Hong Kong Circle: Hong Kong Economic and Trade Office in Washington D.C. Newsletter

Hong Kong Emerges as Transshipment Hub

An efficient container port and logistics strengths will be crucial components of Hong Kong's growth as a transshipment hub in Asia, industry executives say.

Although it is no longer the world's busiest, Hong Kong's container port remains one of the most effective.

According to Sean Kelly, Chief Executive of Modern Terminals Limited (MTL), the volumes of barge and transshipment cargo being handled in Hong Kong and south China are growing at a healthy pace.

Barge throughput at Kwai Chung has increased by an average of 15.6 percent a year since 2000, while transshipments cargo rose by an annual 15 percent.

"The equivalent figures for all of the south China ports were nearly 20 percent and 16.7 percent respectively," he said. "These segments will undoubtedly remain the key driving forces behind our future growth, and we must nurture them carefully."

However, Hong Kong terminal operators find it harder to tap into the potential of the region's most important cargo segment, the trucked exports from south China's the Pearl River Delta (PRD), because of the inefficiencies of cross-boundary trucking arrangements.

"These make it expensive to move cargo to Hong Kong by road from the eastern PRD, which has resulted in a declining volume in this sector," said Mr. Kelly.

"Hong Kong can grow with the market in the future if cross-boundary trucking inefficiencies can be resolved, because of our competitive advantages as a hub port, a free port, and a business-friendly port, that provides value for money," he said.

Mr. Kelly added that he is looking forward to the deregulation of cross-boundary trucking business that will open the network and level the playing field, facilitating the flow of cargo into Hong Kong via various customs checkpoints.

Hong Kong ideally positioned

Eric Ip, Managing Director of Hongkong International Terminals (HIT), said that to make up for the loss of trucked cargo from the Guangdong's hinterland to Shenzhen ports, Hong Kong port operators have been vigorously competing for transshipment cargoes from other Asian origins, including north China, to use Hong Kong as a transshipment hub.

"Supported by the shipping lines, the transshipment volume at Kwai Chung has increased by almost 50 percent over the past three years," Mr. Ip said.

"A natural deep-water port located on major international shipping routes, Hong Kong is favorably positioned to capture international transshipment cargoes. It is a free port, which ranks highly in the region for customs efficiency."

In view of the continuous deployment of mega vessels and rising bunker fuel costs, global shipping lines need to expedite turnaround times and minimize operating costs.

"With our port's strategic location, smooth customs process and cost-effective terminal operations, it will continue to be a preferred transshipment hub in Asia and gateway of south China," said Mr. Ip.

According to Sunny Ho, Executive Director of the Hong Kong Shippers' Council, a very distinct advantage comes from the fact that Hong Kong is a free port with no licensing requirements for importers and exporters, and no import tax, duties or quotas.

"This is in sharp contrast with the very complicated system in the Mainland," said Mr. Ho, adding that Hong Kong's port will continue to handle the bulk of PRD-bound cargoes.

He also dismissed suggestions that Guangzhou's New Baiyun International Airport, which opened in August 2004, poses a serious threat to Hong Kong International Airport (HKIA).

World's busiest airport

HKIA, ranked the busiest airport for international air cargo since 1996, handled 3.58 million tons of freight in 2006, while Baiyun managed only 653,000 tons.

Although air cargo made up just 1.3 percent of Hong Kong's total cargo throughput in 2006, it accounted for 34.5 percent of its total external trade value at $224 billion, which was up 11 percent over the 2005 figure.

"Baiyun is an up-and-coming facility but its cargo traffic growth rate is still in the single digits and it is long years away from posing any serious threat to HKIA," said a Hong Kong-based aviation analyst.

Liu Zijing, General Manager of the Guangdong Airport Management Corp, expects Baiyun airport to handle 2 million tons by 2010, and 4 million tons by 2020.

"By that time throughput at HKIA will have crossed the 6 million ton mark," the analyst said.

In its latest report, Business Monitor International (BMI) said airfreight capacity in Hong Kong will grow as a result of the expansion of the passenger business, driven by the proliferation of low-cost airlines. Although the number of dedicated freighters deployed by international airlines is increasing, about 60 percent of the cargo is still carried in the bellies of passenger aircraft.

Modern Terminals: http://www.modernterminals.com/

Hong Kong International Terminals: http://www.hit.com.hk/

The Hong Kong Shippers' Council: http://www.hkshippers.org.hk/eng/index.asp

Hong Kong International Airport: http://www.hongkongairport.com/eng/index.html

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