Li Withstands Hong Kong Port Labor Strike With Shenzhen: Freight
Li Ka-shing, Asia’s richest man, dominates half of the capacity at Hong Kong’s port, where a two week-long strike threatens to send traffic to Shenzhen. That won’t hurt Li. The billionaire controls that port as well.
Terminals backed by Li’s Hutchison Port Holdings Trust (HPHT) have a 46 percent market share in Shenzhen, helping Li recoup any loss at the Pearl River Delta. Li’s two-decade bet on the Chinese city is proving a hedge even as workers shout slogans in Hong Kong denouncing him for paying low wages.
“Li is smart in hedging his bets while maintaining dominance in key markets,” Lawrence Li, an analyst at UOB-Kay Hian Holdings Ltd. (UOBK) said by phone. “Even if more ships are diverted to neighboring terminals or Shenzhen, he doesn’t have much to lose.”
The Hong Kong port workers strike demanding a 25 percent increase in pay and better working conditions in the former British colony is the biggest labor revolt against the self-made billionaire Li, 84 and nicknamed “superman” by the local media for his investing prowess. The protests may cost Hong Kong the title of the world’s third-biggest container port as shipping companies realign priorities on rising costs.
Hutchison’s terminal units at Shenzhen handled 10.3 million containers in 2011, according to the company’s latest published annual report. The units managed 19 berths at the facility. In comparison, the operator handled 11.7 million boxes in Hong Kong, and along with a partner controls more than half its capacity.
In 2012, total volumes at Shenzhen rose 1.6 percent to 22.9 million containers, according to Shenzhen Ports Association. Hong Kong port handled 5 percent fewer boxes at 23.1 million, Hong Kong Port Development Council data show. Li is boosting his dominance at the facility as Hutchison Port Holdings last month bought a box terminal from DP World Ltd. and a partner.
Evergreen Marine Corp Taiwan Ltd. (2603) and Japan’s Mitsui OSK Lines Ltd. (9104) are among shipping lines that diverted some vessels from Hong Kong to avoid delays caused by the strike. Some city- based manufacturers are also using Shenzhen port following the strike, Jeffrey Lam, a member of Hong Kong chief’s executive council said yesterday.
An “increasing number” of workers are returning to the port, and daily financial loss narrowed to HK$2.4 million ($309,000) on April 5 from HK$5 million earlier, the company said in an e-mail yesterday.
The workers and union negotiators will hold talks with port contractors today. Hongkong International Terminals executives will also attend the meetings arranged by the government.
About 450 dockworkers have stayed away from Li’s Hongkong International terminals since March 28, Ho Wai-hong, a representative of the Union of Hong Kong Dockers, said last week. The workers, including crane operators and stevedores, are hired by contractors and demand that the pay be raised from the current HK$50 per hour, Ho said.
Shanghai was the world’s largest container port last year, handling 32.5 million boxes, followed by Singapore with 31.6 million, according to a statement from the Shanghai government.
“Hong Kong was already losing market share to Shenzhen and the strike couldn’t have come at a worst time,” said Um Kyung A, an analyst at Shinyoung Securities Co. in Seoul. “The strike is going to increase costs for shipping lines and that’s one thing they can’t afford in this market.”
In support of the dockworkers, about 300 crane operators, hired by Hongkong International, began a work-to-rule action on April 4, said Sin Hiu-yan, a spokeswoman of Hongkong International Terminal Group Employees General Union. To play strictly by the rulebook, the workers are now taking an on-the- ground toilet break, instead of relieving themselves aloft to save a half-an-hour trip to the ground, Sin said.
The Hong Kong Dockers union, which represents about 500 people working at the berths of Hongkong International, has raised about HK$3.5 million from supporters as of April 8 and have handed out HK$1.2 million to striking workers, Ho said.
Li, who opened a plastic flower factory after World War II, began investing in Hong Kong real estate in 1967 after riots from China’s Cultural Revolution depressed prices. Besides ports and real estate, his conglomerate Hutchison Whampoa (13) has operations in retail, energy and mobile networks.
Hutchison Whampoa has interests in 52 ports globally from Panama to the Netherlands. The company gained as much as 2.9 percent to HK$80.95 in Hong Kong trading today.
Labor discontent in Hong Kong has risen as its wealth gap widens to the biggest since records started in 1971. Cathay Pacific Airways Ltd. (293) in December agreed on a deal with the flight attendants union, averting labor disruptions threatened after disagreements on wage increases and working conditions.
Record-low interest rates and an influx of buyers from China have fueled a doubling in property prices since early 2009. That’s priced average citizens in the city of 7.1 million people out of the market and left some unable to afford basic necessities.
As many as 4,000 people, including port workers and their families, took out a march on April 7, demonstrating their discontent with Li, Apple Daily reported. Some carried Li’s portraits, calling him “greedy” and shouting “Li Ka-shing, pay me back.”
“Our action won’t be able to hamper Li financially as he has so much money,” said Wong Yu-loy, another representative of the striking dockworkers’ union. “It will hit his reputation and show how he exploits labor by outsourcing.”
To contact the editor responsible for this story: Anand Krishnamoorthy at email@example.com