Hong Kong's second-largest container port operator Modern Terminals will invest US$10 billion on the mainland in the next three years as the special administrative region struggles to retain its position as China's busiest container hub.Modern Terminals operates cargo ports in South China and the Yangtze River Delta. But it has been seeking new investment opportunities on the mainland, and would need "US$10 billion as capital expenditure to acquire and upgrade its operations in the region," Chief Executive Sean Kelly told reporters at a recent luncheon. "Our ports on the mainland enjoyed favourable growth this year, and we are optimistic about our future performance," he said. "First, we will concentrate on the operation of our existing ports on the mainland ... and then look for expansion. We are interested in the region but have yet to decide where to build our next port."
The latest project for Hong Kong's largest port operator after Hutchison Whampoa is Shenzhen's Dachan Bay Terminal One. The groundbreaking ceremony for its control tower was held in July, and it is expected to begin operations by the end of next year. Data from Hong Kong Port Authority shows the city's eight container terminals handled 11.81 million TEUs (20-foot equivalent units) in the first nine months of the year, while the Shenzhen ports of Yantian, Shekou and Chiwan dealt with 13.44 million TEUs. Though analysts say that Hong Kong is still far ahead of its neighbour in terms of profit, the lagging TEU figures worry some Hong Kong market watchers. They fear that the port, long one of the busiest in the world, will lose its leading position in China.
To maintain its competitiveness, Kelly said, Hong Kong should take steps to reduce cost differences with neighbouring Shenzhen. "Moving one TEU from any of Shenzhen's terminals, which are closer to factories in the Pearl River Delta region, costs about US$300 less than Hong Kong mainly because of higher trucking and other costs," he said. Shenzhen has taken almost the entire growth market in the past few years, with its throughput rapidly catching up with Hong Kong's, a Modern Terminals report said. Hong Kong should try to increase its market share in the inland trucking container traffic segment, Kelly said, because it is the key value driver that brings considerable economic benefits to the city. Shipping and port analysts, however, see no cause for immediate concern because most of the profit still goes to Hong Kong. "Shenzhen and other mainland ports have already overtaken Hong Kong, but that's only in terms of quantity. Hong Kong still earns a better profit because of its higher costs," Hong Kong-based Taifook Securities' shipping and port analyst Cho Fook-tat said. "Besides, many ports on the mainland are funded by Hong Kong shareholders," he said.