Hong Kong and Shenzhen unlikely to lose services with alliance regrouping, says HPH Trust CEO
This story was originally published on Fairplay.IHS.com
Terminals in Hong Kong are facing pressure from unprofitable shipping lines to reduce tariffs as negotiations continue ahead of the start of operations of the larger, regrouped alliances in April.
"The discussions are delicate because obviously we cannot handle at a loss. At the same time, the lines are coming out of a very unprofitable year and are quite desperate as a result," Gerry Yim, CEO of Hutchison Port Holdings Trust (HPH Trust) told Fairplay.
"We tell them we can look closely at service development and improvement but don't squeeze us on the rate."
Yim believes Hong Kong is not at risk of losing services when the new alliance structures take effect in April, but that the split of business within the port itself could be adjusted.
The Port of Shenzhen, where HPH Trust owns and operates Yantian International Container Terminal (YICT), is also unlikely to lose services as a result of the implementation of the new alliance structure, he said.
"I don't think Shenzhen will lose out either. All of the alliance members already call to YICT, so no matter how they regroup they are still in the same place. The same is true for Chiwan and Shekou.
"It could indeed mean growth in core business for the terminals in Shenzhen. The new [alliance] structures are supposed to result in better products - more reliable and more frequent services - which could enable the lines to canvas more cargo from further inland."
Container throughput at Hong Kong expanded for the sixth month in a row in January, a period of growth that followed more than two years of declining monthly volumes.
Service rationalisation on the part of global shipping alliances was one reason behind the declines, with Hong Kong affected by the launch of more direct services from ports in other Asian countries such as Vietnam and Indonesia.
Yim said while he expects transhipment business to be under pressure for the short-term, better fortunes for the region's transhipment hubs may be around the corner.
"The profitability of the lines is looking more positive for 2017, we are hopeful this factor together with ongoing structural changes in the liner shipping sector will result in the resumption of frequent, timely, and professional services to multiple ports. This is a scenario that will ultimately be positive for growth in transhipment traffic."
In the tighter business environment, Hong Kong continues to retain important advantages over competing facilities, he added.
"Seventy percent of ships that call here are not on schedule, but we manage to provide berth on arrival at 90%. This catch-up service is very valuable to the industry and an important advantage Hong Kong has to offer."
The port's extensive barge operations also afford it a measure of protection, he added.
Hong Kong's barge traffic is nearly double that of Shenzhen's with Hong Kong International Terminals (HIT) alone handling about 2 million teu of barge-related business per year.
"This effectively turns Hong Kong into a local China gateway and so affords some natural protection to our transhipment business."
At the end of 2016, three of Hong Kong's terminals launched a collaborative agreement aimed at reducing costs and boosting efficiency in an environment of increasing industry consolidation.
The agreement between HIT, COSCO-HIT, and Asia Container Terminals (ACT) sees the majority of the berth space at the city's Kwai Tsing terminals come under unified management and operation for the first time.
According to Yim, the collaboration should deliver efficiency gains of about 10%, mainly from a combination of less waiting time for vessels, reduction in unproductive berth time, optimisation of land usage, and reduced deployment of resources to support operations.
"Under the old system, for instance, a COSCO vessel may have only berthed at the terminal where COSCO holds a stake. Now China vessels can call at any available berth. This greatly improves our ability to maximise berth usage.
"A further benefit is in terms of optimisation of land usage, and this is particularly beneficial in terms of land usage for barge operations. We will also make some savings by removing duplication in some supporting functions."
- Crude Oil Trade: Has Russia started decreasing its output?
- Crude Oil Trade: Another deal for China, growth potential in South Sudan
- Crude Oil Trade: Suezmax earnings, no matter how long the winter, spring is sure to follow
- Crude Oil Trade: Nigeria adjusting to US shale boom and OPEC agreement
- Crude Oil Trade: Venezuela's pain is Brazil's gain
- Crude Oil Trade: Libya braced for another war, will this impact crude oil flows?
- Crude Oil Trade: VLCC freight rates, what goes up must come down
- Crude Oil Trade: Will the alliance last? OPEC struggles with Russia
RELATED INDUSTRIES & TOPICS
The deadline for responses to this year's cyber security survey has been extended to 30th April. Help us to build a… https://t.co/v1fM1eXJH1