Chairman’s Message (Annual Report 2015)

Looking Back On The Year

Looking Forward To A Bright Year In 2015

In January and February, there was a clear indication of the changing function of the Pearl River Delta, with a continued decline in export cargo over the period.

But it was not all doom and gloom, with the Kwai-Tsing container terminals very busy.

Meanwhile, in Hong Kong the diversion of vessel calls to other ports and slippage in terminal and liner services was seen as a situation which could not be allowed to continue. This followed long-standing calls from the Hong Kong Container Terminal Operators Association for additional barge berths and reservation of land under short-term tenancy for port back-up use.

Another key area that needed to be addressed was the acute labour shortage within the industry.

The hope was expressed that the government, commerce and workers’ groups could agree on a project-based import labour relaxation scheme. Such a scheme would allow Hong Kong to make short-term adjustments in labour supply.

Time To Take Advantage Of Opportunities

March and April saw three important developments for the trading and logistics industry.

It was suggested that to counter the trend of declining economic growth it was vital Hong Kong did not miss the opportunities that were being presented.

Qinghai’s Special Economic Zone status, with a series of special advantages and exclusive policies available nowhere else in Mainland China, and the newly officially announced China (Guangdong) Free Trade Pilot Zone made them areas of interest.

The same could be said of The Maritime Silk Road, which was expected to be another important development that would shape the investment and business landscape in the coming decade.

Hong Kong, with its well-established financial and professional service sectors, its status of being the world’s number one offshore RMB service centre, its cosmopolitan image and its connector-role for the East and the West, was seen as potentially being instrumental in realising the many predicted investment projects.

Haitao Opens Door To Choice

In May and June the focus turned to Mainland China’s cross border e-commerce and the role Hong Kong companies could play.

Exponential growth made the market look highly attractive, but those wanting to participate were advised to “pay attention” to seeking out the best way to go, while at the same time recognising some important characteristics of the Chinese model of e-commerce.

It was said that if Hong Kong companies wanted to take part in the trade, the best strategy would be partnering with cross border e-commerce merchants, who were searching for new businesses, including new brands and new products in order to grow their businesses quickly.

In short, these e-commerce merchants needed partners of very different kinds. Many Hong Kong companies were identified as well established in these areas and hence were ideally placed to bring value to cross border e-commerce operations.

Freight Market Feeling The Pinch

July and August saw quiet cargo movement. The freight market was described as “horrible”.

Asia to Europe ocean freight slumped to unprecedented lows and while trans-pacific rates were steadier they were still on the decline. Air freight rates had been stuck in the single-digit zone since late February.

The pessimissim was founded on the fact that European countries remained heavily in debt and their currency was suffering against the US dollar.

Added to that Chinese interest rates were further lowered, indicating signs of a slipping economy, so there was no immeadiate cause for future optimism in the world freight market.

Also, Hong Kong shippers were showing no sympathy for shipping lines as they saw little benefit from the low freight rates offered to overseas buyers which penalised Hong Kong shippers as shipping lines are seeking compensation through surcharge increases.

Much worse was the fact that shipping lines were threatening to switch all their services from Hong Kong if the Hong Kong Competition Commission failed to grant exemption from competition laws.

Belt And Road Can Boost Business

The hot topic in September and October was “Belt and Road”. The subject had attracted substantial attention, not only because it was a cornerstone of Chinese policy, but also it was seen as a wonderful opportunity for the business sector.

The advice offered was that the region should aim to build a common trading e-platform that would allow all stakeholders, including the various customs and regulatory authorities, traders and operators to complete all clearance and transactions.

Hong Kong was said to be in an ideal position to operate such a platform. Given its neutrality, the freedom of movement of personnel, information and monies, and superb information technology infrastructure, it was deemed to be well suited to perform a central clearance role of data, customs and other trading documents.

Of course, it was recognised that there would be other parties interested in performing such tasks and that Hong Kong would have competition; that said, it was recommended that quick action was required.

Chinese Pledge Action Over Surcharges

The November and December focus was on the Chinese Ministry of Communication announcement that it would investigate the surcharge structure and collection of shipping lines. The intention was to rationalise and regulate market surcharges.

The move immediately prompted some shipping lines to lower the level of some surcharges, while others combined some surcharges.

However, it was recognised at the time that the overwhelming majority of the charges that were being cancelled, or charge level reduced, were optional charges.

Furthermore, it was said that shipping lines hardly seem to have shown any real intention of changing the bread-and-butter charges, which formed the main costs. In other words, the overall impact, as far as relief of burden for shippers is concerned, was seen as minimal.

It was further stated that the strange names and nature of the surcharges demonstrated how unreasonable and unjustifiable all these surcharges were and how weak the bargaining position of shippers was, vis-a-vis the shipping lines, in rejecting such ridiculous charges.