai lines (Hou and Wang, 1995). The most intensively used sections, from Zhengzhou to Wuhan on the former and from Xuzhou to Nanjing on the latter, each carry in excess of 25 million tonnes of coal a year. Yet, in terms of downright weight moved, the

north-south arterial routes are eclipsed by lines tracking from west to east. Designed to link the interior coalfields of the North with ports, three of these stand out. The Datong-Qinhuangdao line, 6-33 km long, is the most northerly• A purpose-built heavy-load line (able to take coal trains of 10,000 tonnes), it boasted a movement capacity of 55 million tonnes a year (MTA) on its completion in 1992. Upgrading to 100 MTA is in store. A southerly corridor, stretching from Zhengzhou to Lianyungang, is geared to handling 15 MTA of coal. The third route lies in between, providing a conduit for more than 20 MTA of coal from southern Shanxi to Rizhao and Qingdao. Coal arriving at these ports is summarily transhipped into coal carriers plying coastwise to a chain of receiving ports in East and South China (Figure 3).

46 Daniel Todd

Table 4. Coal traffic in ports, 1989

Export cargoes Port (,000 tonnes) Import cargoes Coastwise outgoing Coastwise incoming

Dalian 507 13 459 1790 Qinhuangdao 10,886 36,236 - - Tianjin 1727 - - 4433 - - Qingdao - - 6809 - - Rizhao 879 - - 7248 - - Lianyungang 1845 - - 3825 - - Shanghai 3 368 17,558 40,407 Ningbo - - 9 2224 5451 Fuzhou - - 12 228 593 Xiamen 11 - - 49 135 Guangzhou - - 765 4062 9373 Zhanjiang 18 - - 546 61

Source: Assembled from unpublished Ministry of Communications data.

Coal ports

Qinhuangdao is the chief coal-loading port by far. In

1989 it shipped more than 36 million tonnes coastwise, to say nothing of nearly 11 million tonnes for export

(Table 4). Lianyungang, the terminus of the southern corridor, loaded 3.8 million tonnes for coastwise

shipment in the same year, with another 1.8 million destined for overseas markets. Rizhao, for its part,

loaded 7.25 million tonnes for coastwise shipment and almost a million more for export. Other northern ports, Qingdao and Tianjin in particular, despatched coastwise another 11 million tonnes of coal (not to mention 1.7 million tonnes of export coal).

On the receiving end, Shanghai discharged 40.4 million tonnes of coal, subsequently reshipping 17.5 million to smaller ports. It was followed in order of importance

by Guangzhou and Ningbo, respectively discharging 9.3 and 5.5 million tonnes. As the 1990s have unfolded,

coal carriage by sea has gone up by leaps and bounds. Befitting its standing as the premier coal-loading port, Qinhuangdao is about to commission facilities which

will allow it to handle 100 MTA, a level one-quarter greater than its capacity in 1989. Its actual coal throughput in 1994 rose to 62.9 million tonnes, or

70% of the total volume of Chinese coal carried by sea that year. No less than 16 million tonnes of this

throughput were exports. Lianyungang too is in the throes of expansion, intent on raising its coal-handling capacity well beyond the existing 9 MTA. In 1994 it shipped 4.8 million tonnes coastwise and exported a

further 3.2 million tonnes. Rizhao is also stepping up capacity, as we shall see below. The year 1994 saw it

despatch 8.74 million tonnes coastwise and 3.18

million tonnes to foreign ports. Tianjin, for its part, recorded a busy 1994, shipping 15.5 million tonnes of coal coastwise and another 5.7 million tonnes over-

seas. Qingdao's 1994 coal shipments were confined to

coastal movements, with 8.04 million tonnes constitut- ing its total. Although chiefly general cargo ports, both Tianjin and Qingdao have emulated the coal specialists in attending to their coal-handling facilities.

Although overshadowed by the loaders, the coal- discharging ports have not been averse to boosting

capacity; indeed, completion of extra loading plant in the northern ports compels them to at tempt to embed matching unloading facilities. Having built a coal wharf in the Zhujiamen district, Shanghai is con- structing the Luojiang Coal Terminal. Xiamen has commissioned an additional coal berth of 1.2 M T A capacity. Shantou has followed suit with one of 4.1 MTA, and a number of developments are under way at Guangzhou. The last port is particularly hard pressed, since in 1994 it was compelled to discharge

16.99 million tonnes of coal, fully 83% more than in

1989.

