Hong Kong faces threat from Guangzhou port

January 15, 2014 7:11 am

Hong Kong faces threat from Guangzhou port

By Demetri Sevastopulo in Nansha

Tens of thousands of litres of Admiral Vodka, a Lithuanian brand, lie in large blue vats in a warehouse in the southern Chinese port of Nansha waiting to be bottled for shipment to consumers in southeast Asia.The 900,000 litres that Nansha – the main port in Guangzhou – handles annually, alongside European wine, Scottish whisky and polyethylene plastic from the United Arab Emirates, are just a few examples of how the lesser known hub has helped Guangzhou gain ground on Hong Kong and become the world’s seventh largest container port.

“Nansha is one of the Chinese ports that is a little bit invisible to the outside, but it is one of the giants in a region of giants,” says Olaf Merk, a shipping expert at the OECD.

Guangzhou and six other Chinese ports rank in the world’s top 10 container ports alongside Singapore, Busan in South Korea, and Dubai, according to Lloyd’s List. While Guangzhou remains smaller than Shanghai, Hong Kong and Shenzhen, it is growing at a much faster rate due to Nansha, easily the dominant of its four ports.

In the decade through 2012, the volume of traffic passing through Guangzhou port rose 434 per cent to an annual 14.7m TEU, the measure for 20-foot containers. Shanghai grew 188 per cent to 32.5m and Shenzhen rose 116 per cent to 22.9m.

The only Chinese port to grow faster than Guangzhou was Ningbo-Zhoushan, just south of Shanghai, which saw volumes rise more than 500 per cent. Meanwhile,Hong Kong

expanded just 13 per cent to 23.1m, after recording the only annual decline at a Chinese port in 2012.

“What’s striking to see is the relative decline of Hong Kong in comparison with these other ports,” says Mr Merk.

The soaring volumes at mainland Chinese ports are mainly due to the big increase in Chinese trade in recent years, a trend that was underscored recently when China overtook the US as the world’s biggest goods trader.

But Guangzhou is also gaining from ships increasingly bypassing Hong Kong – a traditional transshipment hub for China trade – and heading directly to the heart of thePearl River Delta manufacturing area.

This makes even more sense when the cargo is destined for, or coming from, cities such as Guangzhou and Foshan on the west side of the river, averting the need for an expensive cross-border truck drive from Hong Kong around the delta.

To attract more volume, Nansha has developed its facilities and deepened the port to allow bigger ships access. It got a big boost in 2011 when Maersk decided to move about a third of its Hong Kong volumes to the port.

“Nansha was a lemon for many years as it was not charging enough for cost [but] about 8 years ago it became apparent that it was going to be OK,” says Charles De Trenck, an independent shipping analyst.

In contrast, Mr De Trenck says, Hong Kong “lost its mojo a long time ago”. He says it has seen no direct traffic growth in 15 years, and now relies on transshipment where cargo is transferred from one ship to another for re-export.

Some observers are less pessimistic. Jon Windham, a transport expert at Barclays, says Nansha does not pose an “existential threat” to Hong Kong, and that a rise in North Asian trade is sparking more demand for transshipment services that will benefit the former British colony.

Nansha operates 37 foreign routes, a significant rise from 11 in 2008, says Zeng Yanhong, an employee at Guangzhou South China Oceangate Container Terminal at the port. She says the port plans to increase the number of deepwater container berths from 10 now to as many as 18 over the next couple of years.

While the port continues its expansion, the wider Nansha district – a relatively under-developed area of green wetlands 60km south of Guangzhou – is one of several new economic zones Guangdong is promoting as part of a provincial plan to attract new, and particularly high value-added, industry.

Lionel Ni, dean of the Hong Kong University of Science & Technology’s graduate school, which has opened a research institute in Nansha, says the area is “important for the future development of Guangzhou”. He says the local government is looking for investors and is offering incentives to attract business, including the potential of low personal tax rates that are closer to those in Hong Kong.

One early success for Nansha was the decision by Herrenknecht, the German tunnelling equipment maker, to open a plant in 2006. An even bigger victory was the move by Toyota and its Chinese partner, GAC, to build their joint-venture factory in the same year.

Huang Xiumin at the automaker said the plant churned out 251,000 vehicles in 2012 for the Chinese market, of which 30 per cent were shipped through Nansha port.

“Because Nansha has a top level port, the conditions are excellent for the auto industry,” says Ms Huang. “And since it is one of the new development zones in Guangzhou, the potential for future growth is extremely high.”