Fitch Ratings does not expect the ratings of Chinese ports to be affected by the strict Covid-19 pandemic-related lockdown in Shanghai.

We rate two Chinese ports; Zhejiang Provincial Seaport Investment & Operation Group Co., Ltd. (Zhejiang Seaport, A+/Stable; Standalone Credit Profile (SCP): a) and Lianyungang Port Group Co., Ltd. (BBB/Stable; SCP: b). The ratings of both ports are equalised with our internal assessment of the creditworthiness of their sovereign owners, the Zhejiang provincial government and the Lianyungang municipal government, respectively, based on the strength of linkages and the likelihood of government support in accordance with our Government-Related Entities Rating Criteria. This results in stable ratings for the ports unless we revise our internal assessment of the creditworthiness of the relevant governments or if the likelihood of government support changes.

Shanghai has been the epicentre of the latest Covid-19 wave of infection. The city is under strict lockdown that has been extended until further notice. However, as port services are essential for the transport of goods that are required for daily living, the Shanghai government has stressed that port operations should remain unaffected by the lockdown. The operator of the Port of Shanghai, Shanghai International Port Group, said loading and unloading at the port has been largely unaffected, with manageable waiting times. However, tightened restrictions for road transport, including extended waits at checkpoints, Covid-19 testing requirements and potential quarantine upon return, appears to have impacted trucking services and delayed the transportation of goods in and out of the port.

The operator has also said it would implement a ‘closed-loop’ system that requires employees to stay in specific areas and adhere to certain protocols to prevent the spread of Covid-19. We expect the impact on the port to depend on the length of the lockdown, as shippers might re-route goods to other ports if the situation persists or worsens. However, rerouting is less likely in the short term, as it requires cumbersome procedures and approvals from Chinese customs.

The latest lockdown has also had minimal impact on the Port of Ningbo-Zhoushan; the flagship port of Zhejiang Seaport. The port is located in Ningbo city, more than 200 kilometres south of Shanghai. The local government has likewise prioritised the normal operation of the port, which is also operating under a closed-loop system. The port says it has not experienced congestion, which could be due to the fact that the current season is relatively slack, although there have been some delays in goods transport by road.

Nevertheless, the slowdown in China’s economy as a result of the lockdown will depress throughput growth at ports. We believe the Port of Ningbo-Zhoushan, as one of China’s critical export and import hubs, will bear the near-term brunt. However, this could be offset by the port’s geographic expansion and focus on ancillary services, which have brought positive results in 1Q22.
Source: Fitch Ratings