Port re­bounds from cut­throat com­pe­ti­tion

China Daily (Canada) - - HONGKONG - By WONG JOON SAN in Hong Kong joon­san@chi­nadai­lyhk.com

On the sur­face, com­pe­ti­tion be­tween the neigh­bor­ing ports of Hong Kong and Shen­zhen may not ap­pear as in­tense as it re­ally is. At the end of last year, when Shen­zhen sur­passed Hong Kong as the World’s third busiest container port, how­ever the alarm that was sound­ing through­out the lo­cal ship­ping in­dus­try grew more shrill. Hong Kong has strug­gled back, since and has been re­stored into third po­si­tion but there is lit­tle so­lace to be taken.

Ports every­where jeal­ously guard their stand­ing, and Hong Kong stands among the most fiercely com­pet­i­tive. De­spite this, the port’s dom­i­nance has steadily eroded. In re­cent years, main­land ports like Yan­tian, Chi­wan, Shekou and Da Chan Bay Ter­mi­nal One have made spec­tac­u­lar gains in ef­fi­ciency and qual­ity of ser­vice.

The stakes are high amid the in­tense com­pe­ti­tion. Ports have an enor­mous cat­alytic ef­fect on lo­cal economies, es­pe­cially, in the in­creas­ingly glob­al­ized econ­omy. In days past, ship­ping lines just sailed ships and ports han­dled cargo. That’s changed now. Container ter­mi­nals and ship­ping lines to­day, are heav­ily in­vested in lo­gis­tics and sup­ply chain man­age­ment. The key to their suc­cess lies in cost ef­fi­ciency — and cost ef­fi­ciency is the spur for cut­throat com­pe­ti­tion among ports around the globe.

Last year, the eco­nomic pic­ture turned a shade darker for the Port of Hong Kong when it saw its stand­ing fall be­low Shen­zhen. The city’s container port pro­cessed 22.4 mil­lion “twenty-foot equiv­a­lent units” (the stan­dard mea­sure for container ship­ping), a 3.3 per­cent drop from 2012. The Port of Shen­zhen, just across the bor­der, raised its through­put, 1.5 per­cent, to 23.28 mil­lion TEU, over­tak­ing Hong Kong and be­com­ing the third­bus­i­est container port in the World. It didn’t last long.

In the cur­rent en­vi­ron­ment which sees ports, un­re­lent­ing in ef­forts to be­come more at­trac­tive to ma­jor ship­ping lines, no sooner had Shen­zhen de­clared it­self “Num­ber Three” be­fore busi­ness be­gan slip­ping away.

“From Jan­uary through

April, Shen­zhen lost container traf­fic to (neigh­bor­ing) Nan­sha, which had made a “bet­ter” of­fer to the Dan­ish ship­ping car­rier Maersk, on ter­mi­nal fees,” said Sunny Ho, ex­ec­u­tive di­rec­tor of the Hong Kong Ship­pers’ Coun­cil.

Ho stressed, the move was no sur­prise. “Find­ing low cost so­lu­tions is an on­go­ing fix­a­tion with ship­ping lines,” said Ho. They’re al­ways look­ing for a bet­ter deal, es­pe­cially on ter­mi­nal charges paid to port oper­a­tors.

Maersk has bounced around from port to port for years. Back in Au­gust, 2000, when the com­pany was called Maersk Sealand, it pulled out of Sin­ga­pore and moved to the Port of Tan­jung Priok, in Malaysia. Tai­wan’s Ever­green Line wrapped up its Sin­ga­pore op­er­a­tions around the same time, and moved its South­east Asian, west­bound ser­vice to Thai­land’s Laem Cha­bang ter­mi­nal.

The cir­cum­stances of Hong Kong’s re­in­state­ment to the Num­ber Three post among global container ports haven’t solved the prob­lems that caused the fall in the first place.

There’s still not enough over­flow stor­age at the port’s Kwai Ts­ing Container Ter­mi­nals. It’s a prob­lem that’s been around for years, but the 2008 fi­nan­cial cri­sis set off a po­lar shift in the busi­ness cli­mate that made things worse. Di­rect container busi­ness to the US and Europe ac­tu­ally dropped. It never ac­tu­ally re­cov­ered from 2008. The Port of Hong Kong shifted fo­cus from di­rect ship­ment, to trans­ship­ment, al­most as a mat­ter of “sur­vival”. In­stead of ship­ping di­rectly these days, Hong Kong im­ports prod­ucts, prac­ti­cally from every­where, in­clud­ing the main­land, then stores them un­til they are ready to be trans­shipped to over­seas des­ti­na­tions. The stor­age may be for days, or for weeks. It may even be for months. Longer stor­age means more space is needed.

Head out to the New Ter­ri­to­ries and you’ll see ship­ping con­tain­ers scat­tered all over the place, on ev­ery con­ceiv­able plot of land: aban­doned farms, park­ing lots, pri­vate beaches — any­where a container can be put down.

