How can Hong Kong maintain its competitiveness as a transshipment hub?

Abstract

At the top ranking as the world’s busiest port in 2004, Hong Kong has been overtaken by Singapore, Shanghai, and Shenzhen, to become the 4th busiest in 2014. Container handling throughput has been recording a continuous downfall. After China has joined the World Trade Organization, its opened economy benefited Hong Kong. But with the aggressive development of ports in the PRD region, their port facilities, infrastructure, labour and expertise caught Hong Kong. Their operation efficiency is at a competitive level to Hong Kong. Along with cheaper terminal handling charges, shippers tend to use Shenzhen ports for Chinese cargoes.

Manufacturing cargoes had been the major source since containerization developed Hong Kong’s shipping and logistics industry. Because of lower production costs, plants were relocated to South China region. Though manufacturers could use ports in the Pearl River Delta, Hong Kong still attracted a certain amount of transshipments. The rapid appreciation of RMB has led to increased production costs in the Mainland. Factories has begun to moved out of China and set up their business in Southeast Asia countries like Myanmar, Vietnam, etc. The main cargo source has been getting far away from Hong Kong ports.

Since then, more and more international transshipments have been handling by Hong Kong ports. But the overall port infrastructure has not been improving at the same pace. Strategic alliances of shipping lines see them deploying more mega-sized vessels to Hong Kong to enjoy greater economies of scale. It caused port congestion as the limited facilities are dedicated to the vessel which other smaller ships cannot be served simultaneously. Subsequent higher turnaround time and longer transit time lead to the higher shipment costs due to the increased storage cost.

Hong Kong enjoys a lot of benefits from its free port status. Cabotage law in place helps a hand to induce substantial amount of international transshipments heading to China. More free trade zones have established in the Mainland. Operators and international carriers are calling for easing the cabotage rule in Chinese ports.

High terminal charges partly contributed to the expensive shipment costs, together with longer turnaround and transit time have been discouraging shippers to use Hong Kong. Potential direct Chinese shipments may take more international transshipments from Hong Kong. Operation deficiency, uncompetitive rates, and comparatively longer turnaround time, all reduce Hong Kong’s competitiveness.

Lack of land supply and port congestion are the main factors hindering the port’s growth. Hong Kong government should increase land supply for cargo storage, transshipment value-added handling, and increase port infrastructures. Building more berths could accommodate more mega-sized vessels, results in alleviating port congestion. Efficiency would be enhanced once cargo handling facilities are increased. Government support and good coordination between terminal operators are essential for implementation.