GBA Brief

How Hong Kong’s port firms want an alliance to ward off mainland rivals

Old enemies in Hong Kong’s port are looking for common shelter as they come under threat from rivals further up the coast. But local regulators still need to be persuaded that the former foes should be allowed to join forces.

Four of the Hong Kong’s largest port operators – Hongkong International (HIT), Cosco-HIT, Asia Container Terminals and Modern Terminals – want to work closer together in the Hong Kong Seaport Alliance, starting joint operations “progressively” this year.

Together they would control 23 of the 24 berths at the territory’s main port at Kwai Tsing. But this isn’t necessarily a partnership of the powerful. The operators complain that Hong Kong’s container terminal is no longer a haven for profit because of the rapidly changing business environment, including the formation of new carrier alliances, industry consolidation and the dramatic increase in vessel sizes. 

Hence the need to work closer together in berth and yard management: Seaport Alliance says its can shorten waiting times and reduce charges, attracting more ships to call on Hong Kong and helping the city to “thrive as an international hub for decades to come”.

Hong Kong was the world’s busiest container port as recently as 2004, handling nearly 22 million 20-feet equivalent units (TEUs). But it lost top position to Singapore in 2005 and it has slipped further down the ranking since then. Data from Lloyd’s List Maritime Intelligence ranked Hong Kong fifth globally in container throughput last year, behind Shanghai, Singapore, Ningbo Zhoushan and neighbouring Shenzhen. But Hong Kong is the only one to suffer a drop in throughput in recent years, after an almost 10% reduction in volumes between 2012 and 2017.

Analysts argue that Hong Kong is going to have more problems stemming the challenge from its Chinese rivals, who have built massive ports and free trade zones, interlocked with the world-class highways and railways that channel the majority of seaborne goods from the export heartlands on the southern and eastern coasts.

Simply put, mainland cargo no longer needs to be moved through Hong Kong like it once was, and some commentators have argued that it should close its port altogether and let its counterparts focus on the container trade while it finds more profitable uses for the prime real estate around the docks.

Logistics and trade facilitation is a critical aspect of the GBA plan as the central government wants to avoid overlapping in investment across the nine cities in Guangdong province that form the GBA, plus the two ‘special administrative regions’ of Hong Kong and Macau.

Anti-trust regulators in Hong Kong have sounded reluctant to endorse the new alliance, however, presumably on concerns that the operators will benefit more than the wider community. Hong Kong’s Competition Commission is already looking at monopoly concerns raised by local cargo companies and freight forwarders, given that the new alliance will process almost all of the port’s containers.

“These operators have been charging many different types of fees on trucks, and we can do nothing at all in future when they operate as one entity and levy more charges,” Leung Kun-kuen, chairman of the Kowloon Truck Merchants Association, told the Hong Kong Economic Journal, and Willy Lin at the Hong Kong Shippers’ Council was equally critical of the move, claiming that “with 95% market share, the industry virtually has no choice” and that there was “no mechanism to monitor, not to mention regulate, the competition behaviours of the members of the alliance”.