Hutch a step closer to taking over HK port
Today a container terminal, tomorrow maybe Hong Kong’s port will be converted into luxury waterfront flats with a fancy French name.
With 16 of 24 Kwai Tsing container terminal berths, the world’s biggest port operator has just Modern Terminals and one berth at CT3 to go before it can convert the entire Kwai Tsing container port into prime waterfront real estate when the sun inevitably sets on the Hong Kong box shipping business.
Hutchison Port Holdings Trust, the Singapore listed ports arm of the group, last week extended its dominant position in Hong Kong with the acquisition of Asia Container Terminal from DP World. It paid around US$410 million for ACT that comes with container terminal 8 west (CT8W), enabling the Cosco-HIT joint venture to extend the line of its Stonecutters Island quayside.
Port users can now choose between just two operators – Hutchison’s Hongkong International Terminals or Modern Terminals. Although that has been the only real choice for years. Up until last week, CT3 was owned by DP World, but the single berth is just 305 metres long and lies squeezed between HIT and Modern Terminals. Ships calling at CT3 or at neighbouring berths would often spill over.
Most of DP World’s interest in CT3’s CSX World Terminals and ATL were bought out by the Hong Kong logistics fund of Aussie property developer Goodman Group. Goodman now owns enough logistics space in Hong Kong’s port to make a competition regulator blush.
The jewel in last week’s consolidation of Hong Kong’s port assets is obviously CT8 west and the acquisition of ACT. It gives Hutch four berths along that quay wall with eight cranes and adds a two million TEU capacity to its operations. The giant logistics building behind the berths is a welcome part of the deal, and the 285,000 square metres of space is sweet in a port where yard space is in short supply.
Investing in port assets is always long-term, but Hong Kong’s container business does not appear to have the sort of longevity one would expect when forking out such large sums. Hong Kong’s container throughput has been declining steadily over the last few years. It first began to fall as Shenzhen’s container terminals began operations in the 1990s and continued to expand, siphoning off market share of the lucrative direct exports from South China factories.
Now that Beijing is making life unpleasant for makers of mass-produced, low value, labour intensive and high polluting items and forcing them inland to central China or offshore to Vietnam or Bangladesh, all Pearl River Delta ports are suffering, even Shenzhen.
The once de rigueur double-digit volume growth in Shenzhen has fallen to low single figure percentages, with Hong Kong slipping into negative numbers.
Nevertheless, Hong Kong still handles more than 20 million TEUs a year, even if most of them are counted twice, so the business won’t shut down over the weekend. But the long-term continuation of the container port is very much open to debate, as is its future as a container hub.
For Hutchison, it ultimately makes no difference. The ports division has massive interests on both sides of the Shenzhen River, but is just one part of the massive Li Ka-shing empire that has at its core the property development business. So when the container handling business in Hong Kong finally dries up, the Kwai Tsing waterfront property business will be born.