It is the northern loading ports and their associated

railways, however, that have received the most

a t ten t ion--and for good reason: bottlenecks elsewhere in the rail network have not only incurred

huge costs in deferred coal deliveries (Stone, 1995), but have ruled out reliance on the rail mode as the principal means of satisfying the needs of the energy- deficient regions. Instead, the government places its

faith in the intermodal system of railway and coastal shipping for effecting links between Shanxi and East and South China. The results of the lavish attention it

has devoted to this system preoccupy remainder of the paper.


us in the

The Shanxi coal base and its port extensions

Shanxi's extensive mining infrastructure and rich reserves count for much, but its relative accessibility to ports on the Bohai Bay and Yellow Sea is also a mark in its favour. The mining base is actually a collection of distinct coalfields, the most prominent of which is at Datong (Figure 4). Thanks to key mines at Yanzishan and Sitaigou, it produces 40 MTA (Li and Lu, 1995, p. 105). This portion of the base consigned over 90 million tonnes to other provinces in 1993, an amount equal to_45 % of coal transferred out of Shanxi in that year. Much of it travelled on the direct link to Qinhuangdao. South of Datong are yet more fields:

4 7

Yangquan, Luan-Jiaozuo (spilling over into Henan), Huoxi, Hedong and Fenxi. The mines around Yang- quan feed the Yuanping-Beijing and Shijiazhuang- Taiyuan lines: 60 million tonnes moved eastward along them in 1993, some of it ending up in Rizhao and Qingdao for onward carriage by sea. The southern Shanxi fields funnelled 40 million tonnes of co~l in 1993 onto lines connecting the mines to the sea at Rizhao and Lianyungang, not to mention the river ports of Nanjing and Wuhan on the Yangtze. Several of the Shanxi fields lend themselves to open-cast operations, further affirming their attractiveness. Because of such surface extraction and the large .size of deep-shaft collieries, Shanxi enjoys a cost advantage over other mining regions: generally production costs elsewhere are from one-third to two times higher. Pingshuo, south of Datong, should top the size list by the year 2000, boasting an output of 45 MTA.

Planned output Mine Mt/y by 2000

1 Pingshuo 45.0 2 Gujiao 16,5 3 Xiangning 8.0 4 Datong 34.7 5 Xuangang 2.7 6 Xishan 10.0

Planned output Mine Mt/y by 2000

7 Yangquan 29,7 8 Fenxi 12.2 9 Huoxian 7.3

10 Luan 17.5 11 Jincheng 17.0 12 Lishi 5.0

0 100 200 km / ~ . _ , /_2"~

t

, ( ( / /

! I. i

nW ; ,

Shijlazhuang..~ .... ~ _ ~

. . / , , . %._, s. ,oo,a ,

H E N A N _ j Yanzhou / ,_( . . . . . ."

J i a o z u o f ~ " L,_ Heze /~ \

YELCOW

SF_A ~

• City O Coalfield • Coal mine [ ] Planned coal mine

- - Provincial boundary ; : ": : '. Newly-built railway . . . . . Railway

Figure 4. Ports tapping the Shanxi coal base. Source: Modified from Todd and Zhang (1994).

48 Daniel Todd

Vital rail connections

It is absolutely essential that mines of this scale are coupled with a railway network fully capable of handling the tonnages in question. Despite the recently constructed coal lines to the aforementioned ports and a local rail net penetrating to all comers of the Shanxi base, the transport infrastructure is still found wanting. Accordingly, more rail lines are in process of development. The most significant of these runs from Baotou through Shenmu and Shuozhou to Huanghua, a new port on the Bohai littoral. Began in 1990 and due for completion at the turn of the century, the 'Shenhuang' railway is designed expressly to move coal to the sea (Goldstein, 1992). It will eventually entail the completion of 870 km of electrified railway; whereupon coal from as far afield as northern Shaanxi and western Inner Mongolia (the planners have the Shenfu-Dongsheng coalfield in mind), presently lar- gely untapped, will join with Shanxi coal in finding market outlets in East and South China. Construction of Huanghua port began in tandem, and the first phase, centred on a four-berth facility of 30 MTA capacity, is expected to be operational by decade's end (Yao, 1994). Should all three phases come to fruition, the port will be endowed with a loading capacity surpassing 100 MTA some time after the year 2000. Thus port throughput and the volumes traversing the new railway will climb in proportion. In the meantime, Tianjin sees itself as an overspill port for the same hinterland, and is currently installing a coal berth of 10 MTA in readiness for the enormous flows that are anticipated from Inner Mongolia's Shenfu-Dong- sheng field. Another incipient port at Wangtan is conveniently located for the Datong-Qinhuangdao coal route. Although envisaged as a site for a metallurgical industrial complex (Lu, 1992), provision is being made to use Wangtan as an additional coal- shipment port if the others cannot cope. Yet, arguably, Rizhao eclipses all others in the breath- taking scale of its ambitions. Not only does it visualise itself as a coal port of massive proportions, but it plans to take on the trappings of a major growth pole. What has set it apart from other coal ports is a fortuitous combination of factors, as we shall now relate.

