Espionage, state subsidy, protectionism: which is the terminal disease?

Two ZPMC cranes installed in Port Elizabeth in December

The international container terminal sector has long been scrutinised by spooks, spies and security analysts – and for good reason: ports are sensitive, vulnerable zones.

Accusations of espionage devices being fitted to Chinese-made container cranes came as absolutely no surprise to any senior terminal executive – not because they thought allegations true (that remains unknown to the industry, although sentiment is “probably probable”), but because they have been circulating for so long.

The American Association of Port Authorities (AAPA) flatly rejected the assertion.

“There have been no known security breaches as the result of any cranes at US ports, despite alarmist media reports. Further, modern cranes are very fast and sophisticated, but even they can’t track the origin, destination, or nature of the cargo,” it said.

To take the second point first: you don’t need a crane to tell you any of that, just look at the bill of lading, or buy the PIERS data. But also, a crane can actually tell you quite a lot about a container – they are fitted with optical character recognition cameras (anyone with speeding fine will have had a run-in with one of those) that note all the container details; the spreaders (see pic below) are the real brains of container cranes and are mostly built in Sweden by a company called Bromma. They are fitted with all sorts of load-measuring devices since VGM requirements came into force. If the alleged modems could have been transmitting that crane data… there’s a conceivable use for them.

Photo: Bromma

Trade data theft often gets conflated with security threat, and here’s where things could be more serious. The Loadstar doesn’t have a strong grip on the military implications of these suspect devices, or what they could be capable of, but their very presence in ports (see intro) is unsettling, to say the least.

Worse, if they are in US terminals, then they must surely be everywhere else. The company at the centre of the issue, ZPMC, has commanded a container crane market share of between 50% and 85% for the best part of 20 years. There are thousands of ZPMC ship-to-shore gantry cranes operating across the world, including in the US’s major allies – most of Taiwan’s container terminals, for example, use ZPMC cranes. In India, where Chinese port operators are barred from bidding for terminal concessions, over security fears, ZPMC equipment also abounds.

If the allegations are true, the US really needs to tell its allies where and when these cranes were delivered, providing parameters for similar inspections across the world – after all, the US is also a major user of container terminals globally, both commercially and militarily.

Meanwhile, the US response is to propose ploughing $20bn into reshoring crane manufacturing, which could be good idea if it is to embark on a new port-building programme, as some suggest it should.

However, take a look at any other heavy manufacturing requiring lots of steel and which has come to be dominated by the Chinese, such as container manufacturing, and there is an established pattern of behaviour we can expect: ZPMC will drop its prices to the point where even the US’s $20bn investment becomes uncompetitive.

Which means that for that initiative to be successful, it will have to be accompanied by either some sort of ‘buy-American’ legislation or subsidies that have a similar effect.

How protectionist would that be?