The Hong Kong Container Ter­mi­nal Oper­a­tors As­so­ci­a­tion (HKCTOA) has lob­bied the govern­ment to as­sure ad­e­quate container stor­age, by mak­ing bet­ter use of land near the port. HKCTOA chair­man Jessie Chung told China Daily, that al­though more than 100 hectares in the port’s vicin­ity have been des­ig­nated by the govern­ment for stor­age of con­tain­ers, in fact, a great pro­por­tion is used for other pur­poses, in­clud­ing uses not di­rectly re­lated to the port. The as­so­ci­a­tion also wants the govern­ment to ac­com­mo­date grow­ing ship­ments by barge.

“There has been a 30-per­cent in­crease in Pearl River Delta barge traf­fic, over the past ten years, in­volv­ing goods for trans­ship­ment over­seas. That means a sig­nif­i­cant in­crease in de­mand for barge berths,” Chung said.

De­spite the in­creased de­mand, land al­lo­ca­tion in Hong Kong has fallen sig­nif­i­cantly be­hind other ma­jor parts. The port was con­structed on a ra­tio of 14 hectares for ev­ery 400 me­ters of berth. To­day’s in­ter­na­tional stan­dard is 75 per­cent higher: 25 hectares per 400 me­ters of berth.

Con­ges­tion at berthing and stor­age fa­cil­i­ties, dur­ing peak times has been ex­ac­er­bated as larger and larger ships ply the world’s oceans. The big­ger ships can carry more con­tain­ers, giv­ing them, in the­ory, econ­omy of scale over smaller ves­sels. In prac­tice, how­ever, economies have scale have not been achieved and the big ships ac­tu­ally have con­trib­uted to con­ges­tion in the port. One mega-ship oc­cu­pies berthing space suf­fi­cient to ac­com­mo­date two smaller ships. With ship­ments to US and Euro­pean mar­kets way down, the big ships fre­quently have to wait for in­com­ing cargo, still in tran­sit, be­fore they can be fully loaded and be un­der­way. That com­pounds con­ges­tion.

Kwai Ts­ing Container Ter­mi­nals han­dled over 17 mil­lion TEU in 2013. It em­ploys 8,000 work­ers gen­er­at­ing a mul­ti­plier ef­fect be­lieved, con­ser­va­tively to sup­port 32,000 in­di­rect jobs.

There is also a short­age of truck driv­ers for which the HKCTOA has blamed li­cens­ing reg­u­la­tions. Poli­cies like this that ob­struct the flow of busi­ness op­er­a­tions must be re­viewed, Chung told China Daily. “The govern­ment can pro­tect the port’s highly sig­nif­i­cant con­tri­bu­tion to Hong Kong’s eco­nomic and so­cial de­vel­op­ment, by ad­dress­ing these is­sues,” she de­clared.

HKCTOA has cited these is­sues as crit­i­cal to im­prov­ing pro­duc­tiv­ity at the port and main­tain­ing its com­pet­i­tive po­si­tion, in a White Paper sub­mit­ted by the HKCTOA to the govern­ment, last Novem­ber.

The White Paper, out­lin­ing chal­lenges fac­ing the port and lay­ing out time­lines for re­de­vel­op­ment has won sup­port from ship­ping lines, in­dus­try as­so­ci­a­tions and lo­gis­tics oper­a­tors. All agreed that if the pro­pos­als are put into ef­fect, their op­er­a­tions will ben­e­fit and the port will main­tain its com­pet­i­tive po­si­tion.

Among the rec­om­men­da­tions was a call for the reser­va­tion of spe­cific sites to­tal­ing some 70 hectares for backup stor­age. An additional 30 hectares not re­quired for port ex­pan­sion, would con­tinue serv­ing in­de­pen­dent oper­a­tors of container stor­age fa­cil­i­ties and as park­ing space for trucks.

Hong Kong Trade De­vel­op­ment Coun­cil’s econ­o­mist, for global re­search, Wenda Ma pro­jected in a sep­a­rate re­port that container through­put will un­dergo mod­est but steady growth over the next few years. The re­port added how­ever that Hong Kong will need to con­struct a 10th ter­mi­nal by 2015, a dead­line scoffed by some in­dus­try crit­ics.

The govern­ment is con­duct­ing a study to ex­am­ine the tech­ni­cal fea­si­bil­ity and en­vi­ron­men­tal im­pact of con­struct­ing Container Ter­mi­nal 10 (CT10) at South­west Ts­ing Yi.

Shen­zhen ware­house space at­tracts plenty of in­ter­est.

Sunny Ho, ex­ec­u­tive di­rec­tor of the Hong Kong Ship­pers’ Coun­cil, says Shen­zhen lost traf­fiffi c to Nan­sha in the fi­first four months.

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