Pearl in the shadow: The slow demise of the Port of Hong Kong
The cause, the consequences, and the considerations for everyone, everywhere.
The Port of Hong Kong is going through a serious crisis. It’s not due to a single cause but rather a confluence of competitive pressures, strategic shifts by shipping alliances, operational challenges, and broader geopolitical and economic trends.
But when we consider the additional East Asian ports (of which equate to about 332 million twenty-foot equivalent container units - or TEU), why should we be paying attention to what’s happening in the Pearl River Delta?
The Kwai Tsing Container Terminals and its surrounding facilities is facing a multifaceted challenge that has led to a significant decline in its container throughput and global ranking. Their largest threat concerns declining container volumes which is fuelled by competition from mainland ports like Shanghai, Shenzhen, and Ningbo. Hong Kong's traditional role as a transshipment hub for mainland cargo has been steadily eroded as Chinese ports have developed their own direct shipping links.
The statistics highlight the severity of this trend. Hong Kong has seen its annual container volume fall for seven consecutive years and has even dropped out of the world's top 10 busiest container ports. A 4.9% decline in container volumes in 2024, to 13.69m TEU, and a decade-long fall from over 22 million TEUs to under 14 million in recent years.
Consistently the world's busiest container port for over a decade, in 2024, China’s Shanghai port crossed the symbolic mark of 50 million TEUs in a year. Its strategic location at the Yangtze River Delta, a major industrial hub, gives it a significant advantage. Additionally, China holds 6 globally ranked ports. This includes Ningbo-Zhoushan who handled over 39 million TEUs in 2024, Shenzhen, at 33 million TEUs, Qingdao, at 30 million, and Guangzhou, who did another 26 million containers. Hong Kong’s 13 million is competing with an astonishing capacity of 322 million TEUs in East Asia alone.
Key alliances like Gemini Cooperation, and Ocean Alliance also see these figures and are acting accordingly, reducing or eliminating direct calls with Port of Hong Kong. The rationale is often rooted in network consolidation and efficiency. But the truth lies in China, Malaysia, and Vietnam’s competitive edge.
Major alliances have more direct ownership and even significant stakes in terminals at other ports. This creates more incentive to prioritise that particular port in their network design. Shipping alliances and individual shipping companies are highly strategic in their port choices, driven primarily by efficiency, network optimisation, and cost-effectiveness. While a 20-foot container might cost $150-$200 in Shanghai or Dubai, and $180-$220 in Singapore, Hong Kong's fees can be double this making it less attractive for high-volume, low-margin container traffic.
If the port ceases operations, who is most impacted?
Of course, the primary risks would immediately impact global shipping and logistics companies through severely disrupted schedules, escalated re-routing costs, and diminished reliability across their networks. But manufacturers and retailers would grapple with the highest level of widespread inventory delays, higher logistics expenditures, and pervasive supply chain bottlenecks.
Financial institutions and insurers would face increased exposure to maritime insurance claims stemming from disruptions, alongside a reduction in trade finance volumes due to unstable trade flows.
Governments and trade ministries would contend with adverse economic impacts from altered trade patterns, including potential inflationary pressures on goods, while Port and Maritime Authorities in other regions would experience significant operational strain and congestion, risking their own reputations for efficiency. Furthermore, Environmental and Regulatory Bodies would need to address increased emissions from prolonged vessel idling and rerouted traffic.
Even technology and software providers for logistics would see a surge in demand for, and pressure on, their supply chain optimisation solutions. There is even evidence to suggest that materials for new residential and commercial developments could be significantly delayed or even cancelled as we from COVID-19’s supply-chain impacts.
While the immediate impact of Hong Kong's decline would be absorbed by robust alternative ports like Shanghai, Shenzhen, and Singapore, its complete removal would expose systemic vulnerabilities.
But even if other ports are capable, having fewer viable, high-capacity options in a critical global manufacturing region (like the Pearl River Delta/Greater Bay Area) means there are fewer "baskets" for the global trade's "eggs." And, if one of the remaining mega-ports (like Shanghai or Singapore) faces a major disruption like a natural disaster, labour strike, cyberattack, or geopolitical event, the ripple effect could be more severe and widespread because there's less spare capacity and fewer alternative routes to absorb the shock. Again, the pandemic showed us this when seemingly minor disruptions in one port could cascade into global delays and higher costs felt by us all.
The Red Sea crisis is another current example. This crisis, which commenced in late 2023, has intensified pressure on regional ports. While some reports initially suggested a temporary boost for Hong Kong due to schedule disruptions and congestion at other hubs (like Singapore), this was not enough to reverse the long-term downward trend.
Additionally, the loss of the port could increase congestion. When cargo is diverted from Hong Kong, it primarily goes to nearby ports. Already, major Asian hubs like Shanghai, Ningbo, Qingdao, and Singapore are experiencing significant berthing delays (sometimes up to 7 days or more). This leads to vessel bunching, delayed schedules, and a shortage of empty containers, all of which impact the entire global shipping network.
Mitigating the Port of Hong Kong's Crisis
A proactive business knows navigating the complexities of global trade, the impacts from the COVID-19 disruptions, and contending with evolving tariff landscapes, is only a few of the many disruptions we’re due. While Hong Kong's decline has been gradual, a cessation of operations would send disruptive ripples through the global supply chain. A proactive mitigation strategy is the crucial, competitive edge resilient businesses have.
At its core, safeguarding against such a disruption hinges on diversification. Business leaders need to think about broadening their sourcing and manufacturing geographies, exploring suppliers beyond the Pearl River Delta, and even considering nearshoring or re-shoring for critical goods.
Simultaneously, a multi-port shipping strategy is paramount and we can see innovative businesses utilising this heavily during the tariff uncertainties. Instead of relying on a single gateway, they’re leveraging alternative major ports like Shenzhen, Guangzhou, Singapore, Busan, or key Malaysian and Vietnamese ports, working closely with freight forwarders to identify direct calls and pre-vetted backup routes.
Beyond geographical diversification, operational resilience is key. Highly resilient businesses optimise inventory management by moving beyond pure Just-in-Time measures for critical items, to incorporating buffer stock and advanced forecasting.
Crucially, technology remains key. It is used by the best for end-to-end supply chain visibility and data analytics to proactively identify and respond to disruptions.
And when all done, it’s about routinely reviewing contracts and insurance for adequate coverage against delays and re-routing, continuously staying informed on geopolitical and trade developments, and regularly practising scenario planning to anticipate and prepare for future shocks.
For many international businesses, especially large ones with diversified supply chains and access to sophisticated logistics planning, Hong Kong's decline might indeed feel like less of a crisis and more of a strategic adjustment. They may have simply shifted their cargo to Shenzhen, Guangzhou, or Singapore, and the sheer volume and efficiency of these alternative ports mean that the goods are still moving.
However, for those with very specific, less flexible supply chains, the disappearance of a historically reliable option like Hong Kong could necessitate more significant and costly adjustments, contributing to a tsunami across all our oceans perhaps many of us are unprepared for.
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