The US-China competition may dominate news cycles, yet shifts in the port industry are considered a crucial element driving Li Ka-shing’s corporate group to finalize this agreement.
A potential deal involving Hong Kong-based CK Hutchison selling its international ports, which include facilities in Panama, to a group led by BlackRock is still sparking discussions about what the final result might be. While China has voiced dissatisfaction, indicating concern over harm to national interests, CK Hutchison maintains that this transaction is strictly commercial. In our two-part series, we delve into conversations with industry insiders who explain how factors such as geopolitical dynamics, the local political climate in Panama, and shifts within the port sector have impacted CK Hutchison’s decisions. Part two focuses specifically on transformations occurring within the port business. You can read the initial piece here.
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CK Hutchison Holdings, led by Li Ka-shing, has remained tight-lipped following Beijing’s strong reaction to the company’s choice to divest its Panama port assets. However, experts suggest that these operations were fraught with numerous challenges, putting the corporation in an extremely difficult position.
It was only a matter of time before an exit occurred considering all the elements in motion, they mentioned.
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Although the strained relations between the United States and China intensified due to U.S. President Donald Trump’s insistence on freeing the Panama Canal from what he perceived as Chinese influence, one must also consider the challenges posed byPanamanian authorities and their internal political dynamics.
However, another crucial but often neglected element of the agreement was the transformation of the port industry into a vertically integrated system, according to analysts.
When combined, these elements resulted in the transaction being the most favorable result for the corporation. However, this may not be ideal regarding the Li family’s political ties with Beijing. It is still uncertain if they will succumb to the pressure and rescind the deal.
Willy Lin Sun-mo, who leads the Hong Kong Shippers’ Council, pointed out the tendency for shipping companies to become increasingly self-contained, which might have an impact on the potential earnings of port operators like CK Hutchison in the coming years.
“Internationally, shipping companies have committed investments in various global ports to cater to the requirements of their respective fleets and their integrated business strategy,” he stated.
Shipping companies operate at various ports. Additionally, they provide logistics services, air cargo transportation, third-party logistics solutions, and manage the entire supply chain.
Lin pointed out that numerous shipping companies currently lease and manage ports from municipal authorities, a strategy distinct from what CK Hutchison implemented. Under their approach, a port enterprise would acquire an area of land for constructing facilities and then offer services to multiple shipping lines.
Despite an uptick in CK Hutchison’s port business revenue last year, increasing by 11% to reach HK$45.2 billion (US$5.8 billion) due to a 6% boost in volume across various sectors, he maintained his stance.
In a statement within the company’s 2024 annual results published last Thursday, CK Hutchison Chairman Victor Li Tzar-kui identified risks beyond just geopolitical factors.
“In 2025, we might face challenges from supply chain disruptions expected at the beginning of the year because shipping companies will be adjusting to their new alliances. Additionally, continuous geopolitical risks could affect international trade,” Li explained.
It is anticipated that the operational setting for the company’s activities will remain erratic and uncertain.
On March 4, one day prior to the opening of the annual session of the Chinese People’s Political Consultative Conference, CK Hutchison unexpectedly declared an agreement to offload its international port holdings — which include facilities at both ends of the Panama Canal — to a group spearheaded by American financial company BlackRock for $23 billion.
The agreement will position the consortium as a leading entity in the worldwide port sector. It will yield $19 billion in cash for CK Hutchison. Both parties must finalize this transaction exclusively within a period of 145 days.
Rickey Chan Chi-po, the managing director of the local property firm Dorbo Realty, informed the Post that a connection within Li Ka-shing’s CK Hutchison requested him to post an article on March 12 aimed at defending the company’s position regarding the sale of the ports.
Chan mentioned that he received content to author a column for BossMind, a platform focused on business and real estate news, and he consented to having his byline included.
To sum up, the article stated that the transaction was primarily a business move, with neither the national government nor the Hong Kong officials expressing initial opposition. Additionally, it highlighted that the main purchaser was the Aponte Italian shipping dynasty, who own the leading company MSC Mediterranean Shipping Co.
The article mentioned that “the key player” was Diego Aponte, who serves as group president at MSC and chairs Terminal Investments Limited (TiL). This entity, which he established, has grown into one of the biggest terminal operators globally and is also part of the partnership with BlackRock for the port agreement.
It is clear that the aim was to portray the Americans as not being the main parties involved in the deal, but rather the Italians. Chan chose not to disclose which CK Hutchison executive provided him with the information for his column.
The article stated that ‘given the swiftly evolving political and economic landscape, investors ought to remain adaptable when modifying their investment initiatives to mitigate potential risks.’