Rizhao: the quintessential new industrial port

Rizhao's greatest claim to fame is its deep water. From its inception until the mid-1990s it held title to berths with the deepest water in all China. It was able to

accommodate 100,000 dwt ships when Qinhuangdao, for all its acclaimed coal throughput, could only take vessels of 50,000 dwt. Indeed, its genesis is strongly associated with this attribute; for it was recognition by Japanese coal importers of the merits of deep water which first drew the attention of the Chinese government to the site. To be sure, the visionary Sun Yat-sen had advocated the founding of a coal-export port along this coast during World War 1, but his plans were botched in the implementation (Sun, 1922, pp. 114-115). Haichow's Taipu harbour, the terminus of the 1013 km Lunghai railway from Xian in Shaanxi, proved too shallow and prone to silting (an outcome foreseen by Sun), and the artificial harbour created as a substitute in the 1930s, Lianyungang, failed to offer marked improvement. There matters rested until the 1970s when China tentatively sought customers for coal exports. The Japanese were past masters in utilising Chinese resources--they had built the Datong-Tianjin (Tanggu) railway in World War 2 to ship coal to Japan--and so were the obvious partners, promising both capital investment and ready markets (Wang, 1977, p. 48).

Having built a number of coal-fired generating stations with attendant deep-water unloading facilities, the Japanese were keen to benefit from economies of scale in sea transport. The greatest improvement in such economies occurs when the dimensions of coal carriers leap from Panamax size (around 60,000 dwt) to Capesize (about 120,000 dwt). Savings of the order of 25-30% in freight costs accrue when the larger vessel replaces the smaller (OECD, 1984, p. 20). Unfortunately, the switch to large bulk carriers imposes a draught penalty: Panamax vessels can enter ports dredged for 12.5m depths, but Capesize vessels need clearances of 16.5 m or greater. Aware that no ports compatible with Capesize draughts were available in China, the Japanese cast around for a suitable site. Rizhao, or Shijiusuo as it was then styled, answered the purpose admirably. Not only did it offer deep water close inshore, but it presented itself as something of an intervening oppor- tunity between interior coalfields and Lianyungang. Prompted by the Japanese Overseas Economic Co- operation Fund (which invested in Qinhuangdao at the same time), work began in 1980 on the port site and a 300 km railway linking it to Yanzhou (Figure 4). This constituted the first leg in a link extending through Heze to Xinxiang, whereupon the line would penetrate the zone of coal production. Since the Japanese contemplated buying 10 MTA of coking


and steam coal from China at this stage, they were preparing reception ports at both northern and southern oulets of the great interior coalfield. Qinhuangdao, the northern port, was hampered by draught limita- tions; Rizhao, the southern outlet, laboured under no such handicap. In anticipation of substantial coal flows, the line serving Rizhao was designed to a theoretical capacity of 15 MTA (practically, 12 MTA). The port opened for business in May 1986.

Port development

In its layout the port closely conformed to model standards for a coal-loading terminal. Spurning the needs of small coasting vessels (which were catered for in Lanshan, 22 nautical miles to the south), it set its sights on accommodating Capesize vessels, the biggest class for coal carriage. Enjoying deep water, free of ice, silt and typhoons, and with plenty of land for development, the site presented few obstacles to the installation of a top-notch facility. Accordingly, it was

49

designed round two berths for 100,000dwt ships (alongside depths of 16.15 m), together with three for 10,000 dwt vessels. The former are dedicated coal berths, the latter are reserved for general cargo. To ensure access to deep water, the former occupy a wharf positioned on the end of a 1141 m steel trestle jetty (Figure 5). Onshore, adjoining the jetty, is a coal storage area of 2217 m 2, holding 1.4 MT, which is fed by unit trains (40 cars of 60 tonnes capacity) that can be unloaded at the rate of 3600 tonnes per hour (tph). To meet the port's designed coal throughput of 15 MTA, each berth is equipped with ship loaders of 6000 tph capacity. Perhaps the port's only blemish is the absence of a good protective breakwater, since it opens directly to the sea (although it must be allowed that a breakwater, if poorly designed, could inhibit the turning area for large ships). However, contemporary port plans foresee remedying that defect.

