Hong Kong’s port growth challenged by neighbors

Hong Kong’s status as the world’s third largest boxport has been challenged by the ports in neighboring Shenzhen. But as Hong Kong based Ken Gwagni writes the port has risen to the challenge and is looking for new options to make Hong Kong even more competitive. Hong Kong Port enjoys healthy growth but faces many challenges. It enjoys a free port status and is a leading logistics hub in the Asia-Pacific region, enabling it to become a major transshipment hub in Asia. But it faces many obstacles to sustain the high growth of the past few years and neighbor Shenzhen poses a major challenge. Shenzhen surprised experts last year when it dethroned Hong Kong from its position as the third busiest port in the world with throughput of 23.28 million TEUS compared to Hong Kong’s 22.29 million TEUs. It was a small increase but it jolted people in the Corridors of Power and resulted in a government scramble to look at the various options to make Hong Kong more competitive. Hong Kong Port surprised experts with an increase in volume in the first six months of this year. According to figures from the Hong Kong Container Terminal Operators Association, Hong Kong turned the tables on Shenzhen with a throughput of 11.11 million TEUs compared to Shenzhen’s 10.98 million TEUs. In the same period last year Shenzhen was ahead with 11.06 million TEUs with Hong Kong lagging behind at 10.73 million TEUs. “We are already the third busiest port in the world,’’ declared Sunny Ho, executive director of Hong Kong’s Shippers’ Council. “If this trend continues, we will regain our crown that we lost to Shenzhen last year.’’ Volumes are traditionally higher in the second half of the year with the seasonal peak season in August and September and Ho is confident that Hong Kong will surpass last year’s growth figures.

The first six month’s surprise growth was also underlined by Hong Kong shipping line OOCL’s director of trades, Stephen Ng. “It is kind of interesting what happened in the first half of this year. Lots of people were caught by surprise to see a spike in volume, particularly cargo going to Europe. The numbers we have for the first four or five months show volume increasing by eight percent from Asia to Europe. This is despite people talking about recession, negative interest rates and so forth. It seems people in Europe are still buying a lot from Asia. “On the North American route we have been seeing an increase of something like five percent. But we are not quite sure whether that is due to increased spending by the Americans or building up of inventories by retailers on fears of port disruption because of the end of labor contracts with terminal operators of the US West Coast ports.’’ Hong Kong being a transshipment hub benefits from the increase in volumes on the East-West lanes. It is unlikely Hong Kong Port will enjoy high growth because a lot of cargo is moving away from Hong Kong, admitted Ho. “However, we have our own strengths. Despite having a decrease in exports from southern China, Hong Kong finds itself in a much better position as far as transshipment cargo is concerned.’’

Hong Kong is not the only one with problems, Shenzhen also has its problems, said Ho. The main problem of Shenzhen is that it is divided – with Yantian Container Terminals in the east and the twin ports of Shekou and Chiwan at the other end in the west, along with Da Chan Bay. Because of historical and commercial reasons, cargo to Asia-Europe, Asia-Med, intra-Asia and domestic boxes are handled by Shenzhen’s western ports while Yantian handles mainly Pacific trade. “For a company dealing with a port handling Pacific trade in the east and other ports handling cargo services in the west, it makes transshipment services very complex,’’ said Ho. He explained, “For example, take transshipment service to North America from the western part of the PRD from ports such as Zhongshan, Foshan, Zhuhai, Jiangmen. They cannot put the cargo on to the same barge and these barges have to go through the Ma Wan channel to Hong Kong and then on to Yantian. “Hong Kong intercepts all of this transshipment cargo because if the shipper wants to send the goods from Yantian, the barge has to travel an extra day. Barges from different ports in the western PRD are also not always full. So these half-full barges usually hand over their cargo to Hong Kong Port for transshipment.’’ Another strong point for Hong Kong is that all the port facilities are located in one single place, that is Kwai Chung, unlike at Yantian, according to Ho. “So for cargo coming from the western PRD for North America, Hong Kong is the ideal transshipment center.’’ This is one of four advantages Hong Kong has over other ports in the region, according to Ho. “Secondly, the investments in Hong Kong terminals have long been completed and the depreciation of the terminals is over. So if they want to compete with one another they can do it at a very low cost,’’ said Ho. Thirdly, not many ports in the world can handle the complex transshipment business like Hong Kong Port, he said. “Say for a single barge with cargo for 10 destinations. Hong Kong port can easily handle this because it is a very efficient port, but this could create chaos for other small ports.’’ Lastly, Ho noted the strategic location of Hong Kong. “It is in the heart of Asia and between all the key trade routes so shipping lines find it convenient to use Hong Kong as a transshipment hub.’’ Hong Kong has nine terminals situated in the Kwai Chung-Tsing Yi basin operated by five different operators, namely Modern Terminals Ltd (MTL), Hong Kong International Terminals (HIT), COSCO-Hong Kong International Terminals (COSCO-HIT), CSX World Terminals Hong Kong Ltd (CSX) and Asia Container Terminals Ltd (ACT). The water depth of the Kwai Chung-Tsing Yi basin is 15.5m (50 feet 10 inches), so the port can handle mega-ships. But Hong Kong Port despite its advantages and efficiency still lacks sufficient port infrastructure to maintain its growth projection, especially with the advent of mega-ships.

“The increase in barge traffic and increase in length of vessels means Hong Kong desperately needs additional dedicated barge berths to remain competitive and to allow for the handling of transshipment cargo from main vessels without congestion or delay, said Jessie Chung, chairman of the Hong Kong Container Terminal Operators Association. The association has engaged with the government to identify suitable sites for these additional facilities. “We have submitted a White Paper to the government laying out industry-wide solutions for improving the competitiveness of the port. These solutions include a land allocation policy by the government to re-allocate the existing land and barge berths, with those adjacent to the terminals for their priority use as on dock container terminal land and terminal barge berths,’’ said Chung. Hong Kong has to improve port efficiency and find more land for the industry for infrastructure development to maintain its competitiveness or shippers and lines will turn to ports in Shenzhen.