Selling the port business by CK Hutchison can not only mitigate policy risks but also enhance the group’s liquidity to address swift market shifts and facilitate suitable adjustments.
CK Hutchison holds onto port assets both on the mainland and in Hong Kong, such as Yantian Port in Shenzhen and Hongkong International Terminals, valuing the marine opportunities presented by these regions.
BossMind did not respond to the Post’s queries.
Lin stated that the Li family’s decision to sell the ports caught everyone off guard with its timing.
However, if observers had examined the firm closely, they would have recognized its skill in anticipating future profits and shifts in competition. To illustrate this point, he referenced how the Lis divested their telecommunications enterprise in the UK in 1999 during the peak of its prosperity.
The agreement encompassed the disposal of a 44.81 percent shareholding in the telecommunications firm Orange in the United Kingdom by Hutchison Whampoa. This transaction resulted in pre-expense extraordinary gains amounting to approximately HK$113 billion for Hutchison. Lin further commented, “Currently, the telecommunication sector faces intense rivalry and narrow margins.”
Stewart Leung Chi-kin, who chairs the executive committee of the Real Estate Developers Association of Hong Kong, stated that Beijing’s viewpoint differed from that of developers or business entities.
He mentioned that from a business standpoint, CK Hutchison might have considered the price appropriate after managing the ports for such an extended period.
“I believe I have earned sufficient funds, so I will transfer it to another party,” stated Leung, who serves as the chairman of Wheelock Properties.
China might wonder why CK Hutchison is selling port assets at such a crucial canal to the U.S., rather than to entities closer to China or to a more neutral party, as per Leung’s addition.
Previously, CK Hutchison has effectively managed such issues… CK Hutchison undoubtedly had its own rationale behind their decision-making process,” Leung further explained. “I am confident they can discover a solution that respects our nation’s principles without compromising the agreement. They will likely devise a strategy to achieve mutually beneficial outcomes.
In 2024, CK Hutchison managed to handle 39 percent of the containers passing through Panamanian ports, as reported by the Panama Maritime Authority (AMP). The company has decided to sell these port facilities while their operations remain profitable.
The data provided by the AMP indicates that these five ports processed 9.4 million twenty-foot container units in 2024, marking a rise of 14.2 percent compared to 2023 figures and thus reversing a consecutive two-year downturn.
Based on AMP statistics, CK Hutchison’s Balboa port experienced a growth of 13.7 percent, whereas the Cristobal port saw an increase of 24.6 percent in container handling during 2024. This surge can be attributed to the Panama Canal draft limitations, which compelled numerous shipping lines to conduct unloading and loading operations on either side of the canal.
By the conclusion of the fiscal year 2024, the canal announced a net profit of $3.45 billion, marking a 131 percent growth over half a decade, as stated by the Panama Canal Authority.
Based on CK Hutchison’s 2024 annual report, their ports and associated services segment represented 22 percent of the earnings before interest and taxes, totaling HK$13.12 billion—a rise of 24 percent compared to the prior year.
This increase was mainly due to a 13 percent rise in storage revenue along with the positive outcome from an affiliated shipping company and efficient cost management.
However, Lin, who holds the position of honorary chairman at the Hong Kong Exporters’ Association and serves as a board member for the city’s Maritime and Port Board, linked the sale to a shift in the global ports industry’s approach.
It was expected that Chinese shipping companies could experience increased expenses for ports and logistics due to this purchase. However, Lin mentioned that several of these firms either owned their ports or operated across the entire supply chain, making them unlikely to be significantly impacted by the transaction.
There could potentially be alterations to the schedules and port calls, impacting the efficiency of liner operations as well as their collaborative relationships with shippers and importers.
Lin mentioned that the profit margins of port operators like CK Hutchison were being progressively impacted by the tendency of shipping companies to become more vertically integrated. Additionally, he noted that the worldwide port sector was undergoing changes due to advancements like heightened automation and an emphasis on environmental sustainability.
He mentioned that changes in international politics were significantly affecting shipping lanes and port operations across the globe.
“CK Hutchison is a multinational corporation controlled by more than just an individual; it has a large and robust team,” Lin further explained. “It’s clear that they didn’t make this choice hastily.”
Completed in 1914 by the United States following an unsuccessful attempt by France, the Panama Canal transformed international commerce by offering a direct route between the Atlantic and Pacific oceans, eliminating the need for vessels to sail around South America. This shortcut notably decreased journey times and expenses for ships, resulting in heightened marine activity and economic expansion.
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The article initially appeared on the South China Morning Post (www.scmp.com), which is the premier source for news coverage of China and Asia.
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