Shenzhen dangles port subsidies

PUBLISHED : Tuesday, 10 April, 2007, 12:00am
UPDATED : Tuesday, 10 April, 2007, 12:00am

Hong Kong under pressure as rival offers up to five million yuan to shipping lines

Shenzhen will offer one-off concessions of as much as five million yuan to international shipping lines and freight forwarders that increase their presence in the city, increasing the pressure on rival Hong Kong's harbour operations.

Deputy mayor Zhang Siping announced the incentive during the holiday weekend, according to the municipal government's website, describing it as a move to ensure the city can fill the three new berths that will increase capacity 15 per cent.

In the subsidy programme, shipping lines would receive five million yuan for every international route added and 1.5 million yuan for new domestic coastal routes, the Nanfang Daily reported. It also said barge service providers - small vessels moving goods from feeder ports to the container terminal - were being offered 75,000 yuan per new service calling at Shenzhen.

Qualified international shipping lines will receive as much as four million yuan for moving their headquarters or operation centres to Shenzhen. Freight forwarders opening their headquarters in the city and multinationals setting up a distribution centre there can claim up to three million yuan in subsidies.

'This is a very aggressive policy and will deprive Hong Kong of cargo growth over the long term,' said Zheng Tianxiang, an infrastructure studies professor at Sun Yat-sen University.

Although Beijing in its most recent five-year plan has deemed shipping and logistics as one of Hong Kong's strengths, exporters have been increasingly using Shenzhen's ports as they are much closer to the factories producing the shipped goods.

Last year, Shenzhen ports handled 18.4 million 20-foot equivalent units (teu) while Hong Kong moved 24 million teu. In the first quarter of this year, Shenzhen ports handled 4.53 million teu, up 15 per cent from a year earlier. In comparison, for the first two months of the year, Hong Kong handled 6.8 per cent more containers, or 3.55 million teu.

Shenzhen has only become a serious industry player in the past five years, and its growth has spurred Hong Kong port operators to hedge by also running terminals there.

Modern Terminals, controlled by China Merchants Holdings (International) and Wharf (Holdings), operates a port in west Shenzhen and Hutchison Whampoa's terminal arm HIT has one in Yantian container terminal.

'In terms of absolute numbers of containers handled, Shenzhen surpassed Hong Kong last year, when 95 per cent of the containers that Shenzhen handled was direct, compared with only 40 per cent in Hong Kong,' said Alan Lee, the chairman of the Hong Kong Container Terminals Association.

Most goods shipped through Hong Kong are double-counted, once when they arrive from the mainland and again when they are sent off to a third destination.

Shenzhen is expanding its container terminal capacity in Dachan Bay, Shekou and Yantian, aiming to add three berths by the end of this year and boosting its capacity to 27 million teu. The city aims to surpass 20 million teu of throughput this year.

In the meantime, Hong Kong's own plan to add its 10th terminal is still under review.

'It is not possible for Hong Kong to build a new terminal while the usage rate of the existing terminals is just 50 per cent,' Mr Lee said.

While each Hong Kong berth can handle 1.25 million teu per year, they averaged only 666,000 teu last year.