China’s $25 Billion ‘Cyclical Economy’ Industrial Port Complex

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Researched by Industrial Info Resources (Sugar Land, Texas). Sheer size and number of projects coupled with the annual rate of growth in all of China’s industrial sectors sometimes makes it necessary to look at developments in the country through the wrong end of the telescope to give things a perspective. With the overall GDP growth rate for 2006 predicted to be 10.5%, after hitting 10.9% and 11.3% in the first and second quarters of the year, the unstoppable expansion appears to be getting to Chinese planners and decision makers just as it is to outside observers. The integration of the parts of large projects into an optimum operating whole and the onward integration of these into the national scenario is pressured by macro concerns about energy, fuel, pollution and local ownership along with the need for technology exchange and foreign investment. Balancing the demands of the growing urbanized middle class against the dangers of creating a massive and dissatisfied underclass of dispossessed peasantry is another realtime imponderable facing the planners.

An example of a mega-project that will not lie still under a final set of specifications is the industrial and transport complex focused on the Caofeidian Harbor Complex on the Tangshan coast in north China’s Hebei province. Originally a deep water harbor serving local business and industry with imported fuel and raw materials, the development plan under the national 11th Five-Year Plan (2006 – 2010) has expanded a number of times creating the need for rolling revision of the parts and the whole.

“In tune with the national industrial layout and the development of the area around Bohai, the plans for the Caofeidian project have needed changing several times,” Xue Boxun, deputy director of the Caofeidian Industrial Zone told the China Daily. “It may still be the subject for further expansion,” he added.

A total investment of $25 billion is targeted for the complex by 2010, which will include major transport terminals, LNG terminals, steel plants, petrochemical plants and power stations. Xue says that he is still trying to figure how to integrate the value-adding element of scientific development into the new heavy industry base and at the same time reduce pollution. He is currently pondering a model based on a ‘cyclical economy’. Planners see Caofeidian fulfilling a number of roles including a potential distribution terminal for the energy and raw material needs of North China, a national base for heavy chemical industries, a reserve and allocation center for commercial energy, and a role model for a ‘cyclical economy’.

Power generation and desalination plants will serve the heavy base industries and wastewater, gas and residues generated by some production processes will be used in other operations. Using this ‘cyclical economy’ approach the aim is to lower costs, enhance efficiency and protect the environment. Waste gas from the 15 million-ton per annum (tpa) steel plant being constructed by Capital Steel &Iron Plant (CSIP), in cooperation with Tangshan Iron and Steel Corporation of Hebei, will be used in power generation to maximize desalination volumes. Water produced in excess of local needs may be supplied to thirsty Beijing, which will be more cost effective than transferring water from South China.

CSIP was the first of what could become a stream of new enterprises relocated to the region with the coastal area presenting opportunities for investment in deep water harbors and port terminals. The Waterborne Research Institute of China’s Ministry of Communications sees the port providing the industries with the feedstock of raw materials and cheap energy, both of which are causes for bottlenecking in Chinese industrial development.

The current specification will see Caofeidian deep-sea harbor with an annual capacity of 500 million tons. There will be four 250,000-ton mineral handling terminals, two 300,000-ton crude oil terminals, sixteen 50,000 to 100,000-ton coal terminals and one 100,000-ton LNG processing terminal with a final capacity of 10 million tons per annum. By handling 300,000-ton heavy commercial vessels, the port will contain and reduce the cost of imported materials. Currently, the cost per ton on a 50,000-ton vessel from Australia is $31.50, whereas the cost per ton on a 200,000-ton vessel would be between $5 and $6.25 a ton. Two of the mineral terminals were opened in 2005 with a combined annual loading capacity of 30 million tons.

The ‘cyclical economy’ approach to complexes of projects may become the golden rule by which the planners can control and integrate the growth of Caofeidian, as they appear to have accepted the fact that each new development parameter which is set is there to be extended.

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