China Overseas Ports Investments in Europe – A case of Piraeus Port and COSCO

Just when Greece was near the brink of bankruptcy in late 2008 and early 2009, came the COSCO deal for Piraeus Port. At that time, I remembered few insurance companies were willing to consider even insure shipping to Greece due to the credit crisis.

In 2008, Piraeus handled 433,000 TEUs.

Since 2009, COSCO has been operating one of the Piraeus port’s container terminals and have consistently surprised other Mediterranean ports with its ever increasing port volumes.

In 2014, with COSCO management, Piraeus handled 3.6 million 20-foot equivalent units (TEUs) of containers and is investing a further 230 million euros to build a second container terminal at the port.

In January 2016, Greece named COSCO as the sole bidder for Piraeus Port, a gateway to Asia, eastern Europe and north Africa.  Sadly, two other shortlisted investors—APM Terminals, owned by Danish shipping conglomerate A.P. Moller-Maersk A/S, and Philippines-based port operator International Container Terminal Services Inc.—didn’t submit binding bids.

On 8 April 2016, COSCO signed a binding agreement with Greece’s privatisation agency for Piraeus Port.

COSCO will buy 51 percent of Piraeus for 280.5 million euros and the remaining 16 percent for 88 million euros after five years and once it completes investments of 350 million euros over the next decade.

China COSCO Chairman Xu Lirong said, “Let the ship sail and bring the Golden Fleece. China COSCO Shipping … will continue to be committed to Greek growth in the long-term.”

Cosco’s control of Piraeus many believe will turn the Mediterranean port into a logistics hub for Chinese exports to Europe. Cosco also uses Piraeus as a transhipment hub for Asian exports to Europe arriving on container vessels from China, given its proximity to the Suez Canal.

According to Reuters, the total value of the COSCO contract is 1.5 billion euros, including additional investment, as well as revenues of 410 million euros, dividends and interest Greece is expecting to collect under the 36-year concession deal between Piraeus Port and the government.

In response to the One Belt One Road Strategy, COSCO had expressed interest in buying the Greek train operator TRAINOSE, which is on sale. This may help Piraeus to be a Southern European logistics hub.

COSCO had earlier sounded its intention to ​develop the Piraeus into a logistics center that will move goods, mostly via rail, to Eastern Europe.

The conclusion of this Piraeus Port deal end 2 years of uncertainty for COSCO and Piraeus Port.

The success of the deal will further push for more Chinese port investments in Europe.

We need to watch this space for further developments. Things are getting more interesting, to be sure.