The Hong Kong Shippers' Council was established to protect and promote the interests of its members and Hong Kong shippers in general on matters relating to the transportation of merchandise by sea, land and air. The Council operates under the policy guidance of an Executive Committee composed of representatives from 14 major trade associations in Hong Kong.
The Council derives its broad-based representation and membership from these trade associations. The Executive Committee is served by a secretariat comprised of a staff of eight. Although the Council's activities are basically aimed at serving its members, the benefits from the very existence of the Council also go to shippers and traders in Hong Kong.
The Council today is not involved in direct negotiations on freight tariff or rates, nor does it enter into rate agreements or service contracts with Conferences or individual carriers for or on behalf of its members. Instead, the emphasis is on ensuring that shippers should be able to negotiate freight rates in an open market environment and on a level playing field with the carriers.
The Council provides information regularly to its members, on the latest trade situation and freight rate trends by compiling monthly trade and shipping statistics for distribution to members. The Council alerts shippers on vital contract information that is happening in the trade, conducts research and advises shippers of the findings, such as market trends in airfreight and seafreight.
Hong Kong's economy bounced back strongly from the effects of SARS inF 2003, growing 6.8% in the first quarter, and a more astounding 12.1% in the second quarter. According to the Hong Kong General Chamber of Commerce's economic report issued in August, Hong Kong's second quarter rise was the strongest performance since the first three months in 2000. With these results, it became the fastest growing economy in Asia. In August, the government economist raised the full-year growth forecast to 7.5%, 1.5 points higher than that predicted in the Financial Secretary's March budget.
Hong Kong's total exports increased by 11.7% in 2003 following a 5.4% growth in 2002. The growth continued into 2004, and in the first eight months, Hong Kong's exports grew by 11.7%. In 2003, imports strongly picked up and grew by 11.5% compared to the 3.3% growth in imports in 2002. In the first eight months of 2004, imports grew by 19.4%.
In 2003, the Hong Kong port retained its title of busiest port in the world, handling 20.45mn TEU (20ft equivalent units) at a YoY growth rate of 6.8%. From Jan. to Sept 2004, 16.6mn TEU had been handled at the Hong Kong port at a 9.8% growth rate and it seems probable that Hong Kong would be achieving an 8% growth rate in container throughput for 2004.
Hong Kong International Terminals - CT9
The government-commissioned Port Master Plan 2020 is now being studied by the relevant port development advisory bodies and the decision to build container terminal 10 is still not final. The first berth of Container Terminal 9 on Tsing Yi island opposite Kwai Chung came online in July 2003 and it belongs to Hutchison's Hongkong International Terminals. Upon full commissioning in 2005, the six-berth CT9 will add 2.6mn TEU to the Hong Kong port's total handling capacity. CT9 has almost 2,000 metres of quay length to be added to the existing 18 berth Kwai Chung port.
The last of the four berths operated by Modern Terminals at CT 9 was completed in August 2004, three months ahead of schedule. A third CT9 developer, Asia Container Terminal, is a joint venture among Sea-Land Orient Terminals Ltd of CSX World Terminals of the US with 10%, NWS Holdings Ltd. with 33%; and Sun Hung Kai Properties Ltd. and Hong Kong Land Holdings Ltd. with 28.5% each. ACT has swapped its two berths at CT9 for two of Modern Terminals' berths at CT8 West Kwai Chung.
Across the border, the Shenzhen ports handled 10.63mn TEU in 2003 at a 39.8% growth rate. In Jan-Sept 2004, 9.9mn TEU had been handled at the Shenzhen ports with a growth rate of 29% over the same period in 2003. The first berth of Phase Two of Chiwan came online last year; the first berth of Phase Three of Yantian Port came online this year; and the first berth of Phase Two of Shekou is now online as well. The design capacity of each berth is around 400,000 TEU annually, which is expected to relieve the congestion at the ports across the border.
Since the terrorist attack of 11 September 2001, the US has adopted several security initiatives, including the introduction of the Container Security Initiative (CSI) in January 2002. CSI is now implemented at most US trading partners' ports, including Belgium, Canada, the PRC, France, Germany, HKSAR, Japan, Malaysia, the Netherlands, Singapore, South Korea and the UK. As part of the CSI, the US has introduced the advance manifest rule (AMR) that requires ocean carriers bound for any US port to submit cargo manifest information electronically or in paper form 24 hours prior to cargo lading of the vessel at the foreign port of origin.
Apart from CSI, the US has introduced since April 2002 the Customs-Trade Partnership Against Terrorism (C-TPAT) program to ensure supply chain security through working with US importers and their suppliers. It is expected that C-TPAT will eventually be expanded to port authorities, terminal operators, warehouse operators and overseas suppliers and manufacturers.
Hong Kong, being the world's busiest port, has adopted CSI. It has had an impact on trade, such as the shortened leadtime for shippers brought about by the 24-hour advance manifest system. Since the rule requires the container to be at the terminal 24 hours before loading, this has shortened leadtime for shippers by about three days. Most cargo is now delivered to the container terminal 4-5 days before the ship's arrival, as against the 1-2 days before the requirement, resulting in capital cost and some loss of competitiveness for Hong Kong shippers.
Moreover, shipping lines are charging an Advanced Manifest Fee (or similarly called charge) of US$25 per B/L, and US$40 per amendment after submission of manifest. According to the shipping lines, on average there are two amendments per B/L. The Council has been calling for waiving of the fee when the shippers submit their shipment data electronically since shipping lines will not be required to input data and the workload on data verification would be substantially reduced. Regrettably, only Maersk-Sealand and APL had responded positively to the Council's proposal.
