After four years on the back burner, Hutchison Port Holding Trust is going ahead with a once-shelved expansion plan for its port in Shenzhen, China.
Gerry Yim, CEO of Hutchison Port Holding Management, manager of the trust, announced the move in a press briefing in Singapore, according to Nikkei Report.
HPH Trust is a subsidiary of Hutchison Whampoa, a Hong Kong conglomerate controlled by tycoon Li Ka-shing. It is a REIT-like investment vehicle listed in Singapore Exchange, and its portfolio consists of major facilities in Hong Kong and Shenzhen, two of the world's busiest container ports. Assets under management include Hong Kong International Terminals and Shenzhen's Yantian International Container Terminal.
HPH Trust predicts the volume of its container cargo this year will increase three to five percent compared to last year.
Because the manufacturing sector in southern China is reasonably resilient to competition from other low-cost markets, Yim said, the trust will add port capacity as it expects shipping demand to grow, albeit at a slower pace than before the 2008 global financial crisis.
HPH plans to build three more berths in Yantian port, one each year starting 2015, at a total investment of US$580 million.
The expansion plan was originally floated in 2010 but was postponed due to weak shipping demand. It finally received the green light after signs of a recovery in US and European trade started to be seen.
The volume of container cargo from manufacturing centres in southern China shipped through HPH ports declined on percent in 2013 from the year before, mainly due to a 40-day strike by Hong Kong port workers. HPH management says measures have been taken to improve working conditions.
Although many manufacturers are starting to move their plants to emerging economies, such as Vietnam, Cambodia and Bangladesh, Yim said the shift "is still in an experimental stage" and that manufacturers "sometimes find the costs are higher (than in China), or China could do better."
HPH management predicts a steady five percent growth in volume for the coming years, even though Chinese economy is showing signs of slowing down. "We are not specifically tied to GDP growth of China, but we are tied to the export trade, which depends on demand from Europe and the US," Yim said.
The recent trend of major international shipping companies forming alliances to cut operating costs also benefits HPH, as deep-water ports in its portfolio can accommodate the mega-container ships that those alliances tend to use.
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