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Cost savings accrued from terminal alliance in Hong Kong boost HPH Trust’s results

Cost savings accrued from terminal alliance in Hong Kong boost HPH Trust’s results
The Hong Kong Seaport Alliance helped to reduce costs

Despite a challenging year where average revenue per teu fell at Hutchison Port Holdings Trust’s (HPH Trust) container terminals, cost control helped the operator deliver a 2% rise in operating profit.

The cost of services rendered dropped by 8% to HK$3.6bn (US$460m), owing to savings arising from terminal alliance arrangement in Hong Kong, cost control initiatives, lower fuel price and a reduction in operating costs due to the Chinese government’s support measures to COVID-19.

It was hoped that the Hong Kong Seaport Alliance (HKSPA), which jointly operates and manages 23 berths across eight terminals at Kwai Tsing port in Hong Kong, would help to deliver synergies and increase the port’s competitiveness.

Revenue dropped by 4% to HK$10.7bn (US$1.4bn) due to an increased transhipment handling mix across the operator’s Hong Kong and mainland Chinese facilities, with added handling of empty containers in Hong Kong also bringing down average revenue per teu.

Container volumes rose by 2% in 2020, as a late jump in exports to the US and Europe from its Asian hub ports outweighed trade interruptions earlier in the year.

In the fourth quarter, outbound cargoes to the US and EU grew by 33% and 24% compared to Q4 2019. As a result, both outbound cargoes to the US and EU for the full year of 2020 were up by 5%.

HPH Trust is cautious about the sustainability of volume growth, noting: “The increase in outbound cargoes to the US and the Europe in the second half of 2020 of 24% and 18% year on year, respectively, reflects increased household and hospital PPE demand in these regions, airline freighter capacity cuts and efforts to a catch up from pandemic disrupted supply chains.

“It is unclear as to whether these factors will continue to drive cargo volumes in 2021 given the unpredictable economic trajectories of the European and USA economies.”

On the Chinese mainland, throughput rose by 2% at Yantian International Container Terminals (YICT) mainly attributed to the increase in US, EU and transhipment cargoes, but partially offset by decrease in empty cargoes.

Collectively, YICT and Huizhou International Container Terminals (HICT) handled 13.6m teu last year.

At the Hong Kong hub terminals of HIT, COSCO-HIT and ACT (collectively known as HPHT Kwai Tsing), volumes increased by 1% to 10.1m teu due to higher transhipment cargoes, but partially offset by the decrease in intra-Asia and US cargoes.

Looking ahead to this year, HPH Trust is hoping for a “desirable return to more predictable shipping schedules” following challenges related to shipping line capacity and schedule adjustments to cope with increased outbound cargoes from China, congestion delays at container terminals in Europe and the USA and a shortage of shipping containers.

In light of the current supply chain uncertainty, the company’s management is focusing on operational efficiency and cost saving measures for the foreseeable future.