The Far Eastern Freight Conference (FEFC) has proposed an ISPS charge at Euro 5 (or in equivalent other European currency) per container. In Hong Kong, pilot tests on container scanning are being carried out as required under Code B of ISPS Code. If the EC commits to Code B, Hong Kong is likely to follow. It is imperative to ensure that all parties in the industry share the related expenses and terminal operators and shipping lines should not make profit from such an exercise.
The UK consultants, Drewry have stated that 2004 would be a banner year for the container market with 2005 also looking strong. Key to the boom has been trade to/from China with containerised imports and exports reaching year-on-year records since China joined the WTO in November 2001. In particular, according to Drewry's Annual Container Market Review and Forecast 2004/5, China trade increases have benfitted the transpacific and Europe/Far East/Europe trades with two-way traffic volumes projected to rise by 13.8% and 16.5% respectively in 2004. Intra-Asia traffic will reach an estimated 30mn TEU, up at least 205 on 2003 levels, with China accounting for about a third of all cargo movements.
Modern Terminals, Kwai Chung
In Jan - Sep 2004, Kwai Chung container terminals handled 9.9mnTEU.
In the fourth quarter of 2004, the Far Eastern Freight Conference (FEFC) announced strong seven-month figures for January-July 2004 with trade growth of around 17% on eastbound trades and 18% on westbound trades, with similar levels of trade growth expected during 2005.
There are congestion problems in both US West Coast and European ports. The ports of Los Angeles and Long Beach have been plagued with longshore labour shortages and importers have reported 2-3 days' delay for cargo at the two ports.
The delays have been felt in Asia with carriers forced to skip port calls, reduce time in port, advance cutoff times for receiving cargo and sometimes reschedule loading of empty equipment of non-linehaul cargo to maintain service levels and schedules. Shippers were experiencing delays of 5-7 days in September getting cargo delivered as vessels sit idle at anchor and as containers are delayed in transit or at harbour and inland terminals.
Delays worsened in September towards 10 days when it was reported by JoC that Wal-Mart, in a bid to minimise inventory costs, planned to concentrate shipments of 50,000 TEU per month in September and October respectively. In October, the delays reportedly eased off a bit to five-day delays
Man Kam To bordercrossing .
In Hong Kong and southern China, the Kwai Chung container terminals kept pace with the Shenzhen ports in terms of container handling. In January to September 2004, the container terminals at Kwai Chung had handled 9,862,000 TEU while Shenzhen ports had handled 9,852,000 TEU. In total, with the midstream and other ports, the Hong Kong port's container throughput in Jan-Sept 2004 was 16.6mn TEU at a growth of 9.8% over the same period the previous year.
The manufacturing industries in the Pearl River Delta account for some 60% of Hong Kong's shipments. In air cargo, some 70% of the freight handled by Hong Kong are PRD related.
There is a marked market differentiation between the two regions. Hong Kong has sophisticated facilities, topnotch professionals and services that benefit from having the world's busiest air and seaports. Hong Kong will play a key role in handling cargo that requires high value added services. Sea and air transportation will continue to flourish because of these advantages.
| Competitiveness of the port |
The region's shippers rank THC as one of the items on the top of their agenda, and we have called for the re-incorporation of Terminal Handling Charges into ocean freight rates, and for more transparency on THC components and costings. The Federation of ASEAN Shippers' Councils (FASC) had been working to rollback THC into the basic freight rate along with other surcharges which are continuously imposed by the lines. Conference lines have failed to disclose the cost components of THC despite numerous dialogues.
In Hong Kong, a McKinsey & Co report pointed out that high THC and cross boundary trucking costs were slowly eroding the throughput at the Hong Kong port as shippers chose alternate ports across the border in Shenzhen.
For years, the lines had been blaming Hong Kong's high operating costs on property values that they said were the reason container terminal operators were charging them high fees which were being passed on as THC to shippers. However, container terminal operators in Hong Kong have repeatedly said in the last few years that they have substantially lowered their charges. But there has been no corresponding reduction of THC levels by the shipping lines. We have been calling for transparency in the costing of THC because carriers insist that THC collection is a cost-recovery exercise. We have also questioned why there is no built-in mechanism that would adjust the levels downward when the situation warrants.
The other issue affecting the Hong Kong's port competitiveness as per the McKinsey Report, cross boundary trucking costs. The need to reduce trucking costs is a given. In addition to infrastructure expansion and improvement, the present container tractor driving license system should be relaxed to encourage more new blood to join the driver pool. The Government might even consider easing up on the requirements of imported labor. Agreements should be made with Mainland authorities on eliminating the double requirements for annual examinations for tractor and chassis and insurance coverage. The crossboundary container tractor-licensing fee should be reduced.
In late September, the HKSAR's Secretary for Economic Development and Labour, Mr. Stephen Ip, met with industry representatives to discuss measures to reduce cross boundary trucking costs. Mr. Ip accepted from industry representatives a proposal on the subject which he presented to the Chief Executive. "We are grateful to the industry for presenting their proposal, which in fact echoes the finding of the study on Hong Kong Port-Master Plan 2020 commissioned by the Government that road haulage cost is a key factor affecting the competitiveness of the Hong Kong port."
In the proposal raised by the industry, the relaxation of the "4-up-4-down" and "1-truck-1-driver" requirements on Hong Kong container trucks are crucial in enhancing the efficiency and reducing the cost of cross boundary trucking service. "There is a strong industry consensus for the Government to follow-up on them," said Mr. Ip. He said the issues will be taken up in the context of the Hong Kong-Guangdong Cooperation Joint Conference.
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