A few weeks ago, the Haifa Bayport container terminal, operated by Chinese port giant Shanghai International Port Group (SIPG), was officially inaugurated. Despite the official opening, so far the only activity taking place at the port is loading empty containers on their way out of Israel.
In his first interview in Israel, Bayport CEO Miao Qiang explains that, starting this January, the port - which is defined as a container port only in its contract with the State of Israel (via the Israel Ports Development & Assets Company (IPC)) will begin operating in higher gear.
As to why this has not yet happened, Miao sticks by the explanation that contracts in the industry are made according to calendar years, meaning, contracts or shipping routes commencing in January. One way or another, he expects that by the end of this month, SIPG will already have signed contracts with some of the largest shipping companies in the world, adding, "Within a year, I estimate we will be at our full potential pace".
Certain that Bayport will be more efficient than Haifa Port
Asked when he estimates the port will become profitable, Miao replies "within 3-5 years", and predicates his explanation on SIPG's technological advantage: a fully automated port. He says that its efficiency is optimal, so the target numbers are similar to those of the huge port SIPG operates near Shanghai: 200-250 thousand TEU (20-foot equivalent unit) containers per crane, per year. These numbers, he says, indicate far higher efficiency than those of the nearby Haifa Port. "The Port of Haifa has 17 cranes that handle 1 to 1.5 million containers annually, which is a very low number. We have eight cranes and we are certain we can be much more efficient than them," says Miao.
What will your market share be in five years' time?
"I estimate that we will have 25% of the container market," he says. The competitors are not only the ports of Haifa and Ashdod, but also the private Hadarom Container Terminal at Ashdod, operated by Dutch-Swiss Terminal Investment Ltd. (TIL), which is set to open in the coming months.
What advantages do you have over the new private container port in Ashdod?
"We have similar capabilities, but our equipment - the cranes - can be more efficient, because we are more technologically advanced."
"We view Israel as a developing economy"
The name SIPG does not mean much to Israelis, but it's a name that can't be ignored in Shanghai. SIPG is a municipal company. 40% is held by the Shanghai municipality, with the rest held by other entities such as major shipping company Cosco, which owns about 10% of the company. SIPG operates Yangshan Port in Hangzhou Bay, considered the world's largest automated port, built in a complex engineering operation 33 kilometers off the coast of Shanghai. "The company is responsible for moving 43 million containers (TEU) a year," Miao says with undisguised pride, explaining that aside from this port, the company operates many more ports in the area, some along the Yangtze River. "Annual container shipping in Israel is about 3 million containers, while along the Yangtze alone, which is internal trade within China, the company ships about 10 million containers a year."
Given this enormous gap, it is a bit hard to understand the company's decision to operate its first port outside China in Israel. "The company previously invested in a port in Belgium, but the Haifa Bayport in Israel is really the first one for SIPG to operate 100% outside China. One reason is that we view Israel as a developing economy," says Miao.
The tender was for operating a port either in Ashdod or Haifa. Why did you choose Haifa?
"Haifa and Shanghai are twin cities and when the tender took place, the Mayor of Haifa, Yona Yahav, approached the mayor of Shanghai and urged him to use his influence with the company to make a bid," explains Miao, who clarifies that China takes the concept of twin cities far more seriously than does Israel. He also explains that Haifa is considered safer than Ashdod because of the latter's proximity to the Gaza Strip, and that Haifa has another advantage - the possibility of being a gateway for transporting goods to Jordan and from there to other Arab countries.
Nonetheless, asked whether he knows the volume of maritime trade originating in overland trade with Jordan, Miao admits that he does Is not aware of the numbers. However, he still has no reason to be familiar with this topic. Trade between Israel and Jordan via the Sheikh Hussein Bridge is by truck. Infrastructure that was supposed to have been constructed to support the growth of this trade has not yet been built, for example, a bridge that is supposed to be built over the Kishon River, taking trucks directly from the Yagur intersection to the Haifa ports and the Israeli Shipyards port, shortening travel time. The bridge is also supposed to carry a cargo rail line.
"In China, if a senior official supports something, everyone falls in line"
Asked if he feels the Israeli authorities have helped them enough, Miao answers, albeit indirectly: "Israel reminds me of China 20 years ago when, to promote a project, you needed 16 or 17 approvals from different authorities such as firefighting and so on. Even today you need the same quantity of signatures, but everything is done differently, in accordance with the government 'One Window, One Form' policy. Today, approval of plans takes place in one building, and not only is everything all in the same place but also, those with approval authority must provide answers within a short time."
He explains that although SIPG met with Israeli ministers who told them they were very interested in the project, only later did he discover they had no actual authority. This, he says, is because any agency can apply to the courts to halt activity, or because there are authorities that operate in accordance with their own schedules. "In China, if someone senior supports something, everyone falls in line," he says.
