Battle looms over Shenzhen's plans to expand port

Conflict of interest reignites as boomtown's port moves to accommodate giants of the sea

PUBLISHED : Tuesday, 15 October, 2013, 12:00am
UPDATED : Tuesday, 15 October, 2013, 10:43am

The competing needs of Hong Kong aviation, Shenzhen shipping and endangered pink dolphins are sowing the seeds of conflict between the neighbouring cities.

The growth of Shenzhen's western ports has long been limited by difficulties with the Tunggu Channel, a major access point to the ports since it was created in 2000. Shenzhen authorities originally asked for permission to route the channel through Hong Kong waters to allow access for bigger cargo ships. But the request was blocked on environmental grounds.

Now a new battleground is emerging as Shenzhen's plans to open up another channel clash with the expansion of Hong Kong's airport.

Shenzhen wants to make the Longgu West Channel, a fairway mostly for small and medium-sized ocean-going vessels, accessible to some of the world's biggest container ships. But that plan risks being scuppered by restrictions on the height of ships passing close to the future third runway at the airport. The height restrictions on waterways around the airport would, for the first time, stretch into mainland waters.

Hong Kong has dismissed Shenzhen's worries on the grounds that most of the ships using the channel fit beneath the 50-metre height limit. But Shenzhen has aspirations to dredge the channel to accommodate the mammoth container ships international companies are turning to as they seek to cut costs.

It puts Hong Kong and the mainland boomtown on a collision course, at a time when the two cities, despite their close ties, find themselves competing on several fronts, not least in the port business.

Shenzhen's port has been catching up with the Kwai Chung container terminal, and its cargo volume this year is set to overtake Hong Kong for the first time.

According to the latest statistics from the Shenzhen Ports Association and the Hong Kong Port Development Council, the number of boxes moved through Shenzhen's ports, including Chiwan, Yantian and Dachan Bay, rose 1.2 per cent year-on-year in the first eight months of this year, reaching 15.26 million 20-foot equivalent units (teu). By contrast, Kwai Chung handled 14.53 million teu, down 6.9 per cent, in part because of a recent strike by dockers.

Shenzhen has aggressively taken advantage of the rise of China and the proximity of its ports to the manufacturing heartlands around the Pearl River Delta. It has improved efficiency and reduced its cost structure to bolster its competitiveness.

Since the early 1990s, the Shenzhen government has worked with private investors such as Li Ka-shing's Hutchison Whampoa to pour billions of dollars into berths and other port facilities.

But Shenzhen's port is split by the Kowloon Peninsula. And while those terminals to the east - including Hutchison's Yantian facility - have thrived, access problems have limited growth in the west, which is dominated by the state-owned China Merchant Holdings (International). Meanwhile, Wharf subsidiary Modern Terminal has more recently invested in Dachan Bay in the west.

The three major terminals in western Shenzhen are determined to break the bottleneck caused by the limitations of the Tunggu and Longgu West channels. Not only are they losing trade to Yantian, which alone takes 40 per cent of Shenzhen's cargo traffic, they also face competition from the ports of neighbouring Nansha in western Guangzhou, where the local government has invested heavily in channel improvements to snatch western Shenzhen's traffic.

"For a long time ocean-going vessels heading to Shenzhen west have to take Hong Kong's Ma Wan Channel because the Longgu West Fairway is not deep enough for big ships," said Sunny Ho, executive director of Hong Kong Shippers Council. "Then they developed their own Tunggu channel, but due to limitations in its alignment, the utilisation is very low."

When the Shenzhen authorities planned the Tunggu channel in early 2000 to avoid Hong Kong's crowded Ma Wan Channel, they put forward three proposals - all of which would have seen ships pass through Hong Kong waters, to the southwest of Lantau Island, taking it close to the habitat of the endangered pink dolphin.

If you trick Shenzhen this time, Shenzhen may trick you back next time
Professor Zheng Tianxiang

While the Shenzhen port authority claimed the dredging works and the increased sea traffic would have little impact on the dolphins, Hong Kong's director of environmental protection was not convinced, saying the Shenzhen authorities had not provided sufficient evidence to support their claim.

As a result, the channel was diverted to the west, leaving sharp turns in the route and other problems, including strong currents, restricted operating times and an overlap with the Lingding Fairway, which takes ships to the port of Guangzhou.

In the years since, environmental campaigners have accused the Hong Kong government of showing rather less concern for the dolphins' habitat when it approved the Hong Kong-Macau-Zhuhai bridge, or in the planning of the third runway.

Video: What is causing the demise of Hong Kong's pink dolphins?

Some smell conspiracy.

Shi Huisheng, an officer with the planning arm of Shenzhen's Transport Bureau, suggested in the journal Charming China three years ago that the rejection of the channel plan by Hong Kong's Environmental Protection Department was due to the city's fear of competition.

Now the conflict is being reignited as Shenzhen looks at ways to accommodate some of the world's biggest vessels. While the western ports can accommodate only ships of 100,000 deadweight tonnes, the new generation of cargo ships can weigh as much as 165,000 deadweight tonnes

Danish shipping giant Maersk is leading the way with the purchase of 20 triple E-class container ships, the latest leviathan of the sea, capably of carrying up to 18,000 teu. The company says the economies of scale from the huge ships can help it save 35 per cent on fuel costs. It expects to trim a further 8 per cent by sharing vessels with the world's two other largest container shipping companies, CMA CGM and MCS.

The trend towards ever larger vessels and sharing of resources is expected to continue as the industry struggles with the slowdown in international trade.

While the Shenzhen Port Authority has already put contracts out to tender to widen the Tunggu channel, Shi Huisheng from the Shenzhen transport bureau said authorities should also consider expanding Longgu West channel and make it a complimentary fairway for Tunggu.

"Vessels could enter Shenzhen west via the Tunggu channel, then leave via Longgu West," Shi said.

"In this way, the incoming traffic and the outgoing traffic would be better organised, navigation safety guaranteed, and it also could avoid Tunggu channel's overlapping problem with Lingding Channel."

But the height restriction puts that into question.

Professor Zheng Tianxiang, a specialist in cross-border infrastructure at Sun Yat-sen University in Guangzhou, said Hong Kong must come up with a good solution and make sure its infrastructure did not come at the expense of its neighbour's economic interests.

"If you trick Shenzhen this time, Shenzhen may trick you back next time, and there are so many cross-border projects that the two governments have to work upon in the future," he said.

But a person familiar with the talks says tricking Shenzhen is the last thing on the mind of the Hong Kong government. Instead, the Airport Authority is studying ways to limit the impact of the height restriction on the Longgu West channel. The person said it was likely the two sides would come up with a feasible solution.

In fact, a veteran marine officer says a height cap is unlikely to have a big impact as it would be difficult for the Longgu West channel to be dredged to a level sufficient for some of the biggest container vessels.

"The shallowest part of that channel is less than 10 metres deep - only about half the depth required for a loaded cargo vessel of above 100,000 deadweight tonnes. How much effort and money would it take for Shenzhen to dredge that far?" the officer asked.

But that's exactly what the Guangzhou government achieved with its Nansha ports, pouring in billions of yuan to expand a channel that was just a few metres deep into one big enough to accommodate the seventh-generation cargo ships, which carry up to 14,000 teu.

With money and determination, it seems, little is impossible for the mainland authorities.