Hong Kong’s box terminals have fallen from the number one slot to number three in world throughput totals with the rise of Mainland China’s own ports. It’s a challenge for the region to maintain its role as a logistic hub and transshipment center. Nevertheless, Hong Kong is still talking about growth and a third place throughput of 24 million teus isn’t too shabby. By Paul Richardson, AJOT Hong Kong’s nine container terminals are located at Kwai Tsing port, and comprise 24 berths operated by five companies: Modern Terminals (MTL), Hongkong International Terminals (HIT), COSCO, DP World and Asia Container Terminals (ACT). The River Trade Terminal at Tuen Mun handles containers, break bulk and bulk cargo shipped from the mainland and is operated by River Trade Terminal, while separately, the mid-stream operation involves barges loading and unloading containers from vessels anchored in Hong Kong waters. The rapid rise of China’s ports has recently seen Hong Kong slide down the world’s busiest container port rankings as most industry figures see as “inevitable.” From top spot at the end of 2004, Hong Kong is now in third place with a container throughput in 2011 of 24.3 million teu. But as impressive as the handling numbers might appear, Hong Kong is losing market share of South China cargo in the area where it counts most – direct exports that carry greater economic value to a port, rather than the transshipment of containers. Shenzhen’s terminals at Chiwan, Shekou, Dachan Bay and Yantian are closer to the industrialized area of Dongguan, and consequently offer shippers a cheaper and more direct route from factory gate to the quayside. Additionally, cross border delays and high terminal handling charges add to the cost of shipping a container via Hong Kong, and shippers of ocean freight base their port choices on cost. Twelve years ago, Hong Kong handled most of the direct exports from the region. Today, the port handles little more than 50% of the total export volume. But as Hong Kong struggles to attract shippers, the crowded South China port cluster is facing its greatest challenge yet – how to manage capacity while countering sluggish market demand and the migrating factories. A sharp drop in demand for exports and an increasing trend of manufacturing moving to China’s cheaper inland provinces, is hitting all container ports in the region. Where once annual container throughput was well into double figures, single digit growth has replaced the headline numbers as terminals in the Pearl River Delta feel the impact of slowing consumer demand in the US and Europe. “We are seeing the signs of a maturing economy, and you cannot keep growing 20% year-on-year,” said Benjamin Lai, managing director Hong Kong for Modern Terminals recently. “Somewhere down the line relative growth is going to slow down to single digits”, he continued. Lai was specifically referring to the Shenzhen terminals that have posted an impressive growth in the past, enabling Hong Kong’s neighbor to grow its throughput by 10m teu in the space of eight years. Hong Kong’s annual container throughput saw 12% growth in 2010 but that was due to the spike in demand as retailers ran out of inventory and had to frantically restock. Since 2000, the average annual throughput growth in Hong Kong has been just 3.6%. Concern is often raised at industry gatherings about manufacturing shifting away from the Pearl River Delta (PRD) as factories move inland, or even out of China altogether to avoid rising labor costs and government efforts to force production up the value chain. But cargo from these factories is the lifeblood of South China container shipping, without which ports such as Hong Kong cannot exist. However, despite all this, there remains some degree of optimism within. CMA CGM’s vice-president Asia, Stephane Mazain recently shrugged off concerns that the port was facing an uncertain future, and confirmed 10% of the volume handled by the French line was from the PRD, a strategi