There is another gap affecting the different timetables, he notes. "If you look at the duration of a project, the planning phase for Western companies is longer than the execution phase. In China, it is the other way around. It has to do with the fact that in China we say that you cross the river by touching the stones , and then solve things. It may cost more money in the execution phase, but the timetables are far shorter," Miao says. Despite the bureaucratic difficulties, he says that the company is thus far satisfied with its experience in Israel, and in the light of the success, is considering expanding to other ports around the world.
"There is no government directive about coming to Israel"
Miao Qiang is 52 years old, Shanghai-born and, for the last three years, has been living in Haifa, without his wife and daughter who stayed behind in Shanghai. He joined SIPG at the age of 23, after studying mechanical engineering, and has been with the company ever since. "If a crane in the harbor breaks down, I can fix it," he says humorously. In 2004, he was sent by the company to intern at the Port of Rotterdam in the Netherlands, which later helped him when the company chose him to lead the port project in Haifa. "I love to travel, and Israel's region has always interested me, so I was happy when I got the job," he says.
A part that is perhaps less "happy" for him is the fact that the Haifa Bayport has long been dubbed "the Chinese port". The company prefers that the port, or rather its operator, be identified with the people of Shanghai. This may perhaps be an attempt to somewhat blur the connection with China. "Of course, there's no problem with the fact that the company is from China," explains Yoav Zuckerman, who serves as an SIPG director in Israel, and liaison between the company and various entities. "The problem is that, often, it's said to create a kind of negative connotation due to people's wish to depict China and companies from China as if they're looking to take over the world," Zuckerman says.
There have definitely been many reports in Israel that the US administration does not approve of companies like yours entering infrastructure projects in Israel. What do you think?
"I think the Americans are strange," Miao endeavors to explain. "It's just like 40 years ago in China, when the country opened up to the West and American companies started coming to China and Hong Kong. Everyone thought there were spies among them. We at SIPG came to Israel to do business, not politics. There's a win-win here. You want to do business with us and we also want it because of the potential to profit," he says, pointing out what he finds paradoxical. "Do you know that 90% of the cranes in US ports are made in China by ZPMC? Our port in Israel also has workers from the US and Germany."
There are recent reports that US government representatives have asked to tour your port. Are you aware of that?
"We read about it in the paper, but we haven't received an official request," he clarifies, saying that if the intention is to visit for economic reasons, "We will host them without issue. But if it is about other things, the embassy must be consulted."
So there is no reason to fear Chinese companies coming to Israel?
"There is no government directive about coming to Israel. There are many large tenders in Israel and companies are looking to do business, each company with its own goal. Our company's goal is to be a port operator. For example, China Harbor and CRTG's goal is to execute infrastructure projects. Everyone wants to do the best in their field, and sometimes there is competition between Chinese companies," he says. One last point he wishes to clarify: "We are operating under Israeli regulation. If we receive an order from the Chinese government to cease activity, something that could not happen, then according to the terms of the contract, the State of Israel has the option of removing us from the port. Even if there is a security incident, we are subject to the security officer who is not subject to the CEO. The activity in Israel is entirely according to the conditions set by the state."
"Shipping prices will fall in the next six months"
For many months now, sea freight rates have jumped sharply, but Miao expects them to fall within the next six months, as he estimates that manpower problems in the sector will be solved in the near future.
Before the Covid-19 pandemic, a container could be brought to Israel for $2,000. Today, even $18,000 no longer sounds unusual when, in many cases, finding space on a ship is difficult. This began when many Chinese ports shut down operations because of the outbreak of the pandemic, which disrupted the global supply chain, and continued with the closure of factories around the world for various periods, due to measures taken to deal with the spread of Covid-19. Other reasons are related to the sharp rise in fuel prices, and energy crises in many countries, which has raised prices for electricity and hence of production. Add to this a significant increase in online purchasing, due to Covid-19.
"Part of the problem was created because there were not enough workers in the sector. Because of the coronavirus, many countries did not permit workers to leave their country's borders, or restricted workers from other countries coming in, thus creating a shortage," Miao says. He explains that many workers come from Asian countries like China, the Philippines and India - which is the main problem: "Many sailors come from India, and because of the coronavirus they could not get out. I think in half a year it will work out and that will release a lot of pressure, and help bring prices down to more normal levels. "
Miao Qiang
- Personal: 52 years old. Born in Shanghai. Currently living in Haifa without his wife and daughter who stayed behind in China
- Professional: CEO of SIPG Israel, operator of the Haifa Bayport container terminal. Joined SIPG at the age of 23 after studying mechanical engineering
- One more thing: Loves to travel. When a senior company official visited Israel, Miao took him to Masada and guided the tour, with explanations, himself.
Published by Globes, Israel business news - en.globes.co.il - on November 8, 2021.
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