Hong Kong port has a competitive edge in the movement of time sensitive, high value

"Hong Kong will have large volumes of container traffic as far as the eye can see. The question is how fast they will grow," said Michael Enright, a professor at Hong Kong University's School of Business.

"There's no sign I can see that Hong Kong is going to be anything other than a major port going forward."

While being acutely aware of the challenges it is facing, top industry executive Sean Kelly says he remains "optimistic" about the long-term prospects for Hong Kong's container port.

"For Kwai Chung port, we expect about 4-5 per cent growth per annum during the period between 2006 and 2010," said Mr Kelly, managing director of Modern Terminals Ltd, which handles a third of the containers passing through Kwai Chung.

"Rapid growth in river trade is still one of the key driving forces of the growth," he added.

Mr Kelly was referring to barges which bring containers to Hong Kong for onward shipment from the manufacturing base in the Pearl River Delta region (PRD). Concern has followed recent figures about the flow of containers - or boxes - through Hong Kong as year-on-year growth slowed to single-digit pace.

Numbers add up

Sean Kelly, managing director of Modern Terminals, says rapid river growth continues to drive Hong Kong's port activity

Singapore was voted this year's world's busiest port - a title held by Hong Kong for 15 of the past 18 years.

Nevertheless, there are a number of reasons to remain optimistic about Hong Kong's prospects as a port, experts say.

For a start, it was inevitable that Hong Kong, which 10 years ago handled 96 per cent of exports from the PRD, would surrender some market share to Shenzhen, which has lower land and labour costs. Hong Kong still has a 60 per cent of what is now a much bigger pie as exports from China have grown exponentially in recent years.

As for Singapore, its main function is as a transhipment hub, with cargo arriving from surrounding countries on feeder liners being put onto bigger ships for cross-continental trips. Transhipment often means double counting of the same box, one move off the feeder liner, a second move on to the larger ship, making Singapore's claim to be the busiest port doubtful, Mr Enright said. There is some double counting of boxes in Hong Kong but not as much.

Secondly, the economic benefits accruing from transhipping are much less than acting as the original source port for cargo as Hong Kong does for the PRD's enormous manufacturing capacity. The actual movement of containers on and off ships is the low-end, "grunt" work of the industry, but Hong Kong's contribution adds much more value.

"People get obsessed with the physical flow of boxes but what is important is who manages the boxes," Mr Enright said. "We are seeing the PRD become the world's biggest logistics centre and regardless of whether the boxes go through Hong Kong or Shenzhen, Hong Kong is the nerve centre."

Foreign investment strong

Singapore's own port authority, PSA International, certainly sees a bright future for Hong Kong's port. In June it paid US$925 million for minority stakes in two container terminal operations run by Hong Kong's biggest conglomerate Hutchison Whampoa, which handles about half the port's traffic. That follows the February completion of Dubai Ports International's (DPI) US$1.14 billion acquisition of the Hong Kong port facilities from Florida-based CSX Corp.

"The significant sums of money recently paid by PSA and DPI to get a foothold in Hong Kong highlight the enduring attractiveness of the port," said Dr Jonathan Beard, managing director of consultancy GHK (Hong Kong), which last year conducted a strategic review of Hong Kong's port operations.

Hong Kong has also begun taking steps to boost the competitiveness of its port by removing redundant moves from the system.

Last year it cost exporters about US$4,400 to ship a forty-foot equivalent unit from Hong Kong to the US West Coast or about HK$300 more than Shenzhen. About US$200 of the extra comes from higher trucking costs, but efficiency gains achieved so far have reduced the extra trucking costs to US$160, said Modern Terminals' Mr Kelly.

But the government and industry has more work to do in negotiating with Chinese officials to further reduce road transport inefficiencies.
"We must urge our government to continue to pursue all these issues relentlessly and without compromise," said Mr Kelly.

On the infrastructure front there are some developments in store to improve Hong Kong's "connectivity", said Dr Beard.

Road link enhancements

The opening of the Shenzhen Western Corridor road this year should assist the smooth flow of goods as it will ease traffic bottlenecks, and for the first time Hong Kong, and Chinese customs officials will work at the same site, eliminating some duplication of work.

Then in 2011 the ambitious Hong Kong-Zhuhai-Macau bridge is likely to be opened. "That will enhance the connectivity of the west side of the Pearl River Delta," Dr Beard said.

Though mainland ports such as Shenzhen have been improving service quality, Hong Kong is still likely to remain the choice of many exporters.

"If the goods are time sensitive, if the goods are high value and need delivery time requires a high level of certainty, then Hong Kong has a substantial lead," Mr Enright said.

Hong Kong also has critical mass on its side, offering trading companies 386 ship movements a week to choose from against 140 movements for Shenzhen ports.

Related links
Port Development Council 
Modern Terminals
GHK