This report does not constitute a rating action.

Asian ports, particularly those in China, face unprecedented throughput challenges. The latest round of U.S. tariffs has emerged as a significant hindrance alongside volume volatility. If the current levels of tariffs remain for goods from China, it will cause a prolonged plunge in volume on China-U.S. routes. This would affect port operations and force a rerouting of goods through other countries, such as those in Southeast Asia, assuming no other tariffs are imposed.

This may temporarily boost volumes of intra-Asia routes as manufacturers that have capacity in Southeast Asia are rushing production to sell to the U.S. during the 90-day pause in implementation. But it won't compensate for losses on China-U.S. routes. Despite these obstacles, our analysis shows rated Asian port operators maintain sufficient financial resilience to handle throughput declines in 2025. Prolonged tariffs could lead to cuts in capex or lower dividend distributions.

Tariffs Will Curb Shipments, Alter Supply Chains

The magnitude of the tariff impact and how the sector adjusts will take time to play out. We believe shipments will be severely held back between China and the U.S. as long as the high tariffs remain effective. Of China's total exports, about 15% go to the U.S. For some ports in China, the exposure to the U.S. is much larger.

China's Southeast Asian trading partners also face material impact. Manufacturers using a "China-plus-one" or "China-plus-x" supply-chain strategy can expedite shipments from alternative countries to the U.S. However, we believe China's manufacturing capacity will remain significant and irreplaceable for the next 12-18 months at least. During this time, the impact on individual port operator will vary according to their throughput mix. This will also depend on the outcome of the 90-day pause and other new tariffs placed or exempted.

Over the next five to ten years, a shift in the supply chain will be the key driver of growth in port throughput. If China remains exposed to much higher tariffs than other countries, the supply chain shift will likely accelerate. Eventually, if manufacturers rebalance their supply chain to materially shift away from China, it could structurally erode a portion of port throughput.

Chart 1

Chart 2

The Buffers Are There…For Now

The Asian port operators we rate have sufficient rating buffers over the next 12 months. Our sensitivity test suggests their financial metrics have headroom to withstand falls in throughput of 14%-27% for 2025. Notably, each operator also has stable support from their shareholders, being either local governments or parent companies, which stabilizes their credit standing.

On the other hand, if the tariffs persist beyond two years without mitigation or other growth drivers, operators' revenues and financial leverage could be under pressure. In such a case, operators may opt to curb capital spending or adjust dividend distributions to partially offset the impact of revenue declines. Moreover, a scenario where trade volumes are structurally and materially affected could drag down operators’ profitability and business scale.

Stress Tests: Why Rated Issuers Can Hold Out

Our stress tests show rated port operators have financial headroom to absorb demand risks in 2025. Shanghai International Port (Group) Co. Ltd. (SIPG; A+/Stable/--) and Hutchison Port Holdings Trust (HPHT; A-/Stable/--) can withstand an overall volume hit in 2025 of up to 27%. HPHT, which has the highest exposure to China-U.S. routes among our rated issuers, may face the largest downside risks among our rated issuers under the current tariff policy. Over the past four years, these operators have accumulated good financial buffers. Solid and steady growth along with well-timed spending have helped improve their financial metrics.

Our test assumes no fee adjustments. In 2022, regulators allowed China port operators increased their handling fees by 5%-10% following more than a decade of minimal tariff adjustments. Lower port fees are likely to attract volume if tariff policy is the major driver of volume decline, in our view.

We assume fixed costs will remain steady whereas variable costs move in tandem with falling volumes. For most ports in China, costs are fixed, in part because of measures to improve efficiency such as automation.

China Merchants Port Holdings Co. Ltd. (CMPort; BBB+/Stable/--) has smaller headroom of 14% as compared with other rated port operators. This is due to its recently announced acquisition of Vast Infraestrutura S.A., the operator of the largest private crude oil transshipment terminal in Brazil. CMPort is, however, more resilient to volume risks in China because of its diversified portfolio of 46 ports across 26 countries. Our sensitivity tests assume all planned capital spending will still take place.

Adani Ports and Special Economic Zone Ltd. (BBB-/Negative/--) can withstand an up to 22% of overall volume hit in fiscal year 2026 (year ending March). Adani Ports mainly serves domestic needs and we believe will be more resilient due to the origin and destination (O&D) nature of the volume.

Issuers Have Room To Move On Capital Spending

For the three port issuers in China, we have factored in capital spending for capacity expansion and acquisitions. Some projects are under way and unlikely to be suspended, even if there is pressure on operating cash flow.

Adani Ports' total capex over fiscals 2026 and 2027 will likely remain high at Indian rupee (INR) 120 billion-INR130 billion a year due to its growth aspirations. This capex includes discretionary spending, acquisitions, and investments in equity affiliates. However, most of its discretionary spending of INR50 billion-INR55 billion a year over the same period is modular. As such, Adani Ports has the flexibility to lower capex, if required.

We also consider a scenario where the trade conflict continues and severely curtails throughput volumes. In such a case, we believe the issuers we rate will be able to adjust their investments since some of it is for longer-term capacity and discretionary in nature. This is particularly if the trade outlook affects the volumes needed compared with the original capacity expansion.

