Shanghai Port May Form Cruise-Line Venture to Secure Traffic

Shanghai International Port (Group) Co. (600018), operator of the world’s busiest harbor, plans to start a cruise line to pare reliance on overseas operators and secure traffic at its passenger terminal.

Talks are currently on with cruise line operators to form a venture, Henry Hwang, general manager of unit Shanghai Port International Cruise Terminal Development Co., said in an interview. An announcement could be made in the second half of the year, he said without naming any potential partners.

“All cruise liners presently are foreign companies,” Hwang said on July 5. “Their investments here are mobile. If anything happens, be it political developments or weather conditions, they could leave.”

Parent Shanghai International Port may hold about a 50 percent stake in the venture, Hwang said without disclosing planned investments. Royal Caribbean Cruises Ltd. (RCL) and Costa Cruises are the lines currently operating from its terminal, set up at a cost of 1 billion yuan ($157 million), as rising incomes in China spurred spending on tourism.

Shanghai Port’s terminal in the city center adjacent to the tourist destination of the Bund can hold four passenger liners of up to 70,000 tons each. A second facility, a joint venture between the Shanghai Baoshan district government and China Changjiang National Shipping (Group) Corp. is designed to take larger passenger vessels of more than 70,000 tons.

Two Terminals

The city’s two terminals are expected to handle about 400,000 passengers this year, compared with 230,000 last year when travel demand dropped because of Japan’s tsunami and earthquake, Hwang said. As much as 95 percent of the travelers passing through the terminals are Chinese nationals going to Hong Kong, Taiwan, Japan and South Korea, he said.

Hwang said the terminal’s proximity to the Bund and Lujiazui financial district may help boost revenue from hosting special events to 50 percent of sales this year. Events such as fashion shows by Cartier Ltd. contributed 30 percent of revenue last year, he said. The operator is also looking to boost duty- free sales.

Besides Shanghai, the other major cruise terminals in the nation are in the cities of Tianjin, Xiamen and Sanya. Last year, cruise ships made 142 voyages out of Chinese cities, a 50 percent gain over 2010, according to Beijing-based China Cruise & Yacht Industry Association. The terminals handled more than half a million passengers in 2011, the group said.

To contact Bloomberg News staff for this story: Alexandra Ho in Shanghai at aho113@bloomberg.net

To contact the editor responsible for this story: Vipin V. Nair at vnair12@bloomberg.net

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