hktdc.com - Sea Transport

Overview

Endowed with a deep-water, silt-free natural harbour strategically located along a major sea route and with the Chinese mainland providing a huge cargo base, Hong Kong has become a sea transport hub in Asia.
Advanced port facilities and efficient port services are complemented by excellent trade, financial and other services which underpin Hong Kong's status as the 12th largest trading entity in the world. As of January to November 2008, 29.1% of Hong Kong total exports (by value) were transported by ocean, compared to 32.5% by air and 33.6% by land.
Hong Kong Port was the worlds' third busiest container port in 2008, having handled 24.2 million TEUs, following Singapore (29.9 million TEUs) and Shanghai (28 million TEUs).
Hong Kong's port is renowned for its efficiency. All container terminals are privately owned and operated. Productivity enhancement through new cargo management techniques has raised their handling efficiency.
The Hong Kong government is conducting a feasibility study on building Container Terminal 10 (CT10), with the study due by 2011. The government has reserved southwest Tsing Yi for CT10 if the new terminal is to be built, and prefers to have shipping lines operating CT10.
According to Hong Kong Port - Master Plan 2020 released in 2004, Hong Kong's total container throughput is projected to reach 27.9 million TEUs in 2010 and 40.2 million TEUs in 2020.

Industry Data

Total seaborne cargo handled (In million tonnes)	2007	% of total	2008 Q1-Q3	% of total
Total	245.4	100%	198.1	100%
Ocean-going	177.3	72.2%	138.3	69.8%
Exports and imports	81.3	33.1%	59.6	30.1%
Transhipments	96.1	39.2%	78.7	39.7%
River trade	68.1	27.8%	59.8	30.2%
Exports and imports	31.4	12.8%	30.4	15.3%
Transhipments	36.7	15.0%	29.3	14.8%

Source: Hong Kong Shipping Statistics, Census and Statistics Department

Total container traffic (in million TEUs)	2004	2005	2006	2007	2008	08/07 Change
Total	22.0	22.6	23.5	24.0	24.2	+1.0%
Kwai Tsing Terminals	13.4	14.3	16.0	17.3	17.7	+2.3%
Ocean vessel	11.3	12.3	13.7	15.1	..	..
River cargo vessel	2.2	2.0	2.4	2.2	..	..
Mid-stream operation and other berths	8.6	8.3	7.5	6.7	6.5	-2.3%
Ocean vessel	4.2	3.3	2.3	1.8	1.6	-11.6%
River cargo vessel	4.4	5.1	5.2	4.8	4.9	+1.2%

Sources: Summary Statistics on Port Traffic in Hong Kong, Hong Kong Port and Maritime Board

Range of Services

The sea transport sector is of vital importance in supporting Hong Kong's status as the world's 12th largest trading entity, since seaborne cargo accounts for more than 60% of Hong Kong's total cargo throughput tonnage. River trade vessels are increasingly being used to carry goods between Hong Kong and Southern China, which has become the main cargo source for the territory.

During January to October in 2008, Hong Kong handled 198.1 million tonnes of seaborne and river cargo, 69.8% of which were by ocean-going vessels. Of all such seaborne cargo, 108 million tonnes (54.5%) were transshipment cargo. The Chinese mainland was the biggest source and destination of Hong Kong's transhipment business.

Hong Kong handled 24.2 million TEUs of containers in 2008. Of the total, about 73.1% were handled by container terminals at Kwai Tsing terminals, with the rest handled mid-stream by Hong Kong's mooring buoys and by river trade facilities. The moorings also handle most of Hong Kong's break bulk cargo.

Liner versus bulk shipping

Sea cargoes to and from Hong Kong are carried both by liners and bulk vessels. Liner shipping is operated under a scheduled timetable with pre-announced rates and destinations. Many key routes are under liner conferences (agreements by the main shipping lines on tariffs and sailings). Hong Kong is served by some 80 international shipping lines providing over 450 container liner services per week connecting to over 500 destinations worldwide. Containerised cargo dominates the liner market in Hong Kong.

The larger container lines have invested in advanced systems to provide cargo tracking information and improve efficiency. They often form alliances or merge with other transport providers to develop door-to-door multi-modal services. Many liners are also forming alliances amongst themselves to increase efficiency and reduce cost in a very competitive environment. Vessel sharing has enabled the liners to offer a more flexible service in terms of global coverage, higher frequency of departures and a greater choice of routes.

Bulk shipping takes care of bulky, unpacked goods such as oil, gas, grain, minerals and timber.

Port Facilities

Hong Kong's port facilities are financed, built, owned and operated by private firms. It is the only major port not run by a port authority.

Container Terminals

Hong Kong has 9 existing container terminals with a total of 24 berths at Kwai Chung and Tsing Yi Island, operated by some private consortia. Through various productivity enhancement measures, their combined throughput capacity is around 18 million TEUs per year.