The adjoining community grew in parallel, acquiring city status in March 1985. A decade later, the city controlled an area of 5358 km 2 in southern Shandong

//

I Developed Area /

Earmarked for / Development

/ Coal .#5 Storage ~ . x¢,o~/e /

_ _ ~ Dredged / Projected Ore ~ f ~ ~ Channe l

~.,J ~ ,~ Impor t Wh;a r f . ~ ~ ~-S ~;~-~ 55 . . . . .

Coal W h a r f f / 5 ~ ~ ~

Unloadinl Yard

Projected Breakwate r

F ish ing* _ a r~o Berths Whar f ~ ~ - ~ " ' - -

g . . . . . . . . _ ~ ~ _ ~ : ~ - Pro jected Wha_ w e s ~ / ~ , -

II II \ R I Z H A O C ITY

II I 1 ~

m J ! J

J J

J

!/ 1 0 , , , , 0 i5, , ' 1 .0k in

F i g u r e 5. Layout of Rizhao port. Source: Unpublished material from the Rizhao Port Authority.

50 Daniel

and ~boasted a population of 2.7 million. From 1991 it began championing itself as a Development Zone centred round its port. Fundamental to those hopes is the transformation of the port into a diversified undertaking complete with a metallurgical industrial complex. To be sure, the city has enticed foreign interests into investing in a 2400 MW power station, a 2 .47MTA cement factory and a pulp mill of 0.17 MTA throughput, but it is the metallurgical complex which is the cornerstone of the Zone. Alive to the general steel shortage obtaining in the belt stretching from Shaanxi through Hebei to Shandong, but aware of the extensive reserves of coking coal within it, Rizhao is promoting itself as the ideal site for importing ore and making steel. Its deep-water berths can handle Capesize ore carriers just as well as they can accommodate Capesize coal carriers. Better still, some of the imported ore- - tha t portion not absorbed in Rizhao's own works--van be supplied to existing inland steel works at marginal cost by the expedient of loading the empty coal trains returning to the Shanxi

base.

The planners believe that the port can easily take 150,000 dwt ore carriers at a projected wharf that could be added at little cost (Figure 5). Moreover, there would be no difficulty in installing conveyors from the wharf to the steel-works site, conveyors capable of transferring 10 MTA of ore. This volume is far in excess of the 4.86 MTA which would be required by the integrated works when operating at a first-phase steel capacity of 3 MTA. Indeed, even when capacity is doubled in the second phase, the terminal would comfortably accommodate the boosted ore requirement. The ore carriers, for their part, would not depart in ballast; rather they would

Todd

carry export coal as 'back-haul' cargo. Other materials can be obtained from the port 's hinterland. Thus the railway to Yanzhou traverses country containing rich reserves of dolomite and limestone. The required loads of 0.16 MTA of the former and 0.9 MTA of the latter (not to mention the 3.1 MTA of coal) would not exceed the line's carrying capacity, provided that the steel works abided by its first-phase limits. Inciden- tally, the site of the proposed works, Wangpingkou, is a mere 1 km from the port, covers 18 km 2, and has space for berths suitable for direct shipment of its products. Implementation of the project awaits the assembly of appropriate financing.

The feasibility of port diversification--and the con- version of Rizhao into a growth pole which would e n s u e ~ e p e n d s to a large degree on good hinterland connections; for in default of them the port will be neither able to procure all the raw materials needed for its industrial complex nor tempt traffic with the prospect of shipping foreign ore inland. Those connections rely on the railway and, as hinted, that railway will need to be upgraded if the complex hopes to progress to a second stage. At the very least, the doubling of the track from Yanzhou to Rizhao must be granted high priority. It should be followed in short order by track doubling and electrification of the extensions to Xinxiang and Heze. Only then will the port 's mainstream obsession, enlarging coal throughput to 45 MTA, become a realistic proposition.

