Like a black hole, intra-Asian oceanborne trade is known to be massive, and it attracts shipping lines just as absolute gravity attracts all within its reach. But there is little certainty in the industry as to what qualifies as intra-Asia trade and just how many containers are involved.
In the fall of 2010, the Intra-Asia Discussion Agreement released data indicating the size of the business in the first eight months of the year totaled 8 million TEUs, up 13.5 percent from 2009. But IADA represents only 30 of an estimated 100 carriers involved in intra-Asia carriage. The IADA membership excludes such important liner companies as MOL, Sinotrans and Mediterranean Shipping.
And the IADA figures don’t take into account the short-haul coastal volumes, which includes large China business. Also growing in significance are the domestic, coastal and inter-island volumes of Indonesia, Malaysia, the Philippines and Vietnam.
For the shipping world, intra-Asia business is becoming a market commanding significant investment and attention.
According to liner trade analyst Alphaliner, the figures for intra-Asia trade are many times larger than that reported by IADA. In its most recent report, Alphaliner estimated the actual number of boxes carried within the region to be far higher than the 14 million-TEU estimate cited by IADA for 2010. Alphaliner suggests the figure is closer to 70 million TEUs per year.
Alphaliner breaks its estimate down this way: “34 million TEUs are estimated to be used for intra-regional cargo and 23 million TEUs for feeder trades. And there are about 13 million TEUs of slot capacity deployed on domestic and coastal trades, which previously have not been included in most estimates of market volumes.
An estimated 85 percent of the trade’s capacity is deployed on dedicated intra-Asia services, whereas the remainder is offered through inter-port slots.
But there appears to be no overriding definition of just what intra-Asia trade is. The most commonly accepted definition tends to be an intra-East Asia area that excludes Middle East and Indian subcontinent volume. It would be circumspect to exclude feeder volumes so as not to double count transshipment containers. Domestic and coastal trade has become so significant that it should be included in any assessment of intra-Asia business.
Orient Overseas Container Line includes Southeast Asia, Northeast Asia to Australia to Middle East and the Indian subcontinent. On that calculation, OOCL senior executive Stanley Shen said intra-Asia trade accounted for 50 percent of the boxes carried in 2010 and brought in 30 percent of the revenue.
What is undeniable is that intra-Asia trade is the largest container market in the world — and it’s growing rapidly. The driving force behind trade growth since 2010 has been a series of free trade agreements between China and other countries or clusters of countries. The most notable of these was the free trade pact between China and the Association of Southeast Asian Nations, which took effect Jan. 1, 2010, and covered the six founding members of ASEAN — Singapore, Malaysia, Indonesia, the Philippines, Thailand and Brunei.
Bronson Hsieh, chairman of Taiwan’s Evergreen Marine, told The Journal of Commerce’s TPM Asia event in Shenzhen, China, last fall that trade from China to ASEAN nations grew 40 percent in the first eight months of 2010 to $88.1 billion. On the backhaul, trade increased 47.2 percent to $97.3 billion.
Population and economic growth will feed greater trade, of course, but the real driver of trade expansion will be the trade agreements that are allowing a free flow of goods across the region. In 2015, Vietnam, Cambodia, Laos and Myanmar are due to join the China-Asia FTA, when they will eliminate tariffs on 90 percent of imported goods.
Free trade agreement negotiations already are under way between South Korea and China, and feasibility studies for an FTA including Japan are scheduled to conclude in 2012.
The growth in cargoes has led to the deployment of larger vessels and massive terminal development. “As large newbuilds phase into long-haul services, vessels of middle and smaller sizes will cascade to secondary trade routes. The ripple effect has extended to the intra-Asia market,” Hsieh said.
“Previously, vessel sizes utilized in the intra-Asia services were limited to about 3,000 TEUs due to the capacity of ports and terminals in Southeast Asia,” he said. “But excluding the Far East legs of long-haul services, Panamax vessels are being deployed to six intra-Asia loops. With the investment in expansion of terminals in ASEAN countries, the fleet size of ships will continue to increase.”
Although Hsieh identified 12 terminal developments across the region, the largest ships now operating in regional trade are deployed along China’s extensive coastline, where vessels operated by Cosco and China Shipping Container Line are in the 4,000- to 5,100-TEU range.
But much more needs to be done in terms of terminal development and hinterland infrastructure. In 2010, the sharp increase in intra-Asia trade led to port congestion in the Philippines, Vietnam and Indonesia. That infrastructure puts a ceiling on carriers’ ability to boost tonnage by cascading down their Panamax-sized vessels for deployment in the region, OOCL’s Shen said.
“Vessel sizes for intra-Asia trade could only be increased to 5,000 TEUs, as many ports cannot handle larger ships,” he said. “Besides, one does not want a transit time of two days and a port operation time of five days. So, 3,000 TEUs and below are the best sizes to deploy — quick in and quick out.”
Contact Mike Grinter at email@example.com.