BEIJING: From the window in Jessie Chung’s office, Hong Kong’s container port looks like a thriving hub of activity, funnelling Chinese products and other cargo to the rest of the world. But Ms Chung, chairman of the container terminal operators’ association, concedes that the global slowdown, China’s shift away from low-cost manufacturing and increased competition from bigger Chinese ports are taking a heavy toll.
In the first half of the year, Hong Kong handled 10 per cent fewer containers than during the same period in 2015 and is on course for its fifth consecutive year of declines. “While facing lower throughput, we’re also facing the problem of lack of land and waterfront,” says Ms Chung. “It hurts operational efficiency, meaning we’re slower and slower than before.” While crowded Hong Kong, where containers have to be stacked seven high, has its unique issues, it is also suffering because of overcapacity problems in ports and shipping amid a broad global trade slowdown.
The bankruptcy of Hanjin, the South Korean shipping line, has focused attention on the woes of the shipping industry. But ports in China, which has seven of the world’s 10 busiest container terminals, have also been hit hard by the global slowdown. As shipping lines consolidate to mitigate the downturn, analysts fear their increased bargaining power will add to the woes of the port operators.
“Shipping is getting more concentrated, with alliances rationalising their networks, which means fewer port calls and reduced frequency,” says Olaf Merk, a ports expert at the International Transport Forum, part of the OECD, an inter-governmental think-tank. “It’s a dangerous game for ports because if you don’t get one or more of the alliances, you can be a big-time loser.”
As with other state-backed heavy industries, China has a significant overcapacity problem. China’s excess port capacity in 2013 — equivalent to 50m 20-foot containers — was bigger than the entire throughput of Japan, Russia, South Korea and Taiwan. And the unused port capacity will double by 2030, according to the ITF, as local governments compete to build larger and larger facilities.