Hong Kong loses ground as top container port amid change in status — Radio Free Asia

Major shipping companies are pulling out of Hong Kong as it loses its status as a free, international container port, according to analysts, who blamed a recent political crackdown and structural changes for the development.

"Hong Kong is being rapidly deselected from the East-West trades by all major shipping lines," the Danish-based consultancy Sea-Intelligence said in an April 2 report citing recent data from shipping lines.

Total container volumes coming through Hong Kong fell to 14.3 million TEUs in 2023, the lowest volume since 1998.

While the decline was exacerbated by the closure of Hong Kong's borders during the COVID-19 pandemic restrictions, cutting off cross-border road links and prompting shipping lines to send containers straight to Shenzhen, political factors including the international reaction to the city's ongoing crackdown on dissent in the wake of the 2019 protest movement also played a role, according to industry analysts.

"Hong Kong enjoyed a special relationship with the United States and other countries, because it was seen as semi-independent and autonomous, with little interference from mainland China in its day-to-day operations," Tom Derry, Chief Executive Officer at the Institute for Supply Management, told RFA Cantonese in a recent interview. "That's no longer seen as the case."

"Foreign nationals, both U.S. and from other countries, have been arrested under charges due to the new National Security Law," Derry said. "The rule of law in Hong Kong is seen as being a little more arbitrary today than it was in the past, because national security cases can only be heard by specially appointed justices in Hong Kong, not by the main judicial system." 

"So Hong Kong's ... special status as a preferred port has been eroded. It's to the detriment of Hong Kong and to the benefit of other mainland Chinese ports."

On Jan. 18 RFA Cantonese shot footage of the No. 9 Container Terminal at Kwai Ching, which was once stacked with containers several high, and which is now an empty expanse of concrete.

According to Derry, Hong Kong was hit by the loss in May 2020 of its separate trading status previously accorded by the U.S. government -- a move that was in direct response to the crackdown on the 2019 pro-democracy movement -- and by tariffs imposed on technology products amid a Sino-U.S. trade war begun under the Trump administration.

"Mainland China has 38% market share, the largest in the world, in those particular kinds of firms," Derry told RFA Cantonese in a recent interview. "Hong Kong enjoyed a large volume of integrated circuits that were moving to those [electronics] firms in mainland China and then moving from those mainland China firms back through Hong Kong and to their ultimate destinations around the world."

"That has been significantly impacted by the removal of preferential status, and by the later imposition of tariffs ... which has only made those conditions a little bit worse," he said.

Derry said Indonesia, Singapore and Manila will be significant beneficiaries of the shift away from Hong Kong, including Manila due to a significant semiconductor presence in the Philippines.

"Those will be the beneficiaries, and it will be Hong Kong's relative loss," he said.

Meanwhile, a recent network overview from the Gemini Cooperation shipping alliance of Maersk and Hapag-Lloyd, revealed no direct deep-sea calls in Hong Kong since the alliance pivoted to using Shanghai, Ningbo, Yantian, Singapore and Tanjung Pelepas as major hubs on regional container shipping routes, downgrading Hong Kong to the status of "feeder" port with cargo trucked or shipped to Yantian in the neighboring mainland Chinese city of Shenzhen.

Hong Kong isn't the only port that will lose direct connectivity under the Gemini network: the northeastern Chinese port of Dalian, Taiwan's Kaohsiung and South Korea's Busan have also been downgraded.

Yet the damage to its status as an international container port will likely be extensive, with the city's port losing throughput traffic from Hapag-Lloyd of around 615,000 20-foot-equivalent units (TEU)  a quarter and around 261,000 TEUs a quarter from Maersk to Yantian, according to U.K. maritime consultancy MDS Transmodal.

Consolidating routes

The developments come as the Alliance, which groups South Korea's HMM, Japan's Ocean Network Express and Taiwan's Yang Ming shipping lines, is cutting the number of direct port calls it makes to Hong Kong from 11 to just 6, Sea-Intelligence reported.

Hong Kong will only be included on one of Yang Ming's 13 regional and trans-Pacific routes from 2025, according to a press release published to Yang Ming's website.

The consolidation of routes "does not bode well for the Port of Hong Kong," Sea-Intelligence commented in its report. "Analysis of network design and network efficiency will show that fewer, but larger, hubs are economically more efficient. Hong Kong appears to be the first major 'victim' of this."

Hong Kong's Transport and Logistics Bureau issued a statement in response to RFA Cantonese reporting on the issue on April 5, calling it "unreasonable."

"Radio Free Asia's unreasonable comments on the rapid deterioration in Hong Kong's status as an international shipping hub have no basis in fact and have been fabricated out of thin air," a spokesman for the bureau said in a statement.

"This is wanton criticism and attack ... and can never be accepted."

Declining numbers

It cited the Xinhua-Baltic International Shipping Centre Development Index Report（2023), a collaboration between China's state news agency Xinhua and the Baltic Exchange, which claimed that the city ranks fourth in the world as an international container port.

However, Lloyd's List ranked Hong Kong 10th in the world in terms of throughput last year, one place lower than in 2022.

Financial commentator Joseph Ngan, a former assistant controller at Hong Kong's i-CABLE News, wrote in a recent commentary for RFA Cantonese that Hong Kong has indeed "lost its role as an entrepôt port," citing figures that showed a 0.8% decline in the city's exports in the year to Feb. 29, 2024 and a 1.8% decline in imports, "far worse than market expectations."

Ngan cited data from the Hong Kong Maritime and Port Board, which shows that the throughput of Kwai Tsing Container Terminal, which accounts for 70% of Hong Kong's total cargo volume, fell for 25 consecutive months to the end of December 2023, the largest decline on record. 

Total throughput fell by nearly 14% for the whole of last year, Ngan wrote, citing a further double-digit decline in February following a brief spike ahead of the Lunar New Year holiday in January.

Hong Kong's biggest container terminal operator, CK Hutchison, saw a 9% decrease in its China-Hong Kong port revenue and a 18% fall in its gross earnings last year, Ngan wrote.

"We have seen that the ranking of container terminals has dropped from No. 1 in the world 20 years ago to the bottom of the top 10," Ngan wrote. "It is clear from the data that container throughput has plummeted."

He said Hong Kong officials were choosing to deny the problem in favor of issuing positive propaganda about the city's outlook instead.

Translated by Luisetta Mudie.