Hong Kong’s five major container terminal operators need to step up their collaboration efforts 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, more cargo alliances, and a surge in transhipment 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 notes.
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 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 transhipment services at hub terminals.
Transhipment now comprises more than 70% of Hong Kong’s total throughput, up from just 40% in the early 2000s, an upward trend that is expected to continue.
With five major terminal operators operating largely independently of one another and a historical ‘home berth’ practice of incoming vessels assigned to berths at terminals with which they have a contract, ITTs now comprise about 15% of Hong Kong’s total throughput.
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 transhipment operations,” it says.
Hong Kong can ill afford to become more expensive. At a rate of HKD2,140 (USD273), its terminal handling charge is already up to 50% more than those of Shenzhen and Singapore.
HSMC developed a collaborative model for the port that would reduce ITT volumes by nearly 50% 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 of collaboration among terminal operators to share facilities such as berths, cranes, and yards and allowing vessels with high transhipment 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 world’s busiest container ports. There have even been calls to close the port and for government to focus on developing 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% of Hong Kong’s total annual GDP.
In its study, 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.