Rethink needed amid ports slump
Downturn in key markets and shift of factories to Southeast Asia spell tough times for sector
Conglomerate Hutchison Whampoa's disappointing performance in its port business in Guangdong and Hong Kong underlines a worrying prospect for trade flow in the 'factory of the world', according to industry players.
The Li Ka-shing-controlled company's crown asset - Singapore-listed subsidiary Hutchison Port Holdings Trust (HPH Trust), which operates deep water container ports including Kwai Chung in Hong Kong and Yantian in Shenzhen - saw throughput volume fall 2 per cent in the first six months of the year compared with 2012.
Container flow was drying up as a result of economic turmoil in the United States and Europe - the mainland's top trade partners - and the relocation of mainland factories to Southeast Asia, analysts said.
This was a warning for the port and logistics industry about the need to reposition themselves and remap their corporate strategies, they added.
"The European market is in extremely bad shape, much worse than last year," said Yeung Chi-kong, vice-chairman of 53-year-old toy maker Bluebox Holdings. "We hope to chase back first-half's poor sales over the rest of the year, but the chance is slim."
The Dongguan-based toy maker, which like most other toy exporters uses the Yantian port for overseas shipments, expected the mainland to have shipped 10 per cent fewer toys to the US and Europe in the first-half.
Yeung is pessimistic about the outlook.
In the first-half of the year, Hutchison Whampoa's overall portfolio posted 2 per cent throughput growth from Hong Kong, Shenzhen, Panama and Australia to the Netherlands, the United Kingdom and the Middle East.
Earnings before interest, tax, depreciation and amortisation (EBITDA) of the group's 276 berths was flat in the first-half, with the firm blaming rising energy and labour costs. The higher labour costs were partly related to the 9.8 per cent pay rise given to dockers at Hongkong International Terminals in Kwai Chung following workers' 40-day strike in April. HPH Trust said demand was weak in the US and Europe in the first-half and that this had spilled over to the rest of the year.
Hong Kong Shippers' Council chairman Willy Lin Sun-mo said the Pearl River Delta and Yangtze River Delta shared the same problem of factories moving out of China. That implies exports orders are shifting to Vietnam, Cambodia and Bangladesh.
Lin said Hong Kong's port and logistics sector needed to shift its dependence on exports to imports.
"It's wrong to dream that exports will keep giving us the bread and butter," he said. "We have to remodel our operational skills."
He added that "a couple of Hong Kong's biggest logistics firms" had recently laid off or were laying off senior staff, reflecting the lack of optimism about the future of the industry.
The HSBC/Markit Economics purchasing managers' index (PMI) sank to an 11-month low of 47.7 last month from 48.2 in June, weighed down by a sharp drop in new orders.
HSBC chief economist Qu Hongbin said that worsening conditions domestically and internationally meant reduced demand last month, with exporters reporting new orders from Europe, Southeast Asia and the United States all lower than June levels.
The other PMI, commissioned by the National Bureau of Statistics, inched 0.2 higher to 50.3 last month from June, driven by higher output.
However, new export orders remained in negative mode, at 49, compared with 47.7 in June.