- Hongkong International Terminals is freezing salaries for all its staff this year due to rising competition, the US-China trade war and in a bid to cut costs.
- In 2004, Hong Kong filled more than 150,000 vessels, the numbers have almost halved and recorded an overall decline of 5.4 percent last year.
- Has formed an alliance with Modern Terminals and two other operators to jointly manage and operate 23 berths at the main Kwai Tsing terminals.
- Hong Kong’s container terminals are operated by private companies that have no government links and the situation has been deemed as too late by experts.
According to Straits Times, Hong Kong’s continued slide down the rankings of the world’s great ports has pushed billionaire Li Ka Shing’s freight-terminal operator to take action.
Facing hard times
Hongkong International Terminals, the city’s biggest container-terminal operator and part of Li’s CK Hutchison Holdings, is freezing salaries for all its staff this year due to rising competition and the US-China trade war. It has also formed an alliance with rival dock operators in Hong Kong in a bid to cut costs.
Rahul Kapoor, an analyst at Bloomberg Intelligence in Singapore commented that it has been a tsunami of negative developments for Hong Kong and it has failed to keep pace with developments in the past years when the Chinese invested money in expanding capacity.
Drewry Shipping Consultants said Hong Kong had been among the world’s five busiest container ports since 1979 when the company first started compiling the data. But the city probably slipped two notches to seventh place in 2018, overtaken by neighbouring Guangzhou and South Korea’s Busan, based on 11-month and full-year data from port authorities and China’s Qingdao could be next to surpass it this year.
Lost its former glory
As recently as 2004, it was the busiest container port in the world, with boxes full of manufactured goods fed to its wharves by trucks, barges and coastal ships from cities in China. But since then, Hong Kong has been overtaken by one Asian port after another, mostly on the mainland, as local and national governments invested in new facilities for bigger ships that could carry goods directly to markets around the world, without the need for transshipment in Hong Kong.
In 2004, Hong Kong filled more than 150,000 vessels. That number has now almost halved, and container traffic at the port has fallen every month since April for an overall decline of 5.4 percent last year, according to the Hong Kong Maritime and Port Board. That compares with an increase of 4.4 percent for Shanghai and 5.8 percent for Busan in 2018 and a 7.1 percent gain for Guangzhou in the first 11 months.
Trade war could cause further decline
An entrenched trade war could accelerate Hong Kong’s decline if Chinese companies move more production to other countries that are closer to rival transshipment ports like Singapore or Port of Tanjung Pelepas in Malaysia.
Hongkong International Terminals said in an e-mailed statement, “In 2018, the port industry in Hong Kong experienced an increasing number of challenges, ranging from fierce regional competition and evolving customer needs to the US-China trade war. Market uncertainties still cast a shadow over the coming year”.
New alliances
The company agreed to form an alliance with Modern Terminals and two other operators to jointly manage and operate 23 berths at the main Kwai Tsing terminals. Much of Hong Kong’s decline has come from the development of bigger and better facilities in cities along China’s coast – led by Shanghai, which has been the world’s busiest container port now for nine years – other ports in the region have managed to keep pace.
Singapore, which once went neck and neck with Hong Kong for the top spot, now handles a percent more containers than before, while South Korea’s Busan increased its volume over 80 percent.
Singapore has added more berths and set up ventures to operate terminals with China’s Cosco Shipping Holdings and Ocean Express Network to bring in business. Busan said in March that it is cutting port fees and providing funds for shipping lines that bring in more cargo.
Wasted opportunities
Meanwhile, Hong Kong has been hamstrung by years of debate over how and whether it should enlarge its port facilities. It’s been more than a decade since the city began studying the need for a 10th terminal. A preliminary feasibility study on the new facility was made in 2014 and a development plan followed in the same year, but no steps have been implemented.
Hong Kong’s container terminals are operated by private companies that have no government links, such as Hongkong International Terminals as well as Modern Terminals, which counts Wharf Holdings as its biggest shareholder. In China and Singapore, most operators are connected to or supported by the government. The Hong Kong government attaches great importance to the maritime sector. The government announced recently a package of measures to support the industry, including tax plans to foster the ship-leasing and marine insurance business.
Han Ning, China director for Drewry, said the rise of ports on the mainland and the move toward bigger vessels that prefer direct services rather than transshipment mean that Hong Kong may have missed the chance to catch up. Mr.Han commented that new terminals require huge capital expenditure and given the market saturation and more competition, it doesn’t seem economically effective to invest in a new terminal.
Conclusion
Instead, Hong Kong has turned to other industries such as financial services to drive the territory’s wealth. Finance and insurance accounted for 19 percent of the country’s gross domestic product in 2017 and property 11 percent, while transportation was 6 percent, according to the Census and Statistics Department.
As the city gradually reclaims more and more of the natural harbor that fostered one of the world’s great trading centers, Hong Kong’s port is unlikely to ever catch up and recover its position as one of the five busiest in the world.
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Source: Straits Times
