Jan. 16 (Bloomberg) -- Hong Kong was overtaken by Singapore as the world's busiest container port last year, the first time in seven years, prompting the Chinese city to cut fees to stem the move by shipping lines to cheaper mainland terminals.

Container traffic increased 2 percent in 2005, the slowest annual clip in four years, to 22.4 million 20-foot boxes, according to provisional figures on the Hong Kong Port Development Council's Web site today. Singapore's 2005 traffic rose 8.7 percent to a record 23.2 million boxes, according to an announcement last week.

Singapore's container traffic grew as Neptune Orient Lines Ltd. and other shipping companies carried more China-made exports including toys, clothing and furniture to Southeast Asia. Expansion of cheaper mainland ports including Shanghai and southern China's Shenzhen prompted more Chinese manufacturers to skirt Hong Kong's terminals to cut cost.

``The trend of slower growth in Hong Kong will probably continue this year,'' said Sunny Ho, executive director of the Hong Kong Shippers Council, in a telephone interview today before figures were released. ``The savings of shipping through Shenzhen are getting bigger.''

Trucking a 20-foot container from a southern China factory to Hong Kong and shipping it from the city costs $333 more on average than shipping it directly from Shenzhen, according to a study by the Hong Kong government. An estimated 80 percent of global trade is shipped by sea.

Slower Growth

The 2005 growth pace of Hong Kong's container traffic slowed from 7.5 percent in 2004, 6.8 percent in 2003 and 7.4 percent in 2002. December cargo movements rose 6.8 percent from a year earlier to 1.88 million boxes, the Port Development Council said.

Hong Kong's government is proposing to cut fees for vessels calling at the city's terminals and reduce charges for ships anchored in its harbor in moves to win back business from China- based ports.

Shenzhen port, in southern China bordering Hong Kong, handled 14.78 million containers in the first 11 months of 2005, 19 percent more than the same period in the previous year. The port hasn't reported its December traffic.

Shanghai handled 443 million tons of bulk cargo last year, surpassing Singapore as the world's busiest harbor. Measured in containers, China's premier financial city was the world's third- biggest port for boxes, with 18.08 million units handled.

Shanghai's Potential

The city, at the confluence of the Yangtze and Huangpu rivers, is doubling its cargo handling capacity to 15 million boxes by 2010 with the $16 billion Yangshan deep-water port.

Hutchison Whampoa Ltd., the world's biggest manager of port facilities, is investing 4 billion yuan ($496 million) with four companies in the second phase of Yangshan.

The second phase of the project, which will begin operations in December, will have four berths. The first phase opened on Dec. 10 last year and comprises of five berths with an annual capacity of about 3 million boxes.

``There's no doubt Shanghai's throughput will eventually be higher than any other port,'' said the Hong Kong Shippers Council's Ho.

Hong Kong port handled a record number of containers last year, helped by China's expanding trade with the U.S. and Europe. Most of the city's exports are of products made elsewhere and sent to the city for packaging and distribution. China makes up about 60 percent of Hong Kong's so-called re-exports.

Kwai Chung Terminals

At the Kwai Chung terminals, where more than 60 percent of Hong Kong's sea cargo is processed, cargo volume rose 2.1 percent in December to 1.18 million boxes, the Port Development Council said. The rest of Hong Kong's sea freight is loaded and unloaded in the city's harbor and at other wharves.

For the full year, volume at Kwai Chung rose 6.4 percent to 14.3 million boxes.

Singapore government-owned PSA has a venture with Hutchison that operates 11 berths at Kwai Chung. The world's two biggest port operators also have a separate venture with Cosco Pacific Ltd. that manages two berths.

PSA bought stakes in the two ventures from Hutchison for $925 million last year, its second investment in Hong Kong after it bought assets from NWS Holdings Ltd. in March 2005.

China Merchants Holdings (International) Co., Modern Terminals Ltd. and Dubai's DP World are the other operators of Kwai Chung's nine container terminals.

Hutchison, controlled by Hong Kong billionaire Li Ka-shing, is one of the investors in Shenzhen. The company and its Chinese partner will more than triple their investment in the third phase of Shenzhen's Yantian port to $2.1 billion.

The venture, 65 percent owned by Hutchison, will add six container berths in Yantian by 2010, bringing the total to 15. Yantian is the biggest of Shenzhen's three main container ports, accounting for nearly half of the city's cargo volume in 2004. Chiwan and Shekou are the city's two other container ports.

Hutchison owns shares in 41 ports around the world, including 10 in China.

The World's Largest Container Ports in 2004

Source: Containerisation International

Rank      Port                     2004 Volume (TEUs)
1         Hong Kong                     21,932,000
2         Singapore                     20,600,000
3         Shanghai                      14,557,200
4         Shenzhen, China               13,650,000
5         Busan, South Korea            11,430,000
6         Kaohsiung, Taiwan              9,710,000
7         Rotterdam, Netherlands         8,300,000
8         Los Angeles                    7,321,440
9         Hamburg, Germany               7,003,479
10        Dubai                          6,428,883
11        Antwerp, Belgium               6,063,746
12        Long Beach                     5,779,852
13        Port Klang, Malaysia           5,243,593
14        Qingdao, China                 5,139,700
15        New York/New Jersey            4,400,000
16        T. Pelepas, Malaysia           4,020,421
17        Ningbo, China                  4,005,500
18        Tianjin, China                 3,814,000
19        Laem Chabang, Thailand         3,624,000
20        Tokyo                          3,580,000

To contact the reporter on this story: Vicki Kwong in Hong Kong at vkwong@bloomberg.net

Last Updated: January 16, 2006 05:41 EST