Port performance

In the meantime, the results of the port 's first years of operation have been mixed (Li, 1995). On the one

Table 5. Coal handling at Rizhao port

Year Coal shipments (m. tonnes) % Export % Coastwise Capesize Panamax Handymax Handysize Mini

1986 2586 8.7 91.3 - - 5 7 81 43 1987 4115 22.0 78.0 1 3 12 149 52 1988 7170 14.9 85.1 - - 4 13 280 80 1989 8127 10.8 89.2 -- 10 18 304 95 1990 8690 12.7 87.3 - - 13 16 333 105 1991 9791 21.6 78.4 - - 19 22 352 122 1992 10,360 18.5 81.5 - - 25 15 364 141 1993 11,127 21.0 79.0 - - 18 18 383 156 1994 11,920 26.7 73.3 - - 39 24 401 163

Source: Derived from Li (1995).


hand, coal shipments have steadily increased, rising from just over 2.5 MT in 1986 to just under 12 MT in 1994 (Table 5). Furthermore, the proportion of export coal in 1994 stood at a level three times that of 1986. On the other hand, however, coal throughput had yet to achieve the planned 15 MTA, and the export proportion for 1994 exaggerated the real swing towards exports. Perusal of the annual proportions of throughput commandeered by exports reveals wide oscillations, although since the early 1990s they have tended to hover in the 20-25% range. In view of the fact that the port owes its inspiration to coal exports, this finding suggests that its original purpose has been usurped by one orientated to domestic redistribution. It also leads one to conclude that it has been bested by Qinhuangdao in the business of fulfilling Japanese coal demands, a conclusion confirmed by the snapshot of exports featured in Table 4.

More disturbing still, though, is the pattern of vessel calls. For a port designed specifically to take Capesize vessels, calls from this class are notable by their scarcity. Instead, Panamax, Handymax (about 50,000dwt), Handysize (25-35,000dwt) and even smaller (mini-bulkers) carry the coal shipped from the port. They do so because the export trade to Japan, the justification for calls by big carriers, has paled in comparison with the thriving coastal trade, and Handysize is the biggest class of ship that is readily accessible to all Chinese coal-discharging ports. The pattern is thus exposing a major handicap under which coastal coal movement in China suffers: the failure to attain the optimum scale economies that would follow from the use of larger ships. Draught limits proscrib- ing ship movements at other ports rebound to the detriment of Rizhao, denying it the benefits that should attach to a deep-water port. Unfortunately, general cargo remains underdeveloped as an alter- native trade for Rizhao (and, in any event, it would not usually entail usage of ships as large as Capesize); so, pending implementation of the industrial complex, the port's well-being precariously hangs on coal traffic (for example, only 2.37 MT of general cargoes crossed the wharves in 1994 in comparison with the 11.92 MT of coal). If coal governs the future of the port, how does Rizhao rate as a specialist coal loader?

Rizhao's rivals

Ostensibly, Rizhao has a decided advantage over all other coal ports: its ability to handle deep-draught

51

vessels. On commissioning in 1986 no other port could match its 100,000 dwt berths. The best that Qinhuang- dao could offer was one of 50,000 dwt capacity, Tianjin was loading coal from berths of 35,000 dwt dimensions, Qingdao was making do with one of 10,000dwt, whereas Lianyungang's pride was no larger than 35,000 dwt. Its superiority on this score has barely been dented a decade later. True, Qin- huangdao's approaches were being dredged to take 100,000 dwt ships and a berth for them was scheduled for completion in 1998, but the others could not aspire to Capesize standards. Qingdao was opening a new port area at Qianwan complete with two coal berths, the larger of which was suited for 50,000 dwt ships. Lianyungang was intent on expansion, including a 50,000 dwt coal berth in its plans, Rizhao had little to fear from these neighbours--having boosted its own berths to 125,000 dwt standard at next to no cost-- and was not dismayed by the impending Huanghua port with its 35,000 dwt draught limits. Much more unsettling for Rizhao, however, was the patterning of the domestic coal trades around Handysize carriers. Emblematic of this is the continuing construction of a fleet of 24,000 dwt coal carriers. While designed expressly for the run between Qinhuangdao and Shanghai, these ships are equally adept at entering the numerous discharging ports with channels no deeper than 7.5m. In effect, China is acknowledging the restriction imposed on ship movements by its predominantly shallow-water ports and is making the best of it. This reality accounts for the thriving coal throughput recorded by Rizhao's closest competitors, Qingdao and Lianyungang. Despite tighter draught limits, they each shipped just over 8 million tonnes of coal in 1994 (about two-thirds Rizhao's level).

