Shenzhen taking no chances on Hong Kong lead

With cross-border rival edging out the city in port business, Da Chan Bay aims to cement status with terminal expansion

PUBLISHED : Monday, 11 November, 2013, 5:17am
UPDATED : Thursday, 14 November, 2013, 3:57pm

Shenzhen overtook Hong Kong's port business this year in a move that was widely expected, and anyone who thought it was a temporary phenomenon, induced by a labour strike, had better think again.

Da Chan Bay Terminal One, the fastest-growing port in Shenzhen last year, says it wants to triple its throughput over the next three years.

The port, controlled by Wharf's Modern Terminals, expects to see its annual throughput reach 1 million 20-foot equivalent units this year.

It says it has already started talk with the Shenzhen government and Yantian Port on a phase-two terminal that would add four berths of at least 3.5 million teu capacity to the Shenzhen west port cluster before 2020.

"The Shenzhen government said it's time to plan for phase two because it takes five years from the beginning of real discussion to the commissioning of the first berth," said Benjamin Lai, chief executive of Da Chan Bay Terminal One. "You can't wait until your existing capacity is fully utilised."

Terminal One's 5.5 million teu capacity is operating at just one-fifth of capacity so far, but throughput has more than doubled to 742,000 boxes during the first three quarters.

By comparison, its three Shenzhen rivals - Yantian, Chiwan and Shekou - saw flat or negative growth over the same period.

"The growth is mainly attributed to the acquisition of several transpacific and intra-Asia routes by the Grand Alliance and Orient Overseas Container Line. One route could easily bring you several tens of thousands of teu," said Lai.

"Yantian, Shekou and Chiwan are all pretty full. Some routes now calling at Hong Kong may also have the potential to come here."

Back in April, a number of shipping lines including Maersk were reported to have diverted their routes to Shenzhen from Hong Kong after a 40-day dockworkers' strike hampered operations at the Kwai Chung Container Terminal.

The strike, which drove throughput down by 4 per cent during the first nine months, now looks set to remove Hong Kong permanently from a long-standing position as the world's third-busiest port this year - though some government officials still believe the city could take back the helm next year.

At present, Shanghai is the busiest container port in the world, followed by Singapore.

But Lai, who managed the operations of Hong Kong's Modern Terminals for 10 years before moving to Da Chan Bay in May last year, said Shenzhen's displacement of Hong Kong for the No3 ranking was unlikely to be temporary.

"If you look at the figures last year, Shenzhen just missed third place by a few tens of thousands of boxes. It was always going to be just a matter of time that we overtook Hong Kong," he said.

"More shipping lines are shifting to Shenzhen from Hong Kong as Hong Kong has no backup land, and the government didn't really help or provide many incentives to the industry."

According to Hong Kong port operator Modern Terminals, vessels arriving at berths in the city are now about 5 per cent longer than they were five years ago. But despite the bigger size, each ship handled 11 per cent fewer cargoes in terms of movements over the same period.

Shippers are also paying higher barge costs as they need the barges to help them transfer cargoes from ocean-going vessels that cannot find a berth on arrival.

"It is like a restaurant filled with large customers who occupy the seats for a long period of time but order just a couple of drinks," Lai said. "In this way, your productivity declines."

Da Chan Bay is keen to take advantage of a partnership between the world's three largest shipping lines - Maersk, MSC and CMA CGM, or the so-called "P3 Alliance" - which will result in a redeployment of their global routes.

Hong Kong, however, is unlikely to reap much benefit from the alliance, say shippers, as its nine terminals are already running at more than 80 per cent capacity and the government has stalled plans for building a 10th terminal.

So if Da Chan Bay continues to grow, the chance of the Hong Kong port regaining its top three position is slim.

Although analysts do not expect any real turnaround in the shipping trade until 2015, and none of the Big Three have business ties with Da Chan Bay yet, Lai is confident its Terminal One can attain a 3 million teu output by 2016 - annual average growth of 33 per cent.

"If P3 has to choose a port, we really are the only ones in Shenzhen who can provide them with the extra capacity," he said.

That said, the growth prospects of ports in Shenzhen West are hampered by the capacity of their major sea access, the Tunggu channel, which can still barely allow passage for the world's biggest cargo ships even after expansion works due to be completed next year.

But Lai argued that the Tunggu channel would be further expanded and oversized vessels could enter Shenzhen West through Hong Kong's Ma Wan channel.

He added that the opening of the Dongguan sector of Yanjiang Highway would further boost the port's competitiveness by slashing journey times between Da Chan Bay and Dongguan and Guangzhou, and the port would also build a fully fledged logistics centre over the next two years.