Little upstart

Propelled by the continuing export growth in southern Guangdong province, Shenzhen has overtaken Hong Kong's Kwai Chung container port for the first time. Shenzhen's four main terminals moved 13.66m TEUs (20-ft equivalent units) last year, compared with the 13.43m boxes shifted at the nine terminals at Kwai Chung, where long-haul containers are handled.

Shenzhen, which does not offer short-haul "mid-stream" ship-to-ship container handling, is increasing its lead this year, with volumes rising 25%, to 3.5m TEUs, in the first three months, with Kwai Chung lagging with 3.3m boxes, up 13.5% over the same period of last year.

Guangdong accounts for more than one-third of China's foreign trade and its imports and exports are shipped mainly through Hong Kong and Shenzhen ports. But over the past decade, Hong Kong has been steadily losing market share to Shenzhen, where it costs US$300 less to process and export a container.

It costs US$200 more to bring a container to Hong Kong from Dongguan, the industrial heartland of the Pearl River Delta, and the terminal handling charge (THC) collected by shipping lines at Kwai Chung is US$100 higher than at Shenzhen.

Kwai Chung terminals account for about 60% of Hong Kong's throughput, with the remainder handled at the River Trade Terminals in Tuen Mun and in mid-stream.

The end of global textile and garment quotas in December is likely to result in a loss of more than 200,000 TEUs for Hong Kong this year because major importers in the United States and Europe have told their suppliers and shipping lines to load at Shenzhen's terminals. (Textile-related shipments currently account for about 20% of Hong Kong's exports and imports.)

China's export growth is expected to slow 10-15% this year, from nearly 33% last year, on the back of reduced container traffic to and from Guangdong.

Realities are raining down hard on Hong Kong. After seven years, it is also set to lose its title as the world's busiest container port to Singapore this year. Since 1987, Hong Kong has been No 1, except for 1990, 1991 and 1998, when Singapore held the crown.

Hong Kong retained the title last year by handling a record 22.02 million TEUs, up 7.7%. But box volumes at Singapore, helped by a rebounding Southeast Asian economy on the back of China's rapid growth as a manufacturing center, rose nearly 16% to a record 21.33m TEUs, an unprecedented growth of 2.9m TEUs. Analysts say that momentum is expected to continue this year.

"It looks very possible that Singapore will take the title, as Hong Kong's throughput growth is also slowing to about 2-3% this year," says K.Y. Ng, an analyst at Nomura International.

Then there is Singapore
Singapore's state-run port operator PSA Corp is also getting more transhipment business because it has become responsive on pricing after losing two key customers – Maersk Sealand and Evergreen Marine – to the fastgrowing neighboring Malaysian Port of Tanjung Pelepas.

Denmark's Maersk Sealand is the world's largest container carrier, Evergreen Marine – Taiwan's largest shipping line – is ranked fourth.

There is not much competition between Hong Kong and Shenzhen because most of the terminals in both ports are owned and operated by the same companies – tycoon Li Ka-shing's Hutchison Port Holdings (HPH), Modern Terminals, China Merchants Holdings International and Cosco Pacific.

Hong Kong's relegation to the No 2 spot will come as a big disappointment to the government, which has been promoting "Asia's world city" as south China's preferred port and logistics hub. At the urgings of the Hong Kong Shippers' Council, the government has been pushing plans to build Container Terminal 10 (CT10), although the terminal operators say there is enough capacity at Kwai Chung to absorb growth until 2015.

A government commissioned study – Hong Kong Port Master Plan 2020 – has identified two possible sites for CT10, but no decision has been made because both sites have pros and cons. "As recommended in the study, we will conduct an ecology study to assess its suitability," a government official says of one of the sites.

We will also update the port cargo forecast to work out the optimal timing for building CT10 and review the port expansion options when more data are available," he said. The Kwai Chung operators are unfazed at the prospect of Hong Kong losing the crown because they are more concerned with their profit margins, which are among the highest in the world.

"I don't care if Hong Kong is number one or number 10, so long as it is number one to its stakeholders, which it is," says John Meredith, group managing director of HPH, the world's largest port operator.

Meredith has repeatedly said that port league tables are irrelevant and misleading and governments chasing transshipment boxes are wasting taxpayers' money. "Many governments, especially in Asia, watch these figures too closely to make investment decisions, as a result of which money is poured into wrong projects to boost a port's ranking.

"I am not a believer in transshipment cargo because it is fickle and does not add much real value to a city's economy," he argues. Meredith is also suspicious of some of the data. "Some [terminal] operators cheat by counting containers moved within the yards as actual throughput."

Ironically, Singapore will become the No 1 container port in the year PSA Corp raised its banner in Hong Kong by acquiring minority stakes in two smaller terminals at Kwai Chung. After paying US$385m to Hong Kong property developer NWS Holdings, PSA has become a partner of Dubai Ports International in the oneberth CT3 and two-berth CT8 West terminals.