Once the busiest port facility in the world, the facility at Hong Kong, is now in danger of slipping into obscurity.
Facing powerful competition from mainland China, the port has witnessed year-on-year volume declines for the last 18 consecutive months, and appears to be declining relative to the other major ports in the region.
During 2015, Shenzhen’s port achieved volumes of 24.13m TEU’s, whilst Ningbo-Zhoushan overtook Hong Kong to reach 20.49m. Both registered growth, whilst Hong Kong shrank by 9.5%, and ultimately, it is this rise which has led to Hong Kong’s fall.
By being able to carry cargoes directly into the mainland instead of having to traverse a lengthy border-crossing process and employing a less expensive workforce, such facilities have significant strengths. Moreover, shipping lines prefer serving these facilities as they have lower terminal handling charges.
Nonetheless, despite this situation, Hong Kong does have one significant strength; its openness to free trade.
Many now think of mainland China as a capitalist country, but there is no such thing as a free market in the PRC. Protectionist measures have resulted in significant tariffs for cargoes such as agricultural produce and luxury goods. Shippers can avoid such expense, however, by exploiting Hong Kong’s status as a free port and the territory’s free trade agreement with the mainland to re-export goods. Such transhipment operations account for over 70% of the Port of Hong Kong’s volumes, from 25% in 2000, and of this total, 75% is related to China.
Though this affords Hong Kong a vital advantage over mainland facilities the port’s standing is precarious. Any move to liberalise Chinese trade would eliminate this edge in a single stroke and meanwhile, the physical constraints Hong Kong faces are not going anywhere.
The port is also unable to accommodate the biggest ships and though dredging work is underway to address this issue, a more difficult problem to address is the lack of available space for terminal expansion. This is not a new issue for Hong Kong which was notably highlighted in a 2004 government report, yet efforts to expand have been found wanting. Therefore, whilst many observers concur that the port must expand to retain its position as a major regional hub there are significant constraints to overcome in order to do so. The situation is exacerbated by the fact that transhipment business, upon which the port is reliant, takes up more space than direct sailings.
This infrastructure bottleneck has created significant congestion for ships calling at Hong Kong, particularly during peak times, which exacerbates a more fundamental problem. The facility’s transhipment niche is dependent upon connectivity, and a reduction in vessel calls will progressively weaken this trait.
As one of the city’s four major economic pillars, the port is a major contributor to GDP, and represents the centrepiece of Hong Kong’s trading and logistics industry, a sector which employs roughly 10% of its population. The challenges facing the port, and by extension, the city of Hong Kong are direct and progressive.
If action is not taken, there is a very real likelihood that Hong Kong will become bypassed by major shipping lines, and the port will become steadily replaced by other areas of economic activity. It is not outlandish to envisage a future where the docks are replaced by luxury accommodation, as the ships of the world glide past on their way to Shenzhen.
Whether this indeed comes to pass, it is incontrovertible that the Port of Hong Kong faces major challenges, and that if they are not met, the facility will continue to decline as a maritime hub.
Author: Alex Le Roy
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