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  • Apr 20, 2014
  • Updated: 2:41am
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SHIPPING

Tenth Hong Kong container terminal, costing HK$100b, may not be financially viable, consultants say

Prediction of reduced cargo growth from 2020 means HK$100b container project is unlikely to be financially viable, consultants' report says

PUBLISHED : Monday, 02 December, 2013, 5:23am
UPDATED : Monday, 02 December, 2013, 5:24am

A tenth Hong Kong container terminal costing close to HK$100 billion is unlikely to be financially viable, according to a consultancy report due out next month.

With only modest growth expected in the cargo business for the decade from 2020, it says the government should make better use of the 100,000 hectares of land at the Kwai Chung Container Terminal in Tsing Yi in the short-term.

The government first considered building the proposed new terminal, known as CT10, about 10 years ago. But that was when the cargo business was growing by an average of about 5 per cent annually.

With growth expected to drop to between 1 and 3 per cent from 2020, and with the final bill for CT10 likely to be in the "high tens [of billions]", the project may not be able to attract private investors, two people familiar with the report said.

"It usually takes 10 to 12 per cent in financial returns to justify a private investment," one of the sources said.

"Even for a government project, we are talking about an economical return of some 4 per cent. I am not sure if CT10 would satisfy either of these."

The hefty cost comes from placing it next to the existing nine terminals. That would mean reclamation and the relocation of five oil depots, which would in turn require a very costly process to decontaminate the site, dump the polluted mud and assess its impact on the environment.

Meanwhile, industry chiefs say that making better use of existing facilities could boost port capacity by 15 per cent.

They claim this could be done by spending just 40 per cent of the cost of the new terminal.

Alan Lee, chairman of the Container Terminal Operators Association, said the organisation supported building a new terminal only if there was sufficient demand.

"CT10 is not the most pressing matter on our minds now. We are looking at ways to enhance our competitiveness within the next two years," Lee said.

"A lack of backup land is seriously slowing down our handling of cargos and the turnaround time for vessels and barges. If this goes on, more carriers will leave us for Shenzhen."

The government commissioned the consultants to project growth from 2020 to 2030 and find the best way forward.

It is understood they have proposed various options for CT10, such as building five, six or eight berths.

They also explored the possibility of moving it further west to avoid moving the oil depots.

But with major carriers joining hands in mega-alliances and the growing use of mega-vessels, the demand was for terminals to be interconnected. A detached CT10 would minimise its interaction with other facilities.

Last year about 60 per cent of the city's container business came from trans-shipments - cargo moved from one port to another via Hong Kong.

But port authorities in Shenzhen and other cities are lobbying hard for Beijing to open its domestic sea trade to foreign carriers.

If they succeed, Hong Kong will be replaced as the region's primary trans-shipment hub.

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dmw
Glaring error: 100,000 hectares, or 1,000 square kilometres, is 90.6% of HK's total land area.
John Adams
Correct ! 100 hectares = 1 sq km. Glaring error !
HK's total land area is about 1,100 sq km.
.
However, if the consultant's report is otherwise correct, that means that the container ports (now and projected) occupy about 9.06 % of HK's total land area. That's a huge area for a dying industry which we don't need.
More to the point : total residential land area is only 6.9% !
.
****www.pland.gov.hk/pland_en/info_serv/statistic/landu.html.
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That means by replacing all the container ports by reclaimed land we could increase residential land area by 9.06/6.9 = 130% .
So what is there to discuss CY and team ?
.
What am I missing ?
honger
A chance for HK to show its gratitude to the mailand - work together to promote Yantian.
An obvious sunset industry - LKS saw this two decades ago when he invested over the border.
Yet the govt wasted millions on a "study."
captam
@"The government commissioned the consultants to project growth from 2020 to 2030 and find the best way forward."
Are civil servants no longer able to do their own thinking?
Members of the public have warning for years that the the prospect of port growth is a long term loser. Why do they now have to pay consultants to confirm this?
sammckhk
Because the highly paid civil servants can blame the decision on someone else.
HK-Explorer
I agree that moving container business to Shenzhen is the best option. We need to clean the air in HK and moving away from polluting cargo is the best option.
a) Reduce ship pollution
b) Reduce the # of trucks (reduces truck pollution) + reduces traffic at checkpoints.
c) Allows the government to move focus to other areas that take better advantage of HKs skills
HK is too small a place to be a cargo terminal. We only had a competitive advantage before because China was not open internationally and thus HK filed a void. That void is gone now.
John Adams
THE SOONER HK GETS OUT OF THE CONTAINER TERMINAL BUSINESS THE BETTER!
Killing the container business will also kill in one stroke:
1. All the container vehicles from SZ clogging up our roads and polluting our environment
2. Stop container ships using heavy sulfur oil from polluting the harbor air
3. Free up all the farmland in the NT currently used for ugly container storage (and container graveyards) so it can be used for housing
4. Free up local workers for the vital jobs for which we apparently now must import labor
5. Reduce the size of the customs department by 90%, thus saving us all a lot of tax
6. Make it much harder for drug and ivory smugglers to operate via HK
7. Free up SZ road immigration check points so the tycoons' tai tais can drive to SZ to play golf instead of clogging up central with their cars while eating yam char and shopping
8. Stop the overt cheating on Mainland taxes and duties, which is the only reason for HK continuing as a container harbor, and is nothing more than money-laundering on a vast scale
9. Shut down the TDC because finally it will be obvious that HK no longer has any domestic industry worth promoting .
Any other suggestions?
Oh yes... of course ! I forgot Jake vander Kamp's point :
10. Free up all the existing container ports for housing, (thus also saving Fanling golf course as a sop to the container business tycoons)
rpasea
3. Enable farmland in the NT to be used for farm land with high value organic crops.
singleline
Very droll.
johnyuan
Time has lapsed long enough for the Central Government to take a close look at its uneconomical way in handling transshipment by cargo ships. The rule may have predicated to preserve Hong Kong’s position in shipping affair in the beginning of the handover. Both Hong Kong and mainland has undergone a big transformation since the hangover. The ‘hangout’ by the Central Government for Hong Kong to continue its port business seems not to be relevant economically as the country’s economy becomes more market oriented than politically. By agreeing to Shenzhen government’s lobbying, port services would rightly be moved away from Hong Kong.
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While land can be free up for the very pressing housing, the Central Government would also appreciate that it is one more step closer to the integration of the two very southern cities. The Hong Kong port operators and workers have a chance to work in Shenzhen. Well, LKS actually is way ahead – the port that he owns is waiting. Yes, Hong Kong schools will follow there too.

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