More Hong Kong terminal collaboration urged to boost competitiveness

More Hong Kong terminal collaboration urged to boost competitiveness

 

Hong Kong.

“The industry has evolved, with mega vessels, more cargo alliances, and a surge in transshipment containers," the study said. (Above: The Port of Hong Kong.) Photo credit: Shutterstock.com.

Hong Kong’s five major container terminal operators need to step up collaboration if the port is to survive a perfect storm of rising competition and a changing business environment that continues to undermine its competitive position as one of the world’s leading container shipping hubs.

A new study by Hong Kong’s Hang Seng Management College (HSMC) says the deployment of larger vessels and larger alliances, combined with the historical structure of the port, is leading to a critical rise in the number of inter-terminal transfers (ITTs), resulting in higher charges to shipping lines; extra handling time for shipments; and increased burden on the port’s resources and roads.

“The industry has evolved, with mega vessels [mega-ships], more cargo alliances, and a surge in transshipment containers. All of this has resulted in a complex operating environment for the Hong Kong Port, which consists of five different terminal operators,” the study noted.

Alliance reshuffle: Hong Kong down five, Singapore up seven

The alliance reshuffle in 2017 cost Hong Kong dearly with the loss of five calls on northern European and Mediterranean loops, while key competitor Singapore gained seven more weekly calls. 

However, the impact may be more serious and long term, as the practice of many ocean carriers combining loads on single ships puts additional strain on ports that have to deal with higher quantities of containers at once and necessitates more transshipment services at hub terminals.

Transshipment now comprises more than 70 percent of Hong Kong’s total volume, up from just 40 percent in the early 2000s, an upward trend that is expected to continue.

With five major terminal operators operating largely independently of one another, and an historical ‘home berth’ practice of incoming vessels assigned to berths at terminals with which they have a contract, ITTs now comprise about 15 percent of Hong Kong’s total volume.

Handling charge places Hong Kong at a disadvantage

This is a disadvantage for Hong Kong compared with competing ports because a handling charge is levied on shipping lines for each ITT, and the practice consumes available facilities and resources, as well as increasing emissions from the port area.  

The ownership and business structures of competing ports in the region such as Singapore, Shenzhen, and Shanghai mean they do not have ITT charges, the study notes.

“This further reduces the competitiveness of [Hong Kong Port] as the carrier alliances perform many transshipment operations.”

Hong Kong can ill afford to become more expensive. At a rate of HK$2,140 ($272.61), its terminal handling charge is already up to 50 percent more than those of Shenzhen and Singapore.

HSMC developed a collaborative model for the port that would reduce ITT volumes by nearly 50 percent to bring down operator costs, lower port charges, improve productivity, and reduce environmental impact.  

The model — which uses real port data to simulate outcomes — is based on a much higher degree collaboration among terminal operators, including the sharing of facilities (berths, cranes, and yards), and the allowing of ships with high transshipment connections to berth within the same terminal to avoid ITTs.

Hong Kong has experienced a decline in shipment volumes in recent years and slipped to fifth from first on the list of the world’s busiest container ports. There are even calls locally to close the port and for the government to focus on development of other fast-growing industries, despite the fact that the economic contribution of the existing maritime and port industry could be as high as 300,000 jobs and 3.4 percent of Hong Kong’s GDP.

In its study, the HSMC points to numerous examples of collaboration among ports in Asia and elsewhere to deal with increased competition, including the 2010 collaborative agreement between the Japanese ports of Tokyo, Yokohama, and Kawasaki and the 2015 state-directed merger between mainland China’s Ningbo and Zhoushan ports.

Contact Turloch Mooney at turloch.mooney@ihsmarkit.com and follow him on Twitter: @TurlochMooney.

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