Even so, the longer the tariffs at their current levels are held in place, the less useful trimming these expenditures will be. Such trimming may not completely mitigate the pressure on their standalone credit profiles.

Our forecasts factor in key capital spending items
Company	Key capital spending
CMPort	Maintenance capex: HK$1.5 billion-HK$2.0 billion a year
	Vast acquisition: HK$3.5 billion (the deal is pending)
SIPG	Luojing Port Area Container Terminal phase 2 with total investment of RMB4.8 billion and capacity of 1.41 million TEU
	Xiaoyangshan North Terminal construction with a total capacity of 11.6 million TEU to be completed in several phases. A total of RMB51.3 billion is planned.
	Acquisition of Yangshan Phase IV, with a total spending of RMB14 billion. Yangshan Phase IV has an annual throughput of more than 7 million TEU.
HPHT	Maintenance capex of about HK$500 million annually.
	No capital injection is required from HPHT for its Yantian East expansion. HPHT expects the first berth to start operation in early 2026, with much of the capital expenditure expected to be incurred by then.
Adani Ports	Maintenance and committed capex: INR50 billion annually over fiscals 2026 and 2027.
TEU--Twenty-foot equivalent unit. RMB--Chinese renminbi.

Impact On Port Throughput Varies

For China ports, O&D shipments to the U.S. will face the most direct hit. According to media, cargo bookings for the next few weeks are down by 30%-60% in China, as the high U.S. tariffs are making it almost impossible for Chinese exporters to sell in the U.S., and some exporters are waiting to see how the tariff policy might change.

If reciprocal tariffs on other countries become effective, intra-Asia routes will also face a large hit. This is because a high portion of this trade comprises intermediate products, such as components or raw materials, which are part of the value chain of the exports to the U.S. Tariffs on Japan and Korea would also indirectly hinder intra-Asia trade, given transshipment of cargo from other Asian countries bound for the U.S. via Chinese ports would be pulled back.

The Port of Singapore (unrated) has a robust market position and diversified geographical footprint. However, as the world's largest transshipment container hub and one of the busiest container ports by volume, it could see some volatility to its earnings.

On the flipside, ports that mainly serve domestic markets to be largely resilient and is less affected than ports which are exposed to transshipment volume. This includes Adani Ports in India and Indonesia-based Pelabuhan Indonesia PT (Pelindo; not rated).

Chart 5

China's Intermediate Trade Faces Slowdown

China's intermediate trade has been a key driver of growth of Asia ports, at least until now. This may slow down if there are high tariffs on most Asian countries. Despite the first round of tariffs by the U.S. in 2018, China has increased its international commerce. Its contribution to global container trade rose to 32% in 2023 from 25% in 2010. We believe the gain is mainly due to growth in the trade of intermediate goods, which accounted for about 47% of total China exports in 2023, up from 40% in 2012.

Chart 6

So far, supply chain shifts have primarily involved labor-intensive industries with low barriers to entry. Many low value-added processes, like assembly, are moving from China to Southeast Asia. This trend is increasing port throughput, particularly on intra-Asia routes.

A case in point is the apparel sector, where parts of the manufacturing has shifted to Vietnam and Cambodia. And a prominent example of that would be the U.S.-based sports apparel company Nike Inc., which has shifted at least its final stages of footwear production.

Chart 7

Trade With Other Regions: A Way To Level The Playing Field?

Respite may come from balancing the trade with other regions. Throughput growth has benefited from the expansion into new markets such as the EU and Latin America (see chart 8). While this development may not offset the drop in trade with the U.S., it indicates there is room for higher penetration and development. The jolt to trade volumes will test the ability of operators to adapt and stabilize their performance in the longer term.

Chart 8

Editor: Lex Hall

Related Research

• Credit Conditions Asia-Pacific Special Update: U.S.-China Ties In Uncharted Territory, April 15, 2025
• Global Credit Conditions Special Update: Ongoing Reshuffling, April 11, 2025
• Asia-Pacific Credit Conditions To Deteriorate Amid Tariff Fallout, April 7, 2025
• China: Can Stimulus Offset Slow Growth And New Tariffs, March 24, 2025
• Research Update: Hutchison Port Holdings Trust's Debt Reduction To Offset Lower Hong Kong Contribution; 'A-' Rating Affirmed With Stable Outlook, February 12, 2025
• Adani Ports and Special Economic Zone Ltd., Sept. 17, 2024
• China Merchants Port Holdings Co. Ltd., July 29, 2024
• Shanghai International Port (Group) Co. Ltd., July 8, 2024

Primary Contacts:	Shanshan Yang, Singapore 65-6516-1110; shanshan.yang@spglobal.com
	Christopher Yip, Hong Kong 852-2533-3593; christopher.yip@spglobal.com
Secondary Contacts:	Mary Anne Low, Singapore 65-6239-6378; mary.anne.low@spglobal.com
	Ricky Tsang, Hong Kong 852-2533-3575; ricky.tsang@spglobal.com
	Kendrew Fung, Hong Kong 852-2533-3540; kendrew.fung@spglobal.com
	Cheng Jia Ong, Singapore 65-6239-6302; chengjia.ong@spglobal.com
Research Contributor:	Shuyang Liu, CRISIL Global Analytical Center, an S&P Global Ratings affiliate, Hangzhou ;