The Hong Kong government is conducting a feasibility study on building Container Terminal 10 (CT10), with the study due by 2011. The government has reserved southwest Tsing Yi for CT10 if the new terminal is to be built, and prefers to have shipping lines operating CT10. The new terminal will add 8 berths with quay lengths of at least 400m each.

River Trade Terminal

The Pearl River links Hong Kong with many manufacturing centres in Southern China, which has become the main cargo base for the territory. River trade has been the fastest growing external transport mode over the past few years, rising from 9.3 million tonnes in 1990 to 68.1 million tonnes in 2007. To cater for increasing river trade, a dedicated terminal, the River Trade Terminal (RTT) was established in 1996, and it became operational in November 1998. RTT is located in the west of Tuen Mun.

Service Providers

Shipowners own ships to obtain an income. In the liner shipping market, ship owners can rent ships to a shipping line. In the bulk shipping market, ships can be rented on a time or voyage basis to a ship charterer or ship operator.

Hong Kong is a major ship owning and management centre. As of the end of 2008, there were 1,361 vessels (39.6 million gross registered tonnes) on the Hong Kong Shipping Register. According to the Hong Kong Shipowners Association, the total tonnage of ships owned or managed by its members was around 98 million deadweight tonnes as at December 2007.

Shipping lines tend to own and/or lease a group of ships which they deploy on pre-determined liner routes. Ship operators rent ships from owners and use them to carry bulk cargoes from port to port. The aim of the operators is to reduce the number of wasted voyages and this requires careful selection of the ship, routes and cargo.

Shipping lines use shipping agents to sell their freight space in a particular port. The shipping broker acts to match the supply of bulk vessels from operators/owners with the demand for bulk cargo shipments by the charterers.

Establishment and employment	2005	2007
Container terminals, container haulage & container leasing	-	-
Establishments	2,947	2,719
Employment	18,322	17,298
Shipping agents and managers; and local representative offices of overseas shipping companies	-	-
Establishments	241	198
Employment	8,369	7,777
Owners and operators of sea-going vessels	-	-
Establishments	76	115
Employment	2,246	3,731
Maritime insurance	-	-
Establishments	102	101
Employment	..	..
Shipbrokers	-	-
Establishments	31	35
Employment	164	184

Source: Employment & Vacancies Statistics, Census and Statistics Department; Summary Statistics on Shipping Industry of Hong Kong, Transport and Housing Bureau

Business Receipts of Selected Industry Groups (HK$ billion)

-	2006	2007	07/06 change
Ship agents/managers and local representative offices of oversea shipping companies	5.2	5.4	+3.8%
Ship owners/operators of sea-going vessels	75.7	101.1	+33.6%
Container terminals	10.7	11.0	+2.8%
Inland water freight transport	1.3	1.6	+23.1%
Haulage of containers and container leasing	8.8	8.6	-2.3%
Stevedoring services	3.8	3.5	-7.9%
Air or sea cargo forwarding services	150.8	157.9	+4.7%

Source: Report on 2006 / 2007 Annual Survey of Transport and Related Services, Census and Statistics Department

Exports

Hong Kong earned HK$109.8 billion from exporting sea transport services in 2007 (accounting for 16.6% of total service export in 2007), up 21.4% from 2006. Unlike air transport, passenger revenue constituted an insignificant part of the exports of sea transport services.

(HK$ billion)

-	2005	2006	2007	07/06 Change
Exports of Sea Transport Services	80.8	90.4	109.8	+21.4%
Passenger	0.9	1.1	1.6	+47.5%
Freight	45.7	54.9	69.0	+25.7%
Ship Chartering	4.4	5.0	8.4	+69.2%
Others*	29.8	29.5	30.8	+4.5%
Share of total services exports	16.3	16.0	16.6	+0.6%

Sources: Report on Hong Kong Trade in Services Statistics for 2007, Census and Statistics Department

* “Others” include: Supporting and auxiliary services to water transport (e.g. container terminal services; ship broking, surveying, consulting, repair and maintenance services; chandling; stevedoring services; cargo inspection, sampling and weighing services; port and waterway operation services; towing and pushing services; pilotage and berthing services; vessel salvage services; and other water transport supporting and auxiliary services).

Major Export Markets of Sea Transportation Services 2005-2007 (HK$ billion)

-	2005		2006		2007
-	Value	Share	Value	Value	Share	Value
Asia	43.9	54.4%	45.3	50.1%	54.5	49.7%
North America	17.4	21.6%	21.1	23.3%	26.7	24.3%
Western Europe	12.2	15.2%	13.1	14.4%	19.0	17.3%

Sources: Report on Hong Kong Trade in Services Statistics for 2007, Census and Statistics Department

An increasing number of countries are seeking to privatise their port operation and/or develop new ports to be run on a commercial basis. An exportable sea transport service from Hong Kong is thus the development and management of ports on the Chinese mainland and the wider region. Hong Kong port operators are already active in this field. Modern Terminals, a Hong Kong terminal operator, invest and operate several container terminals in Shenzhen, and had expanded its business to the Yangtze River Delta since 2004. Hutchison Port Holdings (HPH) Group, another Hong Kong terminal operator now owns, manages and operates some 300 berths in 50 ports around the world. In 2007, the HPH Group handled 66.3 million TEUs.

