Worlds apart

The previously intimate Shanghai and Hong Kong now seem like strangers, as Stevie Knight discovers

Although Hong Kong saw the advantage of purpose-built box facilities as far back as 1970, and Shanghai has been a much more recent contender, some used to see them as direct challengers to each other.

Indeed, the old Shenzhen special economic zone and government originally helped funnel a lot of foreign investment directly into southern China through Hong Kong, but recent years have seen initiatives to disperse the wealth further afield.

There are, however, some similarities between the two ports. For a start, they have both made it to within the top three places of the world box ranking for several years - although Hong Kong has never been quite as strong on general tonnage. Another parallel is fast-rising competition closer to home. But the growing separation of these two port giants is now hard to miss.

Hong Kong has Shenzhen (which includes deepwater Yantian) as its rival, and Shanghai has the Ningbo-Zhoushan operation.

Chris Runckel of Runckel Associates says: “In the past Hong Kong has actually done well - especially considering its competition with Yantian,” adding that it has kept its charges low despite the island’s higher operating costs.

But there has been some concern that Hong Kong wasn’t able to keep abreast of the general growth of the region, making slow progress against the runaway success of Singapore and Shanghai, losing its top spot in 2004. So the port is still looking at plans for Container Terminal 10 at Tsing Yi and further dredging of the container basin.

However, Hong Kong advocates say it has one important advantage over the competition: it has a mature logistics and specialist maritime sector. Hong Kong’s response, says local government, should be “to expand its cargo hinterland and sharpen its competitive advantages in providing tailor-made logistics services and solutions to complicated tasks”.

Recently, the area has been developing its railroad connections: “Despite the fact it has been slower than people hoped, rail looks like growing, since it is a way to decrease oil dependency and advance the growing green agenda,” says Mr Runckel, adding that this aspect will likely benefit Shenzhen and Yantian over Hong Kong, since the former has more room to modernise operations.

And this is an important point. Modernisation stands to favour the newer competition in a number of ways, simply because like many older city ports, Hong Kong is congested, and there just aren’t as many possibilities for hinterland connections.

Mr Runckel also points out that while Hong Kong has had to make expensive development choices, Yantian has been systematically driving its costs down, and now stands to be a more economical route than Hong Kong.

Shanghai, on the other hand, only really started its rise as a serious box port in the last 10 years. However, it is now in its third stage of development, and Phase 1 and 2 of the deepwater terminals built on the Yangshan islands in Hangzhou Bay have put pay to any memory of its early shallow-port beginnings.

Shanghai has been the world’s top cargo port for three years now handling 590m tonnes last year, up 1.3% compared with the 582m tonnes handled in 2008. But it is certainly being nudged by Ningbo-Zhoushan Port, which claimed 570m tonnes of throughput in 2009.

In fact, Shanghai port has said its operations were less affected by the downturn than its rivals, partly due to the upswing in domestic trade in the latter part of the year. Crucially, this was not the case for Hong Kong which lost over 14% of its boxes last year.

Dr Mark Yong of BMT Asia explains that although a decade ago, Hong Kong had an established place in the high value export market, “Shanghai has steadily moved up the chain".

So much so, it now seems as though their relative positions have, to an extent, been reversed, adds Mr Runckel.

“Unlike Shanghai, the Pearl River ports, including Hong Kong and Shenzen, got hurt much more than other areas when exports volumes fell. This is partly because they are reliant on the production throughput of the Guangdong region, which is slightly downmarket, with a predominance of things like toys and textiles which felt demand drop by as much as 50%,” he says.

However, things have begun to look up. Hong Kong container throughput grew 3% year-on-year to 1.84m teu in December last year, up 4.4% from November, according to port estimates – and some in the industry, like APM, think that because the Pearl River area was the first to get hit by the financial tsunami, it will be the first out the other side on any rebound.
Exported Image Caption: Shanghai has suffered less from the downturn than Hong Kong