BRI Deploys China’s COSCO Fleet to Enter Europe by Sea

19/04/2019

Within the Belt and Road Initiative, China COSCO Shipping allows the Dragon to enter Europe by sea. And Piraeus, Rotterdam, and Zeebrugge ports are going to play a significant role in connecting EU with the maritime route

 

The development of the Belt and Road Initiative (BRI) is extremely intertwined with the activity in Europe of one of the world’s biggest cargo shipping company, the Chinese COSCO Group.

Here, COSCO is strengthening ties with major trading ports, sometimes acquiring majority stakes in relevant maritime hubs. The aim is to become a group that can offer integrated management services in the distribution chain and in the logistics of global shipping.

Its core business, therefore, integrates international shipping services, advanced logistics, and related financial services. A strategy that would not only make the Chinese company a multi-industrial conglomerate world leader in the maritime transport sector but that would also contribute to developing the Dragon’s maritime Silk Road.

The China Ocean Shipping Company (COSCO) was a state-owned shipping and logistics services supplier. Founded almost 60 years ago, in 2016, the company merged with China Shipping Group to form China COSCO Shipping, which is mainly engaged in domestic and international maritime container transport services and related business. Then, the group also bought its Asian competitor, the Hong Kong-based Orient Overseas International Limited.

 

By the end of 2018, China COSCO Shipping managed to collect 376 container vessels, with a total capacity of 2.1 million twenty-foot equivalent units (TEUs) operating in 362 shipping routes and covering 329 ports across a hundred countries.

 

Therefore, the Chinese group is born from the combination of the two largest Chinese shipping companies and in just two years it has succeeded in starting up an industrial cluster thanks to which the group has reached four world records: integrated transport capacity, a fleet of bulk carriers, of tankers, and of general cargo ships. Moreover, the company also expanded its activities in the areas of port terminal management, container shipping, maritime infrastructure construction, container leasing as well as fuel supply, and port services for third parties.

 

BRI Deploys COSCO Fleet in EU - vessel - cifnews

© Picswe. China COSCO Shipping is headquartered in Shanghai but its offices are located all over the world.

 

Since regions along the BRI’s commercial routes have always been important for the Chinese shipping group, COSCO managed to issue a development plan that could fit in the Silk Road context, thus boosting the initiative.

The Mediterranean region has always played a central role in the development of the international maritime industry. As a crossroads of numerous trade routes, it has gained great importance not only for the BRI but also for the COSCO Group, which has decided to expand here its investments in port infrastructure.

Through the Belt and Road Initiative, China aims to better connect the country to commercial hubs in Africa, Asia, Europe, and Oceania. The final project is to pursue greater cooperation and deeper integration of the PRC into the world economy while developing collaboration between Beijing and at least 70 other countries located in an area that accounts for one-third of the world GDP.

 

The European Union represents China’s biggest source of imports and its second-largest export market. This results in over $1 billion in trade per day, whose maritime network outweighs air or rail freight.

 

According to a study by the Organization for Economic Cooperation and Development, as part of the Dragon’s maritime Silk Road, Chinese companies have already acquired stakes in 13 ports in Europe, including Greece, Italy, Spain, Netherlands, and recently even Belgium. And those ports already handle about 10% of EU shipping container capacity.

Beijing’s focus on infrastructure projects led to extensive investments in EU ports with COSCO as the main partner. In addition, maritime ports are a vital resource for the competitiveness of the European economy representing the gateway to the European market thanks to over 70% of goods crossing EU borders by sea.

 

BRI Deploys COSCO Fleet in EU - BRI routes - cifnews

© Bruegel. The Belt and Road Initiative and Chinese stakes in top European ports. The PRC has acquired stakes in maritime ports in Belgium, France, Greece, Italy, the Netherlands, and Spain.

 

For what concerns the development of the port terminals in the Mediterranean region, that of the Greek port of the Piraeus is the most relevant case.

In April 2016, COSCO acquired 51% of Piraeus Port Authority in Greece. However, in 2008, the group already obtained a 35-year concession for the use and development of two of its three piers.

Eight years later, the Chinese group achieved a majority stake of the terminal, thus contributing to its transformation into one of the 40 largest container ports in the world, and confirming its central role as a commercial hub in Europe. Since the acquisition, the harbor has experienced unprecedented growth due to new technology and infrastructure upgrades and in six years, port traffic grew by over 300%.

This event turned Greece into the main Chinese partner in the construction of the BRI. And since then, China and Greece have deepened and strengthened their ties so much that their relationship and the volume of trade have reached historic highs.

 

COSCO Group turned Piraeus into a busy key international terminal right where Europe, the Middle East, and Asia converge. A similar intent drives the company’s investments in the Western Mediterranean with the Spanish port of Valencia and in northwest Europe with Zeebrugge port in Belgium.

 

Even the Netherlands plays a key role as a connective logistics hub in the Silk Road. Home to the largest seaport, Rotterdam, the country is one of the most strategic partners for the PRC in the region as 500 million European consumers are located within 24 hours reach.

“We now call ourselves ‘the Chinese port outside of China’ as Rotterdam port’s trade volume with Chinese companies, including imports and exports, has expanded to account for 25% of the total cargo containers arriving at the port,” told the Global Times, Zhang Min, business manager at the International Trade and Investment under Rotterdam Partners.

In 2016, COSCO Pacific acquired a 35% stake in the Euromax container terminal in Rotterdam. The company revealed that it chose to acquire a large stake based on long-term strategic trends as it historically represents the main port for ship operating divisions of its parent company China COSCO Shipping for North-western Europe.

Due to its position and connection with Western and Central Europe, Rotterdam harbor experienced a 10.9% year-on-year rise in traffic in 2017. Containers are stacked here waiting to reach the hinterland, some of which showing Chinese logos such as COSCO and China Shipping. To accommodate fast-growing cargo input from the PRC, a terminal is dedicated exclusively to receiving shipping vessels from the Asian country.

 

BRI Deploys COSCO Fleet in EU - containers - cifnews

© Unsplash. To date, no Mediterranean harbor is among the 10 busiest maritime hubs in the world. Accession to the BRI would bring the EU back to the center of international trade.

 

Nevertheless, the true bridge between the Middle Kingdom and the European Union is played by Belgium. This region was the first Western country to provide China with interest-free loans and also the first country to establish an industrial cooperation fund with China.

Here, COSCO recently signed a concession agreement with the Port Authority of Zeebrugge for the management of its container terminal in order to build a Northern Europe container gateway that will facilitate traffic with its Mediterranean structure in Piraeus. It is the first Western European port where COSCO gains control.

The president of COSCO Shipping, Xu Lirong, explained that the Chinese company intends to develop the terminal as a gateway to North-western Europe and that it is also discussing a collaboration with the Zeebrugge Port Authority to develop complete logistics services in the storage area. The manager also mentioned, among the characteristics of the port, the depth of the sea, the only one able to welcome the group’s latest generation container ships.

Maritime transport in Europe increasingly needs the development of integrated infrastructures and companies operating in this sector will be able to meet this need only by connecting ports, railways, airports, and logistics parks across the European continent. COSCO investments in the EU thus serve to enhance the flows of goods within the BRI.

The success of the initiative, in fact, lies in having allowed China and its partners to carry out projects based on this model of integration of the industrial chain by relying on companies with strong multi-level capabilities in maritime logistics services, just like the COSCO Group.

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