Shenzhen has three ports—Yantian, Shekou, and Chiwan— which are well positioned to compete with Hong Kong. Over the past eight years, the proportion of south China’s ocean-going cargo handled by Hong Kong has dropped from 91% to 58% (in 2005).

Expansion in Shenzhen, which became the world’s fourth biggest container port in 2004, has been remarkable. Although Hong Kong still handles more containers (at 22.6m TEUs in 2005) than any other port in the world, Shenzhen is rapidly narrowing the gap. Its throughput growth of 19% in 2005 compares with Hong Kong’s 2%. Indeed, as far as sea-container throughput is concerned, Shenzhen has already caught up with Hong Kong’s Kwai Chung terminal. Only Hong Kong’s river trade and midstream operations continue to keep it in the lead for now.

A major issue for users of these facilities is their expense. Terminal charges at Shenzhen’s ports are about 15-20% less (or about US$300/forty-foot container) than Hong Kong’s (a result of lower trucking costs), but they are still the world’s second most expensive facilities. Return on capital for Shenzhen’s port developers may be as high as 60%, according to a report by CLSA, a Hong Kong securities firm.

Shenzhen is now the second busiest container port in mainland China after Shanghai. However, robust growth has come at the cost of port efficiency. With bottlenecks common at some delta locations, many exporters still prefer to use Hong Kong despite its higher costs. What’s more, Shenzhen now faces competition from other ports, in particular the new Nansha port, which is attracting users through a combination of lower prices and proximity to factories in the fast-growing Zhongshan area. The big three Shenzhen ports will also face impending competition from a new facility now under construction at Dachan Bay, 10 km south of Shenzhen Baoan International Airport. The first phase, in which Modern Terminals (MTL) of Hong Kong has a 65% stake, will comprise five berths with a designed capacity of 2.5m TEUs. Two of the berths are due to open at the end of 2007. This four-phase project will see construction of 15 deep-sea container berths with a depth of 15.5 metres and five inland container berths. When completed, it will have capacity of 10m TEUs annually. The terminal is located in the western part of Shenzhen’s Baoan district. It has good land-transport facilities and is nearer to factories in the cities of Dongguan and Guangzhou than the other Shenzhen ports.

Shenzhen’s main ports are:

• Yantian container port, located in Dapeng Bay, east of Hong Kong, is operated by a JV formed by HPH and the Shenzhen Yantian Port Group. Yantian is the largest of Shenzhen’s three ports, and the first deepwater port in southern mainland China. It features ten 50,000-tonne container berths with quayside water depth of 14-16 metres. Yantian handled 7.57 TEUs in 2005, up from 6.26m in 2004. However, Yantian has become notorious both for its steep charges (it has the highest port charges on the mainland) and for long delays, driving away many exporters. Yantian’s share of Shenzhen’s shipping pie dropped to 47% in 2005 from 49% in 2004. Upgrades at Yantian are continuing, while road improvements have helped to ease traffic congestion somewhat.

In November 2005, HPH signed an agreement with the port to build six new deepwater berths able to handle 12,000-TEU container ships. The first berth began operations in September 2006. In May 2006, a plan emerged to build 29 more deepwater berths by 2010, boosting capacity by 10.5m TEUs, to meet surging demand in the PRD.

In addition, the port has signed an agreement with customs authorities to upgrade its status from a free-trade zone to a logistics park, with effect from January 2006. The practical impact of this change will be to allow mainland exporters to claim export tax rebates (of about 10%) as soon as their goods enter the bonded park, instead of waiting for several months. Previously, the only way exporters could claim their rebates immediately was by transhipping their goods through Hong Kong. The change, which is also due to be introduced at eight other customs-bonded parks in China, will chip away demand for Hong Kong’s port facilities.

• Shekou port, operated by China Merchants International, is located just 20 nautical miles from Hong Kong. With access to many of the Pearl River estuaries, it is ideally placed to benefit from the area’s growing river trade. Benefiting from the logjam at Yantian, Shekou recorded a sharp rise in throughput in 2005 to 2.66m TEUs from 2.15m in 2004. The completion of phase three of Shekou container terminal was completed in 2006, giving Shekou a total of seven berths. In 2005, dredging work on the 20-km Tonggu Channel began. When completed in 2007, the new channel should allow Shekou and Chiwan to provide round-the-clock access to some of the biggest new container ships in the world.
• Chiwan port is owned by a consortium of domestic and foreign companies (including Kerry Properties, 25%), with the largest shareholder being China Merchants Holdings, which was reported in late 2006 to be negotiating to buy Kerry’s stake. The port registered a throughput of 4.1m TEUs, up from 3.25m the previous year. Throughput growth continued in 2006 with 3.31m TEUs moved in the first half alone, reflecting strong investment growth in the west side of the Pearl River Delta. Chiwan opened its sixth container berth in mid-2005, bringing official capacity to only 2m TEUs. A seventh berth is due for completion by the end of 2006, followed by two more in 2007. Berth draught is between 13.5 metres and 16 metres.

Table 12.7.6