Recent Developments and Market Outlook

Amidst a global economic downturn, container throughputs in South China ports have fallen. In December, TEUs handled by Hong Kong, Shenzhen, and Guangzhou dropped by 24.1%, 15.7%, and 21.1% year-on-year respectively. Nevertheless, Hong Kong’s container throughput still managed to edge up 1% for the whole year of 2008.
South China ports have been developing quickly in the past years. As at end-2008, Shenzhen is the world’s fourth busiest port with 21.4 million TEUs, up 1.5% YoY. Guangzhou handled 11.7 million TEUs in 2008, up 17.1% YoY.
Up to November 2008, top 10 seaports on the Chinese mainland, in terms of million TEUs handled, were: Shanghai (25.8), Shenzhen (19.7), Guangzhou (10.3), Ningbo-Zhoushan (10.2), Qingdao (9.2), Tianjin (7.8), Xiamen (4.6), Dalian (4.1), Lianyungang (2.6), and Yingkou (1.9).
On 15 December 2008, “Three links” (meaning direct transportation, postal, and trade links between the Chinese mainland and Taiwan) was officially restored after almost 60 years. The mainland has opened 63 seaports, including Tianjin, Shanghai, Guangzhou, Shekou (Shenzhen), Yantian (Shenzhen), and Taiwan opened 11, such as Taichung, Kaohsiung, and Keelung for direct transportation.
The Hong Kong-Zhuhai-Macau Bridge (HKZMB), a large-scale cross border infrastructure linking the three places, is expected to commence construction before 2010. When the HKZMB is completed, scheduled in 2015, cargo movement between Hong Kong and western Guangdong will be further enhanced.
In order to enhance land connectivity with the mainland, several measures have been adopted, including simplifying cross-border procedures, providing "one-stop" kiosks for immigration and customs clearance and expanding capacity at border-crossing points.
Also, the "Green Lane" scheme came into effect in May of 2006. Under the scheme, licensed carriers can load up goods from the shippers and drive to a nearby "freight village" or "duty-free depot" to carry out the customs clearance process. The goods needed not be re-opened or rechecked in Hong Kong. This scheme simplified the Customs clearing system to smooth the flow of cargo transport between the Hong Kong port and South China, and raised overall cost-efficiency.
In the 11th Five-year Plan (2006-2010), the Central Government affirmed Hong Kong's strategic position and supported Hong Kong's status as an international shipping and maritime centre. Further, the National Development and Reform Commission (NDRC) released a Pearl River Delta Development Plan in January 2009, encouraging division of labour between South China ports.

The Closer Economic Partnership Arrangement (CEPA) between Hong Kong and the Mainland

According to China's WTO commitment and the Regulations on the Administration of Foreign Investment in International Marine Shipping (issued by MOFCOM and became effective in June 2004), foreign joint-ventures are allowed to provide the following services:

Maritime cargo-handling services
Customs clearance services for maritime transport
Container station and depot services
International shipping
International shipping agency
International ship management
International marine shipping freight loading and unloading
International marine shipping container terminal and yard business

The shareholding of foreign investors should not exceed 49%.

By contrast, the CEPA provisions allow Hong Kong services suppliers (HKSS) to have greater flexibility to access the market, as they are allowed to form wholly-owned units in providing certain types of maritime services, including:

International ship management services
Containers station and depot services
Non-vessel operating common carrying services
Port cargo loading and unloading services
Ship survey services for ships registered in Hong Kong
International ocean container leasing, buying and selling as well as trading of container parts
Ship maintenance and repair services; and for tugs that they operate between Hong Kong and mainland ports
Regular business services such as shipping undertaking, issuance of bills of lading, settlement of freight rates and signing of service contracts

For a Hong Kong company providing maritime transport services, 50% or more of the ships owned by it, calculated in terms of tonnage, should be registered in Hong Kong^#.

HKSS can set up joint venture enterprises on the mainland to provide third party international shipping agency services. The shareholding of Hong Kong service suppliers should not exceed 51%. This lowers the barrier of the third party international shipping agency services for Hong Kong service suppliers, as compared to other foreign joint-ventures outside CEPA.

Business scope is further expanded for HKSS from January 2009, as they are allowed to set up wholly-owned enterprises and branches in Guangdong on a pilot basis to provide shipping agency services to vessel operators for routes between Guangdong Province and Hong Kong and Macau.

^# The requirement that "50%, or more of the ships owned by it, calculated in terms of tonnage, should be registered in Hong Kong" as set out in Annex 5 of the CEPA legal text (see www.tid.gov.hk for further details), is not applicable to HKSS which provide towing services.

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