Big berths such as those at Rizhao must concentrate on export trades, and in particular those offering economies of scale in sea carriage which appeal to overseas customers equipped to discharge big vessels. But first it must confront the challenge presented by Qinhuangdao. The northern port threatens to crowd Rizhao out of such markets; for not only does it have the advantage of size--on volume grounds it is now the world's biggest bulk port--but, by virtue of its ongoing expansion, is poised to enter the Capesize league. Yet competition for export business is by no means confined to Qinhuangdao. Even shallower- draught ports are posing a threat. Tianjin, more noted for its container terminals than its coal berths (Todd, 1994), is fully prepared to ship coking coal in 40,000 tonne consignments as far afield as Bilbao in

52 Daniel

Spain. Rizhao must counter these rivals through the promotion of a judicious mix of economies of scale and economies of scope.

The former refer to the enlargement of coal cargoes being fed into the port whereas the latter connote the adaptation of existing facilities to the needs of new kinds of traffic. Both economies, by definition, promise extra revenue at little extra cost. Hopes of gaining from economies of scale depend on the upgrading of rail infrastructure. Northern heavy- duty lines carrying 100MTA convey enormous economies on the likes of Qinhuangdao and Huan- ghua. Since the coal flows along the southern corridor are not forecast to reach comparable levels, Rizhao cannot hope to achieve the terminal economies possible at those two northern ports. It can, however, raise them substantially above their current standing. Coal feeding the port could soar to 45 MTA merely by double-tracking its main rail link into the Shanxi coal base. The laying of a spur line from Zaozhuang to Linyi in the port 's immediate hinterland would open up the Tengzhou coalfield and add substantially to the volume reaching Rizhao.

Economies of scope, for their part, are more elusive but yet more alluring. Coal ports lend themselves to adoption by other users of bulk commodities. We have only to remind ourselves of Rizhao's ambitions to create an industrial complex to receive confirmation of that fact. The case for the complex is compelling not simply on account of the port 's attributes, but because of the stimulus it affords Rizhao's hinterland through the extraction of new resources and the distribution of new materials (ores). However, the potential for economies of scope does not end there. Increasingly, general cargoes are being carried in larger container liners, ships of Panamax dimensions. Given China's dearth of deep-water ports, Rizhao can offer to accommodate them and gain in the process a major general cargo function. Given that it already has rail links penetrating deep into China, it has gone farther and argued that it could act as the terminus of a landbridge service. That multimodal operation would conduct containers all the way from Europe to Japan. These proposals have yet to be transformed into reality, but they show in what light the planners intend to affirm the port 's future. What is more, they show that the port 's future rests on the provision of suitable hinterland links.

Todd

Conclusion

The Chinese government condones the privileged treatment accorded its ports because, once they materialise as growth poles, they promise to stimulate development not just in the communities attached to them but in distant hinterlands as well. Equally compelling is the argument that the country's energy distribution would simply break down without tile intervention of the ports. Convinced of the merits of ports and their attendant infrastructure, the government has embarked on a massive programme of investment in them. What sets China apart from similar schemes in other countries is the sheer size of the undertaking. Not only does it embrace infrastructure provision in an immense hinterland, the outlines of which are set by the distribution of energy minerals, but it involves extensive port works merely to handle the vast throughputs of those minerals that are subsequently transhipped. Rizhao, while con- forming in the main to the general pattern, can be singled out on account of two distinct factors. In the first place, it was a harbinger of modern China's rediscovery of the gains to be made from exporting commodities (in this instance coal to Japan). In the second place, it was almost unique in northern China in its ability to provide deep-water berths at moderate cost. Yet even with these factors working in its favour, Rizhao needs to take pains with its hinterland links. It must do so in order to cultivate its coal trade and enhance its competitive standing in relation to other ports. Moreover, it cannot rest on its laurels: it is in the throes of diversifying its economic base so as to realise economies of scope. The industrial complex is an obvious manifestation of this strategy. Future benefits accruing to its hinterland, benefits of a magnitude sufficient to overturn regional disparities, are predicated on the achievement of these initiatives. Rizhao's case, then, illustrates in microcosm the dilemma facing planners advocating coastal development in China: more needs to be done to buttress the port growth poles before there can be any guarantee of significant spread-effects flooding into the inland provinces. In the meantime, regional disparities loom large.

Acknowledgements--1 am grateful for support granted by the Social Sciences and Humanities Research Council of Canada and for co-operation extended by the Rizhao Port Authority.

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China's energy needs, coal transfers and the ports sector