Hong Kong's virtual monopoly on goods in and out of mainland China helped the territory maintain its role as the world's busiest port throughout most of the '90s, before falling to second place behind Singapore in 1998, when it shipped 14.6 million TEUs.

Over the past 10 years, Hong Kong-China trade has been growing at an annual rate of around 18 per cent, and until recently the port of Hong Kong had virtually no competitors for cargo out of southern China -- an estimated 90 per cent of which passes through Hong Kong.

But while Hong Kong port is the world's busiest, its terminal handling charges (THC) are also the world's most expensive.

It costs HK$2,140 to ship a 20ft equivalent unit from Hong Kong to the United States, compared with $1,100 charged by Shenzhen's port and $865 out of Singapore, according to ports' published rates.

However, no one, except the container port operators, knows exactly how much users pay, because each company negotiates fees with terminal operators, and the fees are one of the best kept secrets in Hong Kong.

Still, due to the downturn in traffic in 1997 and '98, fees have been frozen for the past two to three years.

"We have seen a moderation in pricing in the past two years plus, [but] prices are still very high to the extent that there has been some competition from south China and Shenzen ports," Chamber Shipping Committee Chairman Neil Russell (right) said.

Some would argue that Shenzen Port's throughput produces barely a blimp on the major container port map. And indeed only three years ago it wasn't even considered to be on the map. But in that short period of time it has risen to 11th slot to take almost 3 million TEUs in 1999, or a growth rate of 70 per cent. Moreover, analysts predict the port will probably continue to grow at a faster rate than Hong Kong for some years.

Corporate Affairs Manager for Modern Terminals Joel Cheung said that given the big differences in containers handled -- more than 16 million TEUs by Hong Kong's port compared to just under 3 million TEUs by southern China's ports ?the gap is still too wide to consider China's ports as competition.

"If people are saying there is rivalry between the two ports, it is still too early," she said. "Hong Kong and southern China ports will see growth in the coming years, especially if china is going to enter the WTO, this will have a positive effect on all the ports."

Sun Hing Group Chairman Simon Lee said he believes Hong Kong's advantage over ports in southern China is its efficiency, especially with regards to customs procedures.

"If the Yantian and Shekou ports did not have the red tape problems, Hong Kong would be much more affected by them," he said.

He also pointed out that while customs procedures have improved considerably at the ports in the past few years, there is still a considerable gap between them.

"This is good for Hong Kong. It still gives us room to breathe," he said.

While recession and the growing role of southern China's ports have helped moderate rates, the advent of Container Terminal Nine (CT-9) is expected to further lower THCs. The HK$10 billion development project on Tsing Yi Island opposite the eight existing terminals at Kwai Chung is scheduled to come on stream in 2002 and will be fully operational by 2005.

Mr Russell feels that the opening of Container Terminal Nine (CT-9) will help keep prices down, "but rather than just only seeing prices not increasing, we really need to see prices coming down."

Modern Terminals will have four of CT-9's six berths, giving the company the capacity to handle an additional 2.6 million TEUs a year, Ms Cheung said.

Asked how CT-9 will affect Modern Terminals' handling charges, Ms Cheung said now was not the proper time to say.

Customs procedures

Another issue close to the hearts of all liner shipping companies is that of customs procedures. Liner shipping companies would certainly like to see an easier flow of containers across the border into China and back again, but that would almost certainly involve a change in the customs laws regarding empty containers, Mr Russell said.

Containers are a dutiable commodity, and that is really the underlying problem, coupled with smuggling.

"There has been some progress over the past 18 months, but not what I would call a fully rational handling of containers between here and south China," he said.

A trial empty storage depot and the opening of more border gates have brought about some improvements, "But the fundamental problem of containers being a dutiable commodity is still there," he said.

Hong Kong's container ports are largely fed by lorries thundering back and forth across the China-SAR border laden with containers. The congestion this causes has led some to suggest establishing a rail link, and the government is purportedly looking into the feasibility of the idea.

Niels Kim Balling, general manager, corporate marketing for Orient Overseas Container Line (OOCL), said a fairly large volume of containers are now starting to come into Hong Kong on river barges.

This seems to be the same pattern developing in other parts of China, such as Shanghai Port. Although mainland ports don't have one country two systems to contend with, Mr Balling said the mainland has done a brilliant job in creating customs connections with the inland river points and the Shanghai customs to automatically transfer customs for the cargo arriving at the port.

"If Guangdong and Hong Kong could replicate that -- of course it's a little more complicated than that -- then I think it would improve the efficiency of the whole infrastructure," he said.