Date
17 September 2019
Under-investment and insufficient scale among local operators have led to a gradual decline in Hong Kong’s ranking amid top global container ports. Photo: Bloomberg
Under-investment and insufficient scale among local operators have led to a gradual decline in Hong Kong’s ranking amid top global container ports. Photo: Bloomberg

HK port sector fights back after slipping to 7th place

The last time Hong Kong’s container port was ranked at the top globally was in 2004. Since then, it has gradually slipped to the No.7 spot, due to diminishing competitiveness in efficiency and costs. To fight back, four operators recently announced the formation of “Hong Kong Seaport Alliance” to jointly manage their berths.

Hong Kong’s container port throughout amounted to 21.98 million twenty-foot equivalent units (TEUs) in 2004, making it the world’s busiest container port. Back then, Singapore handled 21.33 million TEUs, while Shanghai and Shenzhen only carried up to 14.56 million TEUs and 13.62 million TEUs respectively.

Things have changed a lot since then. Mainland cargo increasingly does not need to go through Hong Kong anymore, as China builds more highways, railways, ports, bonded zones and free-trade zones. That has eroded Hong Kong’s role as a transshipment hub, since most goods in Yangtze River Delta and Pearl River Delta can be exported from Shanghai or Shenzhen directly.

Meanwhile, Singapore cargo port terminal has been expanding its capacity and upgrading its technology after Temasek consolidated the industry. The move has turned Singapore into the most important port in ASEAN, and the city-state took over a lot of south Asian customers from Hong Kong.

By contrast, Hong Kong’s container port has not expanded its capacity after the 9th container terminal was built in 2003. Also, several operators have their own individual plans, and it’s difficult to achieve economies of scale. The firms have not made sufficient investment in technology and automation to improve efficiency, which has further eroded their competitiveness.

In 2017, Hong Kong’s container port terminal only handled 20.76 million TEUs, far less than Shanghai (40.23 million TEUs) and Singapore (33.67 million TEUs). And its ranking slipped to No. 6. In the first half of last year, HK’s throughput dropped further, falling by 3.6 percent to 9.89 million TEUs, putting it in the 7th place as Guangzhou moved into the sixth position.

Hongkong International Terminals, Modern Terminals, COSCO-HIT Terminals (Hong Kong), and Asia Container Terminals have now announced an alliance to offer their berths together under a common terminal operating system. The four operators will share revenue and expenditures.

They would work together to improve efficiency and lower costs in order to shore up competitiveness of Hong Kong’s container terminal.

However, the move has prompted the local competition watchdog to launch an investigation, with authorities seeking to ensure that the new alliance wouldn’t mean breach of antitrust regulations.

In my opinion, antitrust should not be an issue, because rivalry from neighboring cities will hold things in check.

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RC

Hong Kong Economic Journal columnist