Costs, regional port development and regional political developments are the main factors threatening Hong Kong's supremacy as the world's busiest container port, according to a consultancy report. The report, commissioned by the Port Development Board, said Hong Kong's cargo would face less threat of being diverted to other ports if competing ports had similar handling and through costs. 'Competition would then be based simply on geographic and quality factors,' it said. The deep-sea port of Yantian and other Chinese ports provided new options for carriers providing services to China, it said. The report said the prospect of trade normalisation between Taiwan and China put Taiwan in a position to compete for transshipment cargo from the mainland, by-passing Hong Kong. Presently, direct shipping between Taiwan and Hong Kong is banned, forcing mainland cargo to be transshipped through the territory to Taiwan. Hong Kong will also lose this business once Taiwan's offshore transshipment centre - set up to circumvent the direct shipping ban - begins full operations. Under the proposed scheme, foreign-flag vessels, including those owned by Taiwanese and Chinese but registered in a third territory, will be allowed to sail directly between Kaohsiung and Chinese ports. Goods carried by these vessels will be permitted to transship at Kaohsiung, based on the 'no entry, no Customs' principle. It is still not known when the centre will begin operations. The Evergreen group, which plans to invest up to US$80 million in port facilities in China, stands to benefit most from the Taiwanese proposal. Other Taiwanese ports including Taichung, Keelung and Hualien have also expressed interest in similar transshipment centres. The report said the propensity for cargo diversion from Hong Kong would be determined by the availability of alternative low-cost and efficient port and liner services in China and Taiwan. It said: 'As alternatives become more viable both from a cost and a service standpoint, diversion from Hong Kong will be more likely.' The decision by the Global Alliance to make direct calls at Yantian and the Grand Alliance at Shekou also strengthens these arguments. 'The most sensitive cargo will be from north, central and east China, which has available to it potentially viable alternative routing options,' the report said. The use of Hong Kong for these cargoes was likely driven by insufficiency of inland modes of transport and of the facilities and services provided at coastal ports, it said. In a detailed analysis of Hong Kong's throughput, the report said that as political change permitted the development of competing transshipment hubs at Pusan, Kaohsiung and Chinese ports, port handling cost had become a determining issue. 'Furthermore, the movement of the fastest growing cargo bases to the provinces in east, central and northern China detract from Hong Kong's strategic location with respect to the mainland cargo base as a whole,' it said.