Hong Kong’s declining container port traffic shows why it should be run more ‘like the MTR’, analysts say

Ryan Swift

Hong Kong needs a centralised port authority to help oversee changes that will enable the ageing 50-year-old Kwai Tsing Container Terminal to cope with rising competition from other logistics and port operators around the region, according to experts.

Kwai Tsing has undergone successive expansions nearly every decade since it was completed in the 1970s, such that it can now support 24 cargo ships berthed simultaneously.

Unlike other ports in the region, Kwai Tsing’s facilities are shared among five independent operators, a system that is “quite unusual” for the region, according to Professor Collin Wong Wai-hung, a supply chain and logistics expert at Hang Seng University in Sha Tin.

He said that Singapore has a single operator in the form of the Port of Singapore Authority, which could help to explain its rising throughput volumes, whereas Kwai Tsing is the only port in the top five globally to lose traffic in the four years to 2018.

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Roberto Giannetta, executive director of the Hong Kong Liner Shipping Association, said Hong Kong has to take aggressive action to deal with declining volumes, particularly in transshipment trade.

“Without a port authority, Hong Kong cannot compete on the same footing [as other ports],” he said. Giannetta noted the failure of local government departments to work together on port issues, citing the six-year failed effort to relax air draft restrictions at the Tsing Ma Bridge, which limits larger ships from traversing Hong Kong waters. The penalty for vessels passing above the 53 metre height limit on the Tsing Ma Bridge range from a fine to imprisonment, according to the Marine Department.

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Hong Kong’s share of the transshipment business could face further pressure, thanks to the trade tensions. Drewry, a UK maritime consultancy, has reduced its total container throughput growth forecast from 3.9 to 3 per cent for 2019, citing US-China trade war concerns, global instability and new emissions regulations affecting the shipping industry.

About 70 to 75 per cent of Kwai Chung’s container business involved transshipments, compared to about 90 per cent in Singapore, according to Dr Wong.

Hong Kong’s competition watchdog has opened an investigation into whether a new ‘super alliance’ between four of the five operators at the Kwai Tsing Container Terminal breaches antitrust regulations. Photo: Roy Issa

Hong Kong’s port falls under the oversight of the Transport and Housing Bureau. Alan Lee Goldstein, a marine engineer and planner who helped design container ports for SeaLand, said Hong Kong needs a port authority similar to that of New York and London. “It needs to be somewhere between public and private [in operation], like the MTR,” Goldman said.

Giannetta said the transshipment business was important to Hong Kong’s future role in maritime professional services such as arbitration, financing and maintenance.

“If we continue to lose cargo throughput and shipping companies’ regional offices, we will not be able to attract those other peripheral maritime services,” Giannetta said. He said shipping agencies such as CMA CGM and the Japanese shipping conglomerate ONE have recently established regional headquarters in Singapore instead of Hong Kong.

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Port and related logistics businesses represented 3.4 per cent of Hong Kong GDP and supported 300,000 direct and indirect jobs, or 7.5 per cent of city’s total employment, according to Dr Wong.

In January this year, Hutchison Ports, COSCO-HIT, Asia Container Terminals Modern Terminals, four of five operators at Kwai Tsing announced the creation of the Seaport Alliance to coordinate their operations. The aim is to increase coordination and efficiency to deal with the mega container ships now being built by shipping lines, and the formation of shipping alliances.

The Hong Kong Competition Commission has promised to investigate claims by trucking associations that the alliance will lead to a port operator cartel.

The Kwai Tsing Container Terminal supports capacity for 24 cargo ship berths among five operators. Photo: Roy Issa

But Dr Wong defended the Seaport Alliance as a “reasonable move”, saying that Hong Kong had to compete with Shenzhen on port on efficiency and cost.

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“Hong Kong cannot rely on its historic presence as the No 1 container port in the world to retain its position in the future. Hong Kong is no longer a must-call port,” said Gianetta.

Port of Singapore’s throughput – a measure of the amount of cargo passing through a port – has increased from 33.87 million twenty-foot equivalent unit (TEU) in 2014 to 36.6 million TEU in 2018. Over the same period, Hong Kong’s throughput fell from 22.23 million to 19.6 million TEU, dropping from fourth to seventh globally among container ports.

Shanghai’s throughput rose from 35.3 million to 42 million TEU, while Shenzhen rose from 24 million to 27.7 million TEU, according to the